GAN GAN Ltd

Strong profitability improvement driven by B2B revenues and continued cost rationalization

Planned Merger with SEGASAMMY now expected to close in early 2025

GAN Limited (NASDAQ: GAN) (the “Company” or “GAN”), a leading North American B2B technology provider of real money internet gaming solutions and a leading International B2C operator of Internet sports betting, today reported its unaudited financial results for the third quarter ended September 30, 2024.

Seamus McGill, GAN’s Chief Executive Officer, said, “I couldn’t be more pleased with the progress our team members have made to deliver revenue growth while concurrently lowering our cost structure. Our top-line growth of 24% compared to the prior year was driven by B2B revenue growth of more than 60% while operating costs fell by nearly 10%. We remain focused on delivering a leading product offering for our US B2B clients and our international B2C business.”

Mr. McGill added, “In September, we recently received approval from the Nevada Gaming Commission for our planned merger with SEGASAMMY. We continue to work through the remaining regulatory requirements and anticipate a successful closing in early 2025."

Third Quarter 2024 Compared to Third Quarter 2023

• Total revenue of $37.1 million increased 24% driven by an increase in the B2B segment.
• B2B segment revenue was $16.4 million versus $10.2 million. The increase was primarily due to an expansion of our B2B offerings in the state of Nevada and the recognition of revenue related to a partner exit in Michigan.
• B2C segment revenue was $20.7 million versus $19.6 million. Growth in Europe was driven by increased player activity, which was offset by reduced player activity and unfavorable exchange rates in Latin America.
• Operating expenses were $25.1 million versus $27.8 million. The decrease was primarily attributable to the Company's overall reduction of compensation costs and reduced headcount realized as part of ongoing cost saving initiatives, as well as lower depreciation and amortization expenses as a result of intangible assets fully amortizing in the prior year.
• Net income of $2.1 million versus a net loss of $8.2 million improved primarily due to increased revenues and decreased operating expenses.
• Total segment contribution was $27.2 million versus $20.6 million, which was driven primarily by increased revenue in the B2B segment.
• Adjusted EBITDA was $5.4 million versus a loss of $2.5 million. The increase was driven by increased revenues and lower operating expenses resulting from the aforementioned factors.
• Cash was $36.5 million as of September 30, 2024, versus $36.9 million as of June 30, 2024.
• B2C Active Customers declined primarily driven by limited customer acquisition in Latin America.
• B2B Gross Operator Revenue totaled $610.4 million versus $424.1 million in the prior year quarter, a 44% increase. The increase was driven primarily by organic growth in Pennsylvania, New Jersey, Ontario and Connecticut.

GAN Limited

Key Financial Highlights

(Unaudited, in thousands unless otherwise specified)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B2B

 

$

16,375

 

 

$

10,178

 

 

$

41,711

 

 

$

31,353

 

B2C

 

 

20,723

 

 

 

19,639

 

 

 

61,598

 

 

 

67,351

 

Total revenues

 

$

37,098

 

 

$

29,817

 

 

$

103,309

 

 

$

98,704

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profitability Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B2B segment contribution (1)

 

$

14,097

 

 

$

8,123

 

 

$

35,141

 

 

$

25,224

 

B2B segment contribution margin (1)

 

 

86.1

%

 

 

79.8

%

 

 

84.2

%

 

 

80.5

%

B2C segment contribution (1)

 

$

13,081

 

 

$

12,452

 

 

$

38,681

 

 

$

44,592

 

B2C segment contribution margin (1)

 

 

63.1

%

 

 

63.4

%

 

 

62.8

%

 

 

66.2

%

Net loss

 

$

2,083

 

 

$

(8,160

)

 

$

(3,808

)

 

$

(25,068

)

Adjusted EBITDA (7)

 

$

5,412

 

 

$

(2,522

)

 

$

8,574

 

 

$

(4,512

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Performance Indicators

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B2B Gross Operator Revenue (2) (in millions)

 

$

610.4

 

 

$

424.1

 

 

$

1,851.7

 

 

$

1,273.1

 

B2B Take Rate (3)

 

 

2.7

%

 

 

2.4

%

 

 

2.3

%

 

 

2.5

%

B2C Active Customers (in thousands) (4)

 

 

226

 

 

 

244

 

 

 

382

 

 

 

432

 

B2C Marketing Spend Ratio (5)

 

 

24

%

 

 

26

%

 

 

23

%

 

 

22

%

B2C Sports Margin (6)

 

 

7.2

%

 

 

6.0

%

 

 

7.1

%

 

 

7.2

%

SEGASAMMY Transaction

The merger has been approved by GAN shareholders at a special general meeting of its shareholders, has received clearance from the Committee on Foreign Investment in the U.S. (CFIUS) and received approval from several gaming regulatory agencies including the Nevada Gaming Commission. The gaming regulatory approval process continues to proceed pursuant to regulatory requirements and the transaction is expected to close, subject to customary closing conditions, in early 2025.

Conference Call Details

Due to the expected merger of the Company with SEGASAMMY, GAN will not be hosting a conference call in conjunction with its third quarter 2024 earnings release.

About GAN Limited

GAN is a leading business-to-business supplier of internet gambling software-as-a-service solutions predominantly to the U.S. land-based casino industry and is a market-leading business-to-consumer operator of proprietary online sports betting technology internationally with market leadership positions in selected European and Latin American markets. In its B2B segment, GAN has developed a proprietary internet gambling enterprise software system, GameSTACK, which it licenses to land-based U.S. casino operators as a turnkey technology solution for regulated real money internet gambling, encompassing internet gaming, internet sports betting and social casino gaming branded as Simulated Gaming.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding the Company’s anticipated trends in revenues (including new customer launches) and operating expenses, the anticipated improvement in profitability, expectations that it will meet all closing conditions or successfully close its planned merger with SEGASAMMY, as well as statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” and similar statements of a future or forward-looking nature. These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements including those risks detailed under “Risk Factors” in our Annual Report on Form 10-K and subsequent periodic reports. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to update or revise any forward-looking statements for any reason, except as required by law.

Key Performance Indicators and Non-GAAP Financial Measures

This release uses certain non-GAAP financial measures as defined in Securities and Exchange Commission rules. The Company reports financial results in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and also communicates with investors using certain non-GAAP financial measures. These non-GAAP financial measures are not in accordance with, nor are they a substitute for or superior to, the comparable U.S. GAAP financial measures. These non-GAAP financial measures are intended to supplement the presentation of the Company’s financial results that are prepared in accordance with U.S. GAAP.

(1) The Company excludes depreciation and amortization in certain segment calculations.

(2) The Company defines B2B Gross Operator Revenue as the sum of its B2B corporate customers’ gross revenue from virtual simulated gaming (SIM), gross gaming revenue from RMiG, and gross sports wins from sportsbook offerings. B2B Gross Operator Revenue, which is not comparable to financial information presented in conformity with U.S. GAAP, gives management and users of our financial statements an indication of the extent of transactions processed through the Company’s B2B corporate customers’ platforms and allows management to understand the extent of activity that the Company’s platform is processing.

(3) The Company defines B2B Take Rate as a quotient of B2B segment revenue retained by the Company over the total Gross Operator Revenue generated by our B2B corporate customers. The B2B Take Rate gives management and users of our financial statements an indication of the impact of the statutory terms and the efficiency of the commercial terms on the business.

(4) The Company defines B2C Active Customers as a user that places a wager during the period. This metric allows management to monitor the customer segmentation, growth drivers, and ultimately creates opportunities to identify and add value to the user experience. This metric allows management and users of the financial statements to measure the platform traffic and track related trends.

(5) The Company defines B2C Marketing Spend Ratio as the total B2C direct marketing expense for the period divided by the total B2C revenues. This metric allows management to measure the success of marketing costs during a given period. Additionally, this metric allows management to compare across jurisdictions and other subsets, as an additional indication of return on marketing investment.

(6) The Company defines B2C Sports Margin as the ratio of wagers minus winnings to total amount wagered, adjusted for open wagers at period end. Sports betting involves a user placing a bet on the outcome of a sporting event with the chance to win a pre-determined amount, often referred to as fixed odds. Our B2C sportsbook revenue is generated by setting odds that are intended to provide a built-in theoretical margin in each sports bet offered to our users. This metric allows management to measure sportsbook performance against its expected outcome.

(7) Management uses the non-GAAP measure of Adjusted EBITDA to measure its financial performance. Specifically, it uses Adjusted EBITDA (i) as a measure to compare its operating performance from period to period, as it removes the effect of items not directly resulting from core operations, and (ii) as a means of assessing its core business performance against others in the industry, because it eliminates some of the effects that are generated by differences in capital structure, depreciation, tax effects and unusual and infrequent events. The Company defines Adjusted EBITDA as net loss before interest expense (income), net, income tax expense (benefit), depreciation and amortization, impairments, extraordinary gains or losses, share-based compensation expense and related expense, transaction costs, and other items which the Board of Directors considers to be infrequent or unusual in nature. A reconciliation of Adjusted EBITDA to Net Income (the most closely aligned measure under U.S. GAAP) is included in the tables at the end of this release. The presentation of Adjusted EBITDA is not intended to be used in isolation or as a substitute for any measure prepared in accordance with U.S. GAAP and Adjusted EBITDA may exclude financial information that some investors may consider important in evaluating the Company’s performance. Because Adjusted EBITDA is not a U.S. GAAP measure, the way the Company defines Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in the industry.

GAN Limited

Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share amounts)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

37,098

 

 

$

29,817

 

 

$

103,309

 

 

$

98,704

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue(1)

 

 

9,920

 

 

 

9,242

 

 

 

29,487

 

 

 

28,888

 

Sales and marketing

 

 

6,778

 

 

 

7,196

 

 

 

19,851

 

 

 

21,704

 

Product and technology

 

 

8,467

 

 

 

9,150

 

 

 

26,220

 

 

 

29,966

 

General and administrative(1)

 

 

7,823

 

 

 

7,060

 

 

 

22,962

 

 

 

27,095

 

Depreciation and amortization

 

 

1,978

 

 

 

4,339

 

 

 

5,731

 

 

 

12,783

 

Total operating costs and expenses

 

 

34,966

 

 

 

36,987

 

 

 

104,251

 

 

 

120,436

 

Operating income (loss)

 

 

2,132

 

 

 

(7,170

)

 

 

(942

)

 

 

(21,732

)

Interest expense, net

 

 

1,160

 

 

 

1,264

 

 

 

3,449

 

 

 

3,885

 

Other loss (income), net

 

 

—

 

 

 

—

 

 

 

1

 

 

 

(934

)

Income (loss) before income taxes

 

 

972

 

 

 

(8,434

)

 

 

(4,392

)

 

 

(24,683

)

Income tax (benefit) expense

 

 

(1,111

)

 

 

(274

)

 

 

(584

)

 

 

385

 

Net income (loss)

 

$

2,083

 

 

$

(8,160

)

 

$

(3,808

)

 

$

(25,068

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.05

 

 

$

(0.18

)

 

$

(0.08

)

 

$

(0.57

)

Diluted

 

$

0.04

 

 

$

(0.18

)

 

$

(0.08

)

 

$

(0.57

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

45,478,359

 

 

 

44,699,951

 

 

 

45,334,921

 

 

 

43,949,594

 

Diluted

 

 

48,887,335

 

 

 

44,699,951

 

 

 

45,334,921

 

 

 

43,949,594

 

(1) Excludes depreciation and amortization expense

GAN Limited

Segment Revenue and Gross Profit (Unaudited)

(in thousands)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B2B

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platform and content license fees

 

$

8,516

 

 

$

7,240

 

 

$

26,886

 

 

$

23,110

 

Development services and other

 

 

7,859

 

 

 

2,938

 

 

 

14,825

 

 

 

8,243

 

Total B2B revenue

 

 

16,375

 

 

 

10,178

 

 

 

41,711

 

 

 

31,353

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B2C

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming

 

 

20,723

 

 

 

19,639

 

 

 

61,598

 

 

 

67,351

 

Total B2C revenue

 

 

20,723

 

 

 

19,639

 

 

 

61,598

 

 

 

67,351

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

37,098

 

 

$

29,817

 

 

$

103,309

 

 

$

98,704

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B2B

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

16,375

 

 

$

10,178

 

 

$

41,711

 

 

$

31,353

 

Cost of revenue (1)

 

 

2,278

 

 

 

2,055

 

 

 

6,570

 

 

 

6,129

 

B2B segment contribution

 

 

14,097

 

 

 

8,123

 

 

 

35,141

 

 

 

25,224

 

B2B segment contribution margin

 

 

86.1

%

 

 

79.8

%

 

 

84.2

%

 

 

80.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B2C

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

20,723

 

 

 

19,639

 

 

 

61,598

 

 

 

67,351

 

Cost of revenue (1)

 

 

7,642

 

 

 

7,187

 

 

 

22,917

 

 

 

22,759

 

B2C segment contribution

 

 

13,081

 

 

 

12,452

 

 

 

38,681

 

 

 

44,592

 

B2C segment contribution margin

 

 

63.1

%

 

 

63.4

%

 

 

62.8

%

 

 

66.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total segment contribution

 

$

27,178

 

 

$

20,575

 

 

$

73,822

 

 

$

69,816

 

Total segment contribution margin

 

 

73.3

%

 

 

69.0

%

 

 

71.5

%

 

 

70.7

%

(1) Excludes depreciation and amortization expense

GAN Limited

Revenue by Geography (Unaudited)

(in thousands)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue by geography *

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

14,082

 

 

$

7,459

 

 

$

33,628

 

 

$

23,271

 

Europe

 

 

12,159

 

 

 

10,890

 

 

 

37,887

 

 

 

35,674

 

Latin America

 

 

8,356

 

 

 

9,132

 

 

 

23,456

 

 

 

32,790

 

Rest of the world

 

 

2,501

 

 

 

2,336

 

 

 

8,338

 

 

 

6,969

 

Total

 

$

37,098

 

 

$

29,817

 

 

$

103,309

 

 

$

98,704

 

* Revenue is segmented based on the location of the Company's customer.

GAN Limited

Adjusted EBITDA (Unaudited)

(in thousands)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

2,083

 

 

$

(8,160

)

 

$

(3,808

)

 

$

(25,068

)

Income tax (benefit) expense

 

 

(1,111

)

 

 

(274

)

 

 

(584

)

 

 

385

 

Interest expense, net

 

 

1,160

 

 

 

1,264

 

 

 

3,449

 

 

 

3,885

 

Gain on amendment of Content Licensing Agreement

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(9,719

)

Loss on debt extinguishment

 

 

—

 

 

 

—

 

 

 

—

 

 

 

8,784

 

Revaluation of contingent liability

 

 

—

 

 

 

(509

)

 

 

—

 

 

 

(288

)

Depreciation and amortization

 

 

1,978

 

 

 

4,339

 

 

 

5,731

 

 

 

12,783

 

Share-based compensation and related expense

 

 

1,258

 

 

 

818

 

 

 

2,998

 

 

 

4,726

 

Transaction related costs

 

 

44

 

 

 

—

 

 

 

788

 

 

 

—

 

Adjusted EBITDA

 

$

5,412

 

 

$

(2,522

)

 

$

8,574

 

 

$

(4,512

)

GAN Limited

Historical Sports Margin (Unaudited)

 

 

Three Months Ended,

 

 

 

September 30, 2024

 

 

June 30, 2024

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sports Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actual sports margin

 

 

7.2

%

 

 

8.7

%

 

 

5.7

%

 

 

6.5

%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241108987713/en/

Investor: GAN Robert Shore Vice President, Investor Relations & Capital Markets (610) 812-3519 rshore@GAN.com Alpha IR Group Ryan Coleman or Davis Snyder (312) 445-2870 GAN@alpha-ir.com