GAN GAN Ltd

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

August 9, 2024

 

GAN Limited

(Exact name of registrant as specified in its charter)

 

Bermuda		001-39274		Not Applicable
(State or other jurisdiction of incorporation)		(Commission File Number)		(I. R. S. Employer Identification No.)

 

400 Spectrum Center Drive

Suite 1900

Irvine, CA 92618

(Address of principal executive offices, including ZIP code)

 

(833) 565-0550

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary Shares, par value $0.01		GAN		The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

 

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On August 9, 2024, GAN Limited (the “Company”) issued an earnings release reporting its unaudited financial results for the three and six months ended June 30, 2024. A copy of the earnings release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K.

 

The information contained in this Item 2.02, including the related information set forth in the earnings release attached hereto as Exhibit 99.1 and incorporated by reference herein, is being “furnished” and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by the specific reference in such filing.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit Number		Description
99.1		Press Release, dated August 9, 2024
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: August 9, 2024	GAN Limited
	/s/ Brian Chang
	Brian Chang
	Chief Financial Officer

 

 

Exhibit 99.1

 

GAN Reports Second Quarter 2024 Financial Results

 

Growth in B2B revenues coupled with continued cost rationalization leads to improved results

Expected timeline for completion of merger with SEGASAMMY remains on track for late 2024 or early 2025

 

Irvine, California | August 9, 2024: 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 second quarter ended June 30, 2024.

 

Seamus McGill, GAN’s Chief Executive Officer, said “I’m very pleased with the continued operational progress the team is delivering. We achieved top-line revenue growth in the second quarter while reducing our operating expenses. We continue to operate the business more efficiently with a focus on improved profitability.

 

Mr. McGill added, “Looking ahead, our focus remains unchanged. We will continue to optimize our overall cost structure and roll-out product enhancements. We continue to work through the gaming regulatory requirements for our planned merger with SEGASAMMY and anticipate a successful closing in late 2024 or early 2025.”

 

 

Second Quarter 2024 Compared to Second Quarter 2023

 

	●	Total revenue of $35.6 million increased 5% driven by an increase in the B2B segment.
	●	B2B segment revenue was $13.0 million versus $9.9 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 the exit of a B2B partner in Michigan.
	●	B2C segment revenue was $22.6 million versus $23.9 million. Growth in European markets driven by increased player activity was offset by reduced player activity in Latin America and lower margins resulting from unfavorable event outcomes.
	●	Operating expenses were $25.1 million versus $32.8 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 loss of $1.7 million versus $18.4 million, which was primarily due to increased revenues and decreased operating expenses. Additionally, the prior period included a loss on debt extinguishment of $8.8 million.
	●	Total segment contribution was $25.3 million versus $24.3 million, which was driven by increased revenue in the B2B segment.
	●	Adjusted EBITDA was $3.7 million versus $(2.0) million. The increase was driven by increased revenues and lower operating expenses resulting from the aforementioned factors.
	●	Cash was $36.9 million as of June 30, 2024 versus $36.6 million as of March 31, 2024.
	●	B2C Active Customers declined primarily driven by limited customer acquisition in Latin America.
	●	B2B Gross Operator Revenue totaled $609.3 million versus $436.0 million in the prior year quarter, a 40% increase. The increase was driven primarily by organic growth in Pennsylvania, Michigan, New Jersey, Ontario and Connecticut.

 

 

GAN Limited

Key Financial Highlights

(Unaudited, in thousands unless otherwise specified)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Revenues
B2B		$	12,990			$	9,895			$	25,341			$	21,174
B2C			22,570				23,863				40,870				47,713
Total revenues		$	35,560			$	33,758			$	66,211			$	68,887
Profitability Measures
B2B segment contribution (1)		$	10,779			$	7,817			$	21,049			$	17,101
B2B segment contribution margin (1)			83.0	%			79.0	%			83.1	%			80.8	%
B2C segment contribution (1)		$	14,537			$	16,456			$	25,595			$	32,140
B2C segment contribution margin (1)			64.4	%			69.0	%			62.6	%			67.4	%
Net loss		$	(1,731	)		$	(18,409	)		$	(5,891	)		$	(16,908	)
Adjusted EBITDA (7)		$	3,730			$	(2,029	)		$	3,162			$	(1,990	)
Key Performance Indicators
B2B Gross Operator Revenue (2) (in millions)		$	609.3			$	436.0			$	1,241.3			$	858.8
B2B Take Rate (3)			2.1	%			2.3	%			2.0	%			2.5	%
B2C Active Customers (in thousands) (4)			237				257				328				359
B2C Marketing Spend Ratio (5)			23	%			20	%			23	%			21	%
B2C Sports Margin (6)			8.7	%			8.5	%			7.1	%			7.7	%

 

SEGASAMMY Transaction

 

The merger has been approved by GAN shareholders at a special general meeting of its shareholders and received clearance from the Committee on Foreign Investment in the U.S. (CFIUS). 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 late 2024 or 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 second 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.

 

Investor Contacts:

 

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

 

 

GAN Limited

Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share amounts)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Revenue		$	35,560			$	33,758			$	66,211			$	68,887
Operating costs and expenses
Cost of revenue(1)			10,244				9,485				19,567				19,646
Sales and marketing			7,056				7,324				13,073				14,508
Product and technology			8,137				11,238				17,753				20,816
General and administrative(1)			7,980				10,029				15,139				20,035
Depreciation and amortization			1,914				4,243				3,753				8,444
Total operating costs and expenses			35,331				42,319				69,285				83,449
Operating income (loss)			229				(8,561	)			(3,074	)			(14,562	)
Interest expense, net			1,157				905				2,289				2,621
Other loss (income), net			27				8,358				1				(934	)
Loss before income taxes			(955	)			(17,824	)			(5,364	)			(16,249	)
Income tax expense			776				585				527				659
Net loss		$	(1,731	)		$	(18,409	)		$	(5,891	)		$	(16,908	)
Loss per share, basic and diluted		$	(0.04	)		$	(0.42	)		$	(0.13	)		$	(0.39	)
Weighted average ordinary shares outstanding, basic and diluted			45,390,559				44,147,701				45,262,413				43,568,197

 

⁽¹⁾ Excludes depreciation and amortization expense

 

 

GAN Limited

Segment Revenue and Gross Profit (Unaudited)

(in thousands)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Revenue
B2B
Platform and content license fees		$	8,700			$	7,243			$	18,371			$	15,870
Development services and other			4,290				2,652				6,970				5,304
Total B2B revenue			12,990				9,895				25,341				21,174
B2C
Gaming			22,570				23,863				40,870				47,713
Total B2C revenue			22,570				23,863				40,870				47,713
Total revenue		$	35,560			$	33,758			$	66,211			$	68,887
Gross Profit
B2B
Revenue		$	12,990			$	9,895			$	25,341			$	21,174
Cost of revenue (1)			2,211				2,078				4,292				4,073
B2B segment contribution			10,779				7,817				21,049				17,101
B2B segment contribution margin			83.0	%			79.0	%			83.1	%			80.8	%
B2C
Revenue			22,570				23,863				40,870				47,713
Cost of revenue (1)			8,033				7,407				15,275				15,573
B2C segment contribution			14,537				16,456				25,595				32,140
B2C segment contribution margin			64.4	%			69.0	%			62.6	%			67.4	%
Total segment contribution		$	25,316			$	24,273			$	46,644			$	49,241
Total segment contribution margin			71.2	%			71.9	%			70.4	%			71.5	%

 

⁽¹⁾ Excludes depreciation and amortization expense

 

 

GAN Limited

Revenue by Geography (Unaudited)

(in thousands)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Revenue by geography *
United States		$	10,454			$	7,296			$	19,546			$	15,812
Europe			14,120				12,107				25,728				24,784
Latin America			8,204				12,388				15,100				23,658
Rest of the world			2,782				1,967				5,837				4,633
Total		$	35,560			$	33,758			$	66,211			$	68,887

 

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

 

GAN Limited

Adjusted EBITDA (Unaudited)

(in thousands)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Net (loss) income		$	(1,731	)		$	(18,409	)		$	(5,891	)		$	(16,908	)
Income tax (benefit) expense			776				585				527				659
Interest expense, net			1,157				905				2,289				2,621
Gain on amendment of Content Licensing Agreement			—				(427	)			—				(9,719	)
Loss on debt extinguishment			—				8,784				—				8,784
Revaluation of contingent liability			—				221				—				221
Depreciation and amortization			1,914				4,243				3,753				8,444
Share-based compensation and related expense			870				2,069				1,740				3,908
Transaction related costs			744				—				744				—
Adjusted EBITDA		$	3,730			$	(2,029	)		$	3,162			$	(1,990	)

 

GAN Limited

Historical Sports Margin (Unaudited)

 

		Three Months Ended,
		June 30, 2024				March 31, 2024				December 31, 2023				September 30, 2023
Sports Margin
Actual sports margin			8.7	%			5.7	%			6.5	%			6.0	%

 

v3.24.2.u1

Cover	Aug. 09, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 09, 2024
Entity File Number	001-39274
Entity Registrant Name	GAN Limited
Entity Central Index Key	0001799332
Entity Incorporation, State or Country Code	D0
Entity Address, Address Line One	400 Spectrum Center Drive
Entity Address, Address Line Two	Suite 1900
Entity Address, City or Town	Irvine
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92618
City Area Code	(833)
Local Phone Number	565-0550
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Ordinary Shares, par value $0.01
Trading Symbol	GAN
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	true

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