GAN pleased with ‘strong progress’ toward US market launches

GAN has today reported its unaudited Q2 2022 results, declaring year-over-year improvements in total revenue thanks to growth in the firm’s B2B segment.
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GAN Limited has reported its unaudited financial results for the second quarter of 2022, declaring year-over-year improvements in total revenue thanks to growth in the firm’s B2B segment.

Reflecting on the results, CEO Dermot Smurfit stated that the company is making “strong progress” towards the robust launch of GAN Sports in several US markets throughout 2023.

For Q2, GAN’s total revenue came in at $35m, a 2% increase from the previous year (2021: $34.4m) which the company attributes to “strong growth” from its B2B segment.

However, the firm did also see its total income hindered by a decrease in its B2C segment due to a “lower sports margin and the unfavorable impact of foreign currency fluctuation”.

B2B revenues for the quarter came in at $14.2m, a 36% improvement YoY (2021: $10.4m) following “an increase in development services and other revenue, which include hardware sales and organic growth in US real money igaming”.

Meanwhile, B2C earnings stood at $20.8m, a 13.3% drop YoY impacted by a “260-bps decrease in the sports margin from the prior year period to 7.1% and a $2.4m impact from the unfavorable impact of foreign currency fluctuation.”

GAN noted that the B2C handle for the period did, however, improve by 8% on the organic demand for the Coolbet product offering.

“We continue to make strong progress toward the launch of GAMESTACK 2.0 and GAN Sports in US markets as we position GAN for improved performance in the face of a difficult macroeconomic environment,” Smurfit commented.

“Our cost-saving initiatives and other productivity measures are working and will enhance our long-term profitability profile. Both our B2B and B2C segments continue to demonstrate unique technology and capabilities, as customer adoption and new launches remain on a positive trend.”

US and Latin America driving GAN revenues

Per region, the US leads the way in revenue contribution with $11.7m, a 1.9% improvement on the previous quarter (Q1: $11.4m), and a 40.6% increase YoY (2021: $8.3m).

While the US was GAN’s biggest revenue driver per region, Latin America wasn’t too far behind, with $11.1m towards the total revenue for the quarter, an 8.4% decline on the previous quarter (Q1: $12.2m), but a 9.1% growth YoY (2021: $10.2m).

Regarding GAN’s presence across the Americas, Smurfit stated that the company is now licensed in 16 US states, Canada, and has begun the initial stages of entering the Mexican market.

Europe followed the US and Latin America in terms of revenue with $10.2m (Q1: $12.5m, 2021: $14.1m), with the remaining of the quarter’s revenue coming from its rest of the world segment ($1.8m).

Active customers grew by 39% during the quarter thanks to “growth in Latin America and strong customer retention”.

B2B gross operator revenue totaled $283m in Q2, a 28% increase YoY (2021: $221.4m), primarily due to the “expansion of existing clients into new jurisdictions”, alongside the launch of RMiG solutions for new customers in existing jurisdictions.

Other financial figures

GAN’s gross profit for Q2 came in at $24.5m, a 2% increase YoY following strong B2B revenue growth offset by the decrease in B2C revenue compared to the previous year.

The firm’s operating expenses stood at $62.3m (2021: $26.8m), including a “$28.9m non-cash goodwill impairment charge related to the B2B segment”. D&A increased by $2.4m due to “higher amortization expenses” while sales & marketing grew by $1.8m following “expansion in Latin America”.

Net loss for the quarter came in at $38.3m, a significant increase YoY (2021: $3.8m) due to the above-mentioned factors.

GAN’s adjusted EBITDA stood at $1.3m (2021: $3.5m) following “increased B2C segment sales and marketing expense related to securing key sponsorships to drive continued growth and brand awareness”, particularly in Latin America ahead of the World Cup.

As of June 30, the company’s cash was $49.1m, a $9.6m increase from December 31, 2021. In April 2022, the company successfully entered into a fixed-term credit facility, providing $30m in aggregate principal amount of secured term loans. It incurred $2.4m in debt issuance costs in connection with the credit facility.

2022 Outlook

Commenting on the financial results, CFO Karen Flores noted that due to “a difficult foreign exchange environment and European headwinds”, GAN is lowering its full-year revenue and adjusted EBITDA expectations.

Flores said: “Our deliberate, focused efforts to improve our profitability are bearing results in the midst of the difficult macroeconomic and inflationary environment, as seen through our Adjusted EBITDA in the quarter.

“All of our cost savings actions have been executed without hindering our longer-term strategy or ability to accelerate future growth. During the quarter, we were also able to repurchase roughly $1m of our stock in the open market and completed a $30m term loan to facilitate our investment in our strategic initiatives.

“Our balance sheet and financial profile remain strong and will be supported by a much-improved path toward increased profitability and scale. However, it has become clear that a difficult foreign exchange environment and European headwinds will temporarily impact our results in the second half of the year. 

“As a result, we are lowering our full-year revenue expectation to $142.5m to $152.5m, and Adjusted EBITDA expectations to be in the range of $10m to $15m for the full year.”

Smurfit added that GAN is excited about a stronger second half of the year with the World Cup still to come.

The CEO concluded: “We are excited about the momentum behind our key initiatives, such as Super RGS, and the customer feedback surrounding the uniqueness and value of our exclusive gaming content has been highly encouraging and validating.

“We expect a robust launch schedule for GAN Sports throughout the US in 2023, which will further our position as a leading provider of a true omnichannel gaming experience. We are excited about the prospect of a stronger second half of the year, supported by the FIFA World Cup.”