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Company to Host Conference Call Today at 4:30pm ET

LONDON–(BUSINESS WIRE)–$GAN–GAN Limited (“GAN” or the “Company”) (NASDAQ: GAN), a leading business-to-business supplier of internet gambling software-as-a-service solutions to the U.S. land-based casino industry, today announced its operating and financial results for the three and six months ended June 30, 2020.

Second Quarter 2020 Financial Highlights

  • Revenues increased 99% compared to the prior year quarter to $8.3 million
  • 110% increase in real money Internet gaming (“RMiG”) revenue to $5.7 million compared to the prior year quarter
  • United States accounted for 85% of revenue (75% in prior year quarter)
  • Active Player-Days1 and Average Revenue per Daily Active User2 (“ARPDAU”) increased 18% and 100%, respectively, compared to the prior year quarter
  • Gross profit increased 459% compared to the prior year quarter to $5.5 million
  • Loss attributable to equity holders of $8.8 million (including $8.8 million in expenses associated with GAN’s initial public offering in the United States), compared to a loss of $1.9 million in the prior year quarter
  • Adjusted EBITDA3 increased to $1.9 million compared to a loss of $0.2 million in the prior year quarter
  • Cash and cash equivalents balance was $63.8 million at June 30, 2020, compared to $10.1 million at December 31, 2019, primarily reflecting the net proceeds from GAN’s initial public offering in the United States

Dermot Smurfit, CEO of GAN, stated:

“We were pleased to achieve revenues of $8.3 million during the second quarter of 2020, a period during which nearly all of our land-based casino customers were forced to close their physical operations and when most major sporting events were cancelled as a result of the global pandemic. Our business has proven resilient to these outside forces in recent weeks, and we believe GAN can greatly contribute to both our customers’ success and the accelerated secular shift to iGaming as casino operators continue to be impacted by the pandemic. The substantial growth in our business is a result of our ability to deliver results for clients, such as Parx Casino, whose Pennsylvania online casino gross gaming revenues reached $19.3 million in Q2 including an all-time monthly high of $7.6 million from their online casino for the month of May, according to regulatory reports and Eilers & Krejcik. We achieved record KPIs during the second quarter of 2020, and our operational model continues to demonstrate strength, particularly in the current market environment.”

“Last week we launched Cordish Gaming Group’s new “PlayLive!” branded Internet gambling business in the Commonwealth of Pennsylvania, a particularly notable achievement as we launched just 72 days after contract signing. Additionally, yesterday we activated Simulated Gaming for Penn National Gaming, one of the largest casino operators in the United States. We are anticipating activation of the Michigan market early in the fourth quarter, and are currently preparing to launch three operator clients, which we believe will drive significant market share.”

“We are well positioned financially and, having welcomed Marcus Yoder as our new Senior Vice President of Sales who will be working with our Chief Commercial Officer Jeff Berman, are poised to make great strides in our new business pipeline on all fronts. We also added Todd McTavish as our Chief Legal Officer and expanded Don Ryan’s role to global Chief Operating Officer, driving our regulatory compliance and operating activities to support our expected increase in scale.”

GAN Limited
Segment Revenue and Gross Profit Analysis (Unaudited)
for the Three and Six Months Ended June 30, 2020 and 2019
(in thousands of US$)
 
Three months ended
June 30,
Six months ended
June 30,
Revenue

2020

2019

2020

2019

RMiG
SaaS Revenue

4,157

 

2,088

 

8,903

 

4,367

 

Service Revenue

1,531

 

615

 

3,040

 

1,539

 

Other

 

 

 

4,904

 

RMiG Revenue

5,688

 

2,703

 

11,943

 

10,810

 

 
Simulated Gaming
SaaS Revenue

2,265

 

1,175

 

3,452

 

2,383

 

Service Revenue

370

 

296

 

598

 

571

 

Simulated Gaming Revenue

2,635

 

1,471

 

4,050

 

2,954

 

 
Total Revenue

8,323

 

4,174

 

15,993

 

13,764

 

 
Three months ended
June 30,
Six months ended
June 30,

2020

2019

2020

2019

RMiG
Revenue

5,688

 

2,703

 

11,943

 

10,810

 

Cost of sales (excl. depreciation and amortization)

(1,145

)

(1,434

)

(2,260

)

(3,504

)

RMiG Segment Gross Profit

4,543

 

1,269

 

9,683

 

7,306

 

Segment gross profit margin %

80

%

47

%

81

%

68

%

 
Simulated Gaming
Revenue

2,635

 

1,471

 

4,050

 

2,954

 

Cost of sales (excl. depreciation and amortization)

(1,026

)

(579

)

(1,653

)

(1,146

)

Simulated Gaming Segment Gross Profit

1,609

 

892

 

2,397

 

1,808

 

Segment gross profit margin %

61

%

61

%

59

%

61

%

 
Depreciation and amortization cost of sales

(694

)

(1,185

)

(1,531

)

(2,428

)

Total Gross Profit

5,458

 

976

 

10,549

 

6,686

 

Gross profit margin %

66

%

23

%

66

%

49

%

During the three months ended June 30, 2020, revenue of $8.3 million increased 99% versus the prior year quarter, driven primarily by customer launches including Parx, FanDuel RMiG in Pennsylvania and New Jersey, and Snoqualmie Simulated Gaming, plus organic growth. RMiG revenue increased 110% with Simulated Gaming increasing 79% period to period.

During the six months ended June 30, 2020, revenue of $16.0 million increased 16% versus the prior year period, driven primarily by similar customer launches and organic growth. The prior year period also included Other Revenue of $4.9 million related to hardware sales and the licensing of GAN’s strategic U.S. patent.

RMiG segment gross profit margin during the three months ended June 30, 2020 increased to 80% versus 47% in the prior year quarter. Simulated Gaming segment gross profit margin was flat versus the prior year quarter. RMiG segment gross profit margin for 2019 was impacted by expenses associated with the production and launch of the real money iGaming B2C online casino operated in the U.K. with WinStar Casino. During the three and six months ended June 30, 2019, the Company recorded $0.5 million and $0.8 million in cost of sales, respectively, with no corresponding revenue.

GAN Limited
Revenue by Geography (Unaudited)
for the Three and Six Months Ended June 30, 2020 and 2019
(in thousands of US$)
 
Three months ended
June 30,
Six months ended
June 30,

2020

2019

2020

2019

Revenue by Geography
United States

7,044

3,120

13,295

11,432

Italy

1,235

1,038

2,435

2,268

U.K. and Channel Islands

33

243

3

Rest of the world

11

16

20

61

Total Revenue

8,323

4,174

15,993

13,764

Attribution is based upon the location of the legal entity of the Company’s customer. Revenue generated in the United States represented 85% of total revenue during the three months ended June 30, 2020, versus 75% in the prior year quarter. This reflects the Company’s focus on the emerging U.S. Internet casino gaming and sports betting industry as supported by the GameSTACK™ platform optimized for this market.

The Company generated $4.4 million in revenues from the U.K. in the second half of 2019 principally from the B2C online casino operated in conjunction with WinStar Casino. WinStar Casino withdrew from the collaboration effective December 31, 2019. The Company does not expect to generate substantial revenues from the U.K. in 2020 unless it identifies another branded operator to sponsor the B2C online casino.

GAN Limited
Key Performance Indicators (Unaudited)
for the Three and Six Months Ended June 30, 2020 and 2019
 
Three months ended
June 30,
Six months ended
June 30,

2020

2019

2020

2019

Key Performance Indicators
Active Player-Days (in millions)

5.6

4.8

14.6

10.0

Gross Operator Revenue4 (USD $M)

129.1

54.8

271.0

114.1

ARPDAU

23.02

11.52

18.53

11.37

GAN’s management uses the above key performance indicators (“KPIs”) to gauge trends that are expected to have a substantial impact on the results of the business. These KPIs give management an indication of the level of engagement between the player and the Company’s platforms. No estimation is necessary in quantifying these KPIs, nor do they represent Generally Accepted Accounting Principles (“GAAP”) based measurements. These KPIs are subject to various risks, such as client concentration, competition, licensing and regulation, and macroeconomic conditions.

Active Player-Days

The increase in Active Player-Days during the three and six months ended June 30, 2020 versus the same periods in 2019 was primarily attributable to the continued expansion of existing U.S. customers and business, as well as the result of new states passing regulation allowing for online real money and sports gaming.

Gross Operator Revenue

The increase in Gross Operator Revenue during the three and six months ended June 30, 2020 versus the same periods in 2019 was primarily the result of GAN launching new clients throughout 2019 and 2020 in new states passing legislation relating to iGaming, increasing both the number of active players, and the handle processed on the Company’s platforms.

ARPDAU

The increase in ARPDAU during the three and six months ended June 30, 2020 versus the same periods in 2019 was primarily the result of a revenue mix shift toward the highest-yield segment, which is U.S. RMiG.

GAN Limited
Administrative Expenses (Unaudited)
for the Three and Six Months Ended June 30, 2020 and 2019
(in thousands of US$)
 
Three months ended
June 30,
Six months ended
June 30,

2020

2019

2020

2019

Administrative expenses

13,731

 

2,727

 

18,110

 

6,067

 

Less:
Share-based payment and related expense

(6,728

)

(128

)

(7,483

)

(258

)

Exceptional costs – IPO transaction related

(2,591

)

 

(2,831

)

 

Administrative expenses, excl. share-based and
exceptional costs5

4,412

 

2,599

 

7,796

 

5,809

 

As a percentage of revenue

53

%

62

%

49

%

42

%

During the three and six months ended June 30, 2020, administrative expenses increased versus the prior year periods as a result of: (1) expenses incurred in connection with the Company’s initial public offering (“IPO”) in the United States, (2) additional ongoing expenses associated with the Company’s operations as a U.S. reporting company, (3) expansion of operations to support the anticipated increases in clients and revenue and (4) increased share-based payment and related expense, including the acceleration of expense recognition.

During the three months ended June 30, 2020, administrative expenses increased 404% compared to the prior year quarter to $13.7 million, reflecting 165% of revenue (65% in the prior year quarter). During the quarter, administrative expenses included $8.8 million in share-based payment and related expenses and one-time charges associated with the IPO in the United States. This total included $5.4 million of cash expense and $3.4 million of non-cash expenses. Those charges were comprised of $0.8 million of direct legal, financial and accounting expenses related to the IPO; $1.8 million in cash bonus compensation; and $6.2 million in share-based payment and related expense.

Share-based payment and related expense of $6.2 million includes $2.8 million related to share-based payments related to Enterprise Management Incentive options issued under the 2017 GAN PLC Share Option Plan. Due to an administrative error, some option grants were not properly registered with the U.K. tax authority. The Company absorbed the related incremental tax liability which resulted in expense of $1.6 million related to option exercises during the second quarter 2020, as well as an accrued liability for the outstanding unexercised options based on the fair value at June 30, 2020 of $1.2 million.

For the three months ended June 30, 2020, administrative expenses, excluding share-based payment and related expense and exceptional costs related to the IPO transaction, represented 53% of revenue as compared to 62% on the same basis for the prior year quarter. The Company expects administrative expenses to decrease in the third quarter and beyond as the expenses incurred in connection with the IPO were heavily absorbed during the second quarter.

Second Quarter 2020 Operational Overview and Recent Developments

  • In May 2020, the Company launched Simulated Gaming for the Snoqualmie Indian Tribe, which owns and operates the Snoqualmie Casino located 25 miles east of Seattle. The casino features a 51,000-square-foot gaming floor and is a sponsor/branding partner of the Seattle Seahawks, its local NFL team. This agreement with the Snoqualmie Indian Tribe also provides GAN with the opportunity to supply sports wagering to the tribe should enabling legislation and corresponding regulatory approvals come to pass in the State of Washington.
  • In August 2020, the Company launched Cordish Gaming Group’s new “PlayLive!” branded Internet gambling business in the Commonwealth of Pennsylvania, complementing the development of two new Live!-branded gaming facilities in Pittsburgh and Philadelphia, expected to open in late 2020 and early 2021, respectively.
  • In August 2020, the Company launched Simulated Gaming for Penn National Gaming, Inc. (“Penn National”) through its subsidiary Penn Interactive Ventures, fully integrating with Penn National’s mychoice® customer loyalty program, which currently has over 20 million members. With 41 properties across 19 states in its industry-leading portfolio, Penn National is the largest single casino operator in the United States to select GAN as its enterprise software service provider of B2B social gaming since the launch of simulated gaming in 2014.
  • In August 2020, the Company announced the signing of a binding agreement with Laguna Development Corporation (“LDC”) to supply its Simulated Gaming software to LDC’s Route 66 Casino property located just outside of Albuquerque, New Mexico, with new services anticipated to launch to customers in Q3 2020. The agreement also provides GAN with the opportunity to supply online sports wagering to LDC in New Mexico, should enabling legislation and corresponding regulatory approvals come to pass.

2020 Revenue Outlook

The online casino business is expected to remain strong in the remainder of 2020. The Company continues to be the exclusive online gaming provider of FanDuel’s online casino operations throughout the United States and anticipates launching in both West Virginia and Michigan in the immediate term. The Company has secured significant new customers that will enter Michigan on the GAN platform in Q4.

The pandemic continues to create some uncertainty around sports gaming for the balance of 2020. In addition, FanDuel deployed their proprietary digital wallet for its sports gaming business, and therefore GAN does not anticipate sports gaming revenues from FanDuel after August 31, 2020. For the full year ended December 31, 2019, GAN derived $3.0 million from FanDuel’s sports gaming operations. However, the Company is launching Internet sports wagering operations with a number of new customers including Parx, which is launching the GAN-developed iOS native app in New Jersey, and expects to launch sports betting in Michigan with three operators. The 2020 revenue contributions from these new customers will depend on customer acquisition and the timing of product launches and market openings.

In summary, GAN reiterates its full-year 2020 revenue guidance of between $37 million and $39 million.

May 2020 Completion of U.S. IPO and Reorganization with GAN plc

On May 5, 2020, GAN Limited completed a reorganization and share exchange pursuant to which it acquired all of the outstanding ordinary shares of GAN plc. The consolidated financial statements included in this earnings release include the operations of GAN plc through the period ended March 31, 2020, on the basis that it is the predecessor to, and following the reorganization, became a wholly owned subsidiary of, GAN Limited.

On May 7, 2020, GAN Limited completed its U.S. IPO under which it sold an aggregate of 7,337,000 ordinary shares at a price per share to the public of $8.50 and raised gross proceeds of $62.4 million. Shares of GAN Limited are traded on The Nasdaq Capital Market under the trading symbol “GAN.”

Conference Call Details

The GAN management team will host a conference call for analysts and investors today (Thursday, August 20, 2020), at 4:30pm EDT/1:30pm PDT.

Please use the following dial-in numbers:

UK Participants:

+44 (0) 800 756 3429

U.S. & Canada Participants:

+1 877-407-8629

International Participants:

+1 201-493-6715

The Second Quarter 2020 Results Press Release and Presentation are available to download from the Company’s website, www.GAN.com.

The call will also be simultaneously webcast over the Internet via the following link:

https://78449.themediaframe.com/dataconf/productusers/gan/mediaframe/39974/indexl.html

1 GAN defines Active Player-Days as unique individuals who log on and wager each day (either wagering with real money or playing with virtual credits used in Simulated Gaming), aggregated during the calendar year period. By way of illustrative example: one (1) unique individual logging in and wagering each day in a single calendar year would, in aggregate, represent 365 Active Player-Days. Active Player-Days provides an indicator of consistent and daily interaction that individuals have with the Company’s platforms. Active Player-Days allows management and users to understand not only total users who interact with the platform but gives an idea of the frequency to which users are interacting with the platform, as someone who logs on and wagers multiple days are weighted heavier during the period than the user who only logs on and wagers one day.

2 GAN defines ARPDAU as Gross Operator Revenue divided by the identified number of Active Player-Days. ARPDAU allows management to measure the value per daily user and track user interaction with the platforms, which helps both management and users of financial statements to understand the value per user that is driven by marketing efforts and data analysis obtained from GAN’s platforms.

3 Adjusted EBITDA is a non-GAAP company specific measure and excludes net finance costs, tax, depreciation, amortization, share-based payment and related expenses, exceptional IPO-related costs and other items which the Board of Directors considers to be non-recurring and one time in nature.

4 GAN defines Gross Operator Revenue as the sum of its corporate customers’ gross revenue from Simulated Gaming, gross gaming revenue from real money regulated iGaming, and gross sports win from real money regulated sports betting. Gross Operator Revenue, which is not comparable to any GAN financial information, gives management and users an indication of the extent of transactions that have passed through GAN’s corporate customers’ platforms and allows management to understand the extent of activity that GAN’s IP is processing.

5 GAN defines Administrative expenses, excluding share-based and exceptional costs as Administrative expenses, excluding (1) Share-based payment and related expense and (2) Exceptional costs – IPO transaction related.

About GAN Limited

GAN is a leading business-to-business supplier of internet gambling software-as-a-service solutions to the U.S. land-based casino industry. GAN has developed a proprietary internet gambling enterprise software system, GameSTACK™, which it licenses principally to land-based U.S. casino operators as a turnkey technology solution for regulated real-money internet gambling, encompassing internet gaming, internet sports gaming and virtual 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 2020 revenue guidance, the Company’s anticipated trends in revenues (including new customer launches) and operating expenses, the anticipated impact of the COVID-19 pandemic on the Company’s operations and industry, the resilience of the Company’s business in the pandemic, the anticipated customer shift to iGaming, the strength on the online casino industry for the remainder of 2020 and the ability of the Company to replace the anticipated loss of FanDuel sports gaming revenue with sports betting revenue from new customers, 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. 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.

GAN Limited
Interim Condensed Consolidated Statement of Comprehensive Income (Unaudited)
for the Three and Six Months Ended June 30, 2020 and 2019
(in thousands of US$, except per share data)
 
Three months ended
June 30,
Six months ended
June 30,

2020

2019

2020

2019

Revenue

8,323

 

4,174

 

15,993

 

13,764

 

Cost of revenue

2,865

 

3,198

 

5,444

 

7,078

 

Gross profit

5,458

 

976

 

10,549

 

6,686

 

Administrative expenses

13,731

 

2,727

 

18,110

 

6,067

 

Total administrative expenses

13,731

 

2,727

 

18,110

 

6,067

 

(Loss) profit from operations

(8,273

)

(1,751

)

(7,561

)

619

 

Finance costs

341

 

30

 

429

 

62

 

Net (loss) income before taxes

(8,614

)

(1,781

)

(7,990

)

557

 

Income tax expense

(172

)

(122

)

(317

)

(268

)

(Loss) income for the period attributable to equity holders of the parent

(8,786

)

(1,903

)

(8,307

)

289

 

 
Net (loss) income per share attributable to ordinary shareholders
Basic earnings per share ($)

(0.33

)

(0.09

)

(0.32

)

0.01

 

Diluted earnings per share ($)

(0.33

)

(0.09

)

(0.32

)

0.01

 

GAN Limited
Interim Condensed Consolidated Statement of Financial Position (Unaudited)
(in thousands of US$)
 
As of
June 30,
2020
December 30,
2019
ASSETS
Non-current assets
Intangible assets

5,367

5,164

Property, plant and equipment

551

190

Right-of-use assets

942

1,334

Lease deposits

113

115

Contract costs

80

57

Total non-current assets

7,053

6,860

Current assets
Cash and cash equivalents

63,849

10,098

Trade and other receivables

7,570

5,974

R&D tax credit receivable

1,127

Inventory

829

883

Prepayments

466

1,061

Lease deposits

77

80

Contract costs

28

29

Total current assets

72,819

19,252

Total assets

79,872

26,112

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Trade and other payables

12,887

6,760

Contract liabilities

1,865

3,023

Current portion of lease liabilities

472

692

Total current liabilities

15,224

10,475

Non-current liabilities
Lease liabilities

396

535

Total liabilities

15,620

11,010

Total stockholders’ equity

64,252

15,102

Total liabilities and stockholders’ equity

79,872

26,112

GAN Limited
Interim Condensed Consolidated Statement of Cash Flows (Unaudited)
(in thousands of US$)
 
Six months ended
June 30,

2020

2019

Cash flows from operating activities:
Net (loss) income

(8,307

)

289

 

Adjustments to reconcile net (loss) income to cash provided by operating activities

6,235

 

2,977

 

Changes in working capital accounts

4,118

 

3,373

 

Net cash provided by operating activities

2,046

 

6,639

 

Cash flows from investing activities:
Capitalized development and purchase of property and equipment

(1,998

)

(1,942

)

Net cash used in investing activities

(1,998

)

(1,942

)

Cash flows from financing activities:
Proceeds on issuance of shares, net

57,588

 

78

 

Payment of listing related costs

(1,678

)

 

Payment to previous shareholders

(2,525

)

 

Proceeds on exercise of share options

2,249

 

 

Payment of Loan Agreement finance costs

(385

)

Lease payments

(346

)

(361

)

Net cash provided by (used in) financing activities

54,903

 

(283

)

Effect of exchange rate on cash and cash equivalents

(1,200

)

174

 

Increase in cash and cash equivalents

53,751

 

4,588

 

Cash and cash equivalents, beginning of period

10,098

 

6,967

 

Cash and cash equivalents, end of period

63,849

 

11,555

 

Contacts

Investor:

GAN

Jack Wielebinski

Head of Investor Relations

(214) 799-4660

[email protected]

The Equity Group
Adam Prior

(212) 836-9606

[email protected]

Carolyne Sohn

(415) 568-2255

[email protected]

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