GAN(GAN) - 2024 Q4 - Annual Results

Executive Summary & Strategic Update GAN Limited provides B2B internet gaming technology and operates B2C sports betting, showing improved 2024 financial performance and progressing towards a merger with SEGA SAMMY Company Overview GAN Limited is a B2B internet gaming technology provider in North America and a B2C sports betting operator internationally - GAN Limited operates as a B2B technology provider for real money internet gaming solutions in North America and a B2C operator of internet sports betting internationally[1][10] - The B2B segment provides its proprietary GameSTACK internet gambling enterprise software system to U.S. land-based casino operators[10] Q4 & Full Year 2024 Performance Overview GAN Limited reported improved financial performance for both Q4 and the full year 2024, driven by revenue growth and a streamlined cost structure - GAN reported stronger financial performance in 2024 with growth in both top and bottom lines, attributed to continued execution and a streamlined cost structure[2] - Net loss significantly improved in Q4 2024 to $4.2 million from $9.4 million in Q4 2023, and for the full year 2024 to $8.0 million from $34.4 million in 2023[5] - Adjusted EBITDA turned positive for the full year 2024 at $8.6 million, compared to a loss of $(8.4) million in 2023[5] SEGA SAMMY Merger Update The planned merger with SEGA SAMMY is progressing, having received GAN shareholder approval and clearances from CFIUS and several gaming regulatory agencies - The merger with SEGA SAMMY is expected to close in the second quarter of 2025[2][8] - The merger has been approved by GAN shareholders, received CFIUS clearance, and gained approval from several gaming regulatory agencies, including the Nevada Gaming Commission[8] - GAN will not host a conference call for its Q4 and year-end 2024 earnings due to the expected merger[9] Financial Performance Highlights GAN Limited achieved revenue growth and significant net loss reduction in Q4 and full year 2024, with positive Adjusted EBITDA Fourth Quarter 2024 Financial Highlights In Q4 2024, GAN's total revenue increased by 3% to $31.7 million, primarily driven by growth in the B2C segment Fourth Quarter 2024 Financial Highlights (in thousands) | Metric | Q4 2024 (in thousands) | Q4 2023 (in thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Total Revenue | $31,689 | $30,715 | 3% | | B2B Segment Revenue | $9,007 | $11,802 | -23.7% | | B2C Segment Revenue | $22,682 | $18,913 | 19.9% | | Operating Expenses | $23,400 | $29,500 | -20.7% | | Net Loss | $(4,151) | $(9,376) | 55.7% | | Adjusted EBITDA | $8 | $(3,884) | >100% | - The decrease in B2B segment revenue was primarily related to a B2B partner exit[5] - Growth in B2C revenue was driven by increased player activity in Europe, partially offset by reduced activity and unfavorable exchange rates in Latin America[5] Full Year 2024 Financial Highlights For the full year 2024, total revenue grew by 4% to $135.0 million, primarily due to increases in the B2B segment Full Year 2024 Financial Highlights (in thousands) | Metric | FY 2024 (in thousands) | FY 2023 (in thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Total Revenue | $134,998 | $129,419 | 4.3% | | B2B Segment Revenue | $50,716 | $43,154 | 17.5% | | B2C Segment Revenue | $84,282 | $86,265 | -2.3% | | Operating Expenses | $98,200 | $121,000 | -18.8% | | Net Loss | $(7,959) | $(34,444) | 76.9% | | Adjusted EBITDA | $8,583 | $(8,395) | >100% | - The increase in B2B segment revenue was primarily due to an expansion of offerings in Nevada and revenue recognition from a partner exit in Michigan[5] - Operating expenses decreased due to overall reduction in compensation costs, reduced headcount from cost-saving initiatives, and lower depreciation and amortization[5] Detailed Financial Statements Detailed statements reveal improved net loss and operating income for Q4 and full year 2024, driven by revenue growth and cost reductions across segments and geographies Consolidated Statements of Operations The consolidated statements of operations show a significant reduction in net loss for both the fourth quarter and full year 2024, driven by increased revenue and substantial decreases in total operating costs and expenses Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :-------------------- | :------ | :------ | :------ | :------ | | Revenue | $31,689 | $30,715 | $134,998 | $129,419 | | Total Operating Costs and Expenses | $34,347 | $39,297 | $138,598 | $159,733 | | Operating (Loss) Income | $(2,658) | $(8,582) | $(3,600) | $(30,314) | | Net (Loss) Income | $(4,151) | $(9,376) | $(7,959) | $(34,444) | | Loss per share, basic and diluted | $(0.09) | $(0.21) | $(0.18) | $(0.78) | - Depreciation and amortization expenses decreased significantly from $4,378 thousand in Q4 2023 to $1,903 thousand in Q4 2024, and from $17,161 thousand in FY 2023 to $7,634 thousand in FY 2024[22] Segment Revenue and Gross Profit Segment analysis reveals that B2C revenue increased in Q4 2024 while B2B revenue decreased, but for the full year, B2B revenue grew significantly while B2C slightly declined Segment Revenue and Gross Profit (in thousands) | Metric (in thousands) | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :-------------------- | :------ | :------ | :------ | :------ | | B2B Revenue | $9,007 | $11,802 | $50,716 | $43,154 | | B2C Revenue | $22,682 | $18,913 | $84,282 | $86,265 | | Total Revenue | $31,689 | $30,715 | $134,998 | $129,419 | | B2B Segment Contribution | $6,112 | $9,507 | $41,257 | $34,730 | | B2B Segment Contribution Margin | 67.9% | 80.6% | 81.3% | 80.5% | | B2C Segment Contribution | $14,633 | $11,396 | $53,310 | $55,989 | | B2C Segment Contribution Margin | 64.5% | 60.3% | 63.3% | 64.9% | | Total Segment Contribution | $20,745 | $20,903 | $94,567 | $90,719 | - B2B revenue from platform and content license fees decreased in Q4 2024 but increased for the full year 2024[24] - B2C gaming revenue showed strong growth in Q4 2024 (19.9% YoY) but a slight decline for the full year 2024 (-2.3% YoY)[24] Revenue by Geography Geographically, revenue from the United States and Europe increased in both Q4 and the full year 2024, while Latin America showed mixed results Revenue by Geography (in thousands) | Geography (in thousands) | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :----------------------- | :------ | :------ | :------ | :------ | | United States | $8,649 | $8,487 | $42,277 | $31,758 | | Europe | $14,437 | $12,114 | $52,324 | $47,788 | | Latin America | $8,011 | $7,145 | $31,467 | $39,935 | | Rest of the world | $592 | $2,969 | $8,930 | $9,938 | | Total | $31,689 | $30,715 | $134,998 | $129,419 | - Revenue in the United States increased by 1.9% in Q4 2024 and 33.1% for the full year 2024[26] - Latin America revenue decreased by 21.2% for the full year 2024, despite a 12.1% increase in Q4 2024[26] Adjusted EBITDA Reconciliation The reconciliation of net loss to Adjusted EBITDA highlights the impact of non-operating and non-cash items, showing significant improvement for both periods Adjusted EBITDA Reconciliation (in thousands) | Metric (in thousands) | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :-------------------- | :------ | :------ | :------ | :------ | | Net (loss) income | $(4,152) | $(9,376) | $(7,959) | $(34,444) | | Income tax (benefit) expense | $309 | $(247) | $(275) | $138 | | Interest expense, net | $1,158 | $1,118 | $4,607 | $5,003 | | Depreciation and amortization | $1,903 | $4,378 | $7,634 | $17,161 | | Share-based compensation and related expense | $690 | $785 | $3,688 | $5,511 | | Transaction related costs | $100 | $0 | $888 | $0 | | Adjusted EBITDA | $8 | $(3,884) | $8,583 | $(8,395) | - Adjusted EBITDA improved from a loss of $(3,884) thousand in Q4 2023 to $8 thousand in Q4 2024[28] - For the full year, Adjusted EBITDA swung from a loss of $(8,395) thousand in 2023 to a positive $8,583 thousand in 2024[28] Key Performance Indicators & Non-GAAP Measures Key performance indicators show strong B2B growth and improved B2C sports margin, with definitions provided for non-GAAP measures Key Performance Indicators Key performance indicators show strong growth in B2B Gross Operator Revenue for both Q4 and the full year 2024, indicating increased activity on GAN's B2B platforms Key Performance Indicators | KPI | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :-------------------------------- | :------ | :------ | :------ | :------ | | B2B Gross Operator Revenue (in millions) | $651.2 | $384.7 | $2,514.6 | $1,657.8 | | B2B Take Rate | 1.4% | 3.1% | 2.0% | 2.6% | | B2C Active Customers (in thousands) | 212 | 236 | 436 | 500 | | B2C Marketing Spend Ratio | 17% | 28% | 22% | 24% | | B2C Sports Margin | 8.5% | 6.5% | 7.5% | 7.0% | - B2B Gross Operator Revenue increased by 69% in Q4 2024 and 52% for the full year 2024, driven by organic growth in Pennsylvania, New Jersey, Ontario, and Connecticut[5] - B2C Active Customers declined primarily due to limited customer acquisition in Latin America[5] Historical Sports Margin The actual sports margin for the B2C segment showed an improving trend throughout 2024, peaking at 8.5% in Q4 2024 Historical Sports Margin | Quarter | Sports Margin | | :------ | :------------ | | Dec 31, 2024 | 8.5% | | Sep 30, 2024 | 7.2% | | Jun 30, 2024 | 5.7% | | Mar 31, 2024 | 6.5% | - The B2C Sports Margin increased from 6.5% in Q1 2024 to 8.5% in Q4 2024[30] Non-GAAP Financial Measures Definitions This section provides definitions for various non-GAAP financial measures used by GAN, including B2B Gross Operator Revenue, B2B Take Rate, B2C Active Customers, B2C Marketing Spend Ratio, B2C Sports Margin, and Adjusted EBITDA - B2B Gross Operator Revenue indicates the extent of transactions processed through the Company's B2B corporate customers' platforms[14] - Adjusted EBITDA is used to measure financial performance by removing the effect of items not directly resulting from core operations and assessing core business performance against industry peers[19] - B2C Active Customers, B2C Marketing Spend Ratio, and B2C Sports Margin are metrics used to monitor customer segmentation, marketing effectiveness, and sportsbook performance, respectively[16][17][18] Additional Information This section includes forward-looking statements and investor contact information Forward-Looking Statements This section contains forward-looking statements regarding anticipated trends in revenues, operating expenses, profitability, and the successful closure of the merger with SEGA SAMMY - Forward-looking statements include expectations regarding revenue trends, operating expenses, profitability, and the successful completion of the SEGA SAMMY merger[11] - These statements are subject to known and unknown risks, uncertainties, and other important factors detailed in the Company's Form 10-K and subsequent periodic reports[11] Investor Contacts Contact information for investor relations is provided for GAN and Alpha IR Group - Investor inquiries can be directed to Robert Shore, VP, Investor Relations & Capital Markets at GAN, or Ryan Coleman/Davis Snyder at Alpha IR Group[20]