GAN(GAN) - 2025 Q1 - Quarterly Results

First Quarter 2025 Financial Results Overview GAN reported strong Q1 2025 B2C revenue growth in Europe and Latin America, offsetting B2B segment decline, with the SEGA SAMMY merger on track for a Q2 2025 close Executive Summary and CEO Commentary GAN's CEO highlighted strong B2C performance in Europe and Latin America, confirming the SEGA SAMMY merger is on track for a Q2 2025 close - GAN reported strong B2C revenue growth, driven by performance in Europe and Latin America, with the SEGA SAMMY merger on track for an expected close in Q2 2025[1] - CEO Seamus McGill highlighted strong B2C results in European and Latin American markets, confirming the merger with Sega Sammy is nearing regulatory conclusion, expected in Q2 2025[2] Q1 2025 vs Q1 2024 Key Financial Highlights Summary | Metric | Q1 2025 ($M) | Q1 2024 ($M) | Change (%) | Primary Driver | | :----- | :----------- | :----------- | :--------- | :------------- | | Total Revenue | 29.4 | 30.6 | -4% | Decrease in B2B segment | | B2B Revenue | 5.1 | 12.3 | -58.6% | Expiration of multistate B2B contract | | B2C Revenue | 24.3 | 18.3 | +32.8% | Growth in Europe and Latin America | | Operating Expenses | 23.7 | 24.6 | -3.7% | Reduction of compensation costs and headcount | | Net Loss | (6.8) | (4.2) | +61.9% | Lower B2B revenues, partly offset by B2C contribution and lower operating expenses | | Adjusted EBITDA | (1.5) | (0.6) | +150% | Factors impacting net loss | | Cash (as of period end) | 39.9 | 38.7 (Dec 31, 2024) | +3.1% | Favorable changes in working capital | Key Financial and Operational Highlights Q1 2025 saw a 4.2% total revenue decrease to $29.4 million, driven by B2B decline, partially offset by strong B2C growth, leading to worsened net loss and Adjusted EBITDA Q1 2025 vs Q1 2024 Key Financial Highlights (in thousands) | Metric | March 31, 2025 | March 31, 2024 | YoY Change | | :-------------------------- | :------------- | :------------- | :--------- | | Revenues | | | | | B2B | $5,087 | $12,347 | -58.8% | | B2C | $24,279 | $18,304 | +32.7% | | Total revenues | $29,366 | $30,651 | -4.2% | | Profitability Measures | | | | | B2B segment contribution | $2,896 | $10,266 | -71.8% | | B2B segment contribution margin | 56.9% | 83.1% | -26.2 pp | | B2C segment contribution | $15,761 | $11,062 | +42.5% | | B2C segment contribution margin | 64.9% | 60.4% | +4.5 pp | | Net loss | $(6,828) | $(4,160) | +64.1% | | Adjusted EBITDA | $(1,511) | $(569) | +165.6% | Q1 2025 vs Q1 2024 Key Performance Indicators | Indicator | March 31, 2025 | March 31, 2024 | YoY Change | | :-------------------------- | :------------- | :------------- | :--------- | | B2B Gross Operator Revenue (in millions) | $144.6 | $632.0 | -77.1% | | B2B Take Rate | 3.5% | 2.0% | +1.5 pp | | B2C Active Customers (in thousands) | 235 | 222 | +5.9% | | B2C Marketing Spend Ratio | 18% | 23% | -5 pp | | B2C Sports Margin | 8.6% | 5.7% | +2.9 pp | - The significant decrease in B2B revenue and B2B Gross Operator Revenue was primarily driven by the expiration of a multistate B2B commercial contract[3][5] - B2C Active Customers increased, primarily driven by higher customer activity in Latin America and Europe[3][5] Strategic Developments This section details the progress and approvals for the SEGASAMMY merger, expected to close in Q2 2025 SEGASAMMY Merger Update The merger with SEGASAMMY has received shareholder and key regulatory approvals (CFIUS, Nevada Gaming Commission) and is expected to close in the second quarter of 2025, subject to remaining regulatory requirements - The merger with SEGASAMMY has been approved by GAN shareholders and received clearance from CFIUS and the Nevada Gaming Commission[6] - The merger's closing is subject to remaining regulatory requirements and customary conditions, with an anticipated close in Q2 2025[6] - GAN will not host a conference call for its Q1 2025 earnings release due to the expected merger with SEGASAMMY[7] Company Information and Disclosures This section provides an overview of GAN Limited's business, outlines forward-looking statement caveats, and lists investor contact information About GAN Limited GAN is a leading B2B technology provider of internet gambling software-as-a-service solutions predominantly to the U.S. land-based casino industry and is a market-leading international B2C operator of proprietary online sports betting technology, with market leadership positions in selected European and Latin American markets - GAN operates as a leading B2B supplier of internet gambling software-as-a-service solutions to the U.S. land-based casino industry[8] - GAN is also a market-leading B2C operator of proprietary online sports betting technology internationally, with strong positions in European and Latin American markets[8] - Its B2B segment utilizes the proprietary GameSTACK enterprise software system for regulated real money internet gambling, including internet gaming, internet sports betting, and social casino gaming (Simulated Gaming)[8] Forward-Looking Statements This section cautions that the release contains forward-looking statements based on current expectations, involving risks and uncertainties that could cause actual results to differ materially, with no obligation to update - The release contains forward-looking statements regarding anticipated trends in revenues, operating expenses, profitability, and the successful closing of the SEGASAMMY merger[9] - These statements are based on management's current expectations and involve known and unknown risks, uncertainties, and other important factors detailed in the company's Form 10-K and subsequent reports[9] - Readers are cautioned not to place undue reliance on forward-looking statements, and the Company undertakes no obligation to update or revise them, except as required by law[9] Investor Contacts Provides contact information for investor relations inquiries for GAN and Alpha IR Group - Investor inquiries can be directed to Robert Shore, VP, Investor Relations & Capital Markets at GAN, or Ryan Coleman of Alpha IR Group[18] Detailed Financials and Definitions This section provides detailed financial statements, segment performance, geographical revenue, and definitions for key performance indicators and non-GAAP financial measures Consolidated Statements of Operations The consolidated statement of operations shows a net loss of $6.8 million for Q1 2025, an increase from $4.2 million in Q1 2024, primarily due to lower revenue and increased operating costs, despite some cost savings Consolidated Statements of Operations (Unaudited, in thousands) | Metric | March 31, 2025 | March 31, 2024 | YoY Change | | :-------------------------- | :------------- | :------------- | :--------- | | Revenue | $29,366 | $30,651 | -4.2% | | Cost of revenue | 10,709 | 9,323 | +14.9% | | Sales and marketing | 5,916 | 6,017 | -1.7% | | Product and technology | 7,866 | 9,616 | -18.1% | | General and administrative | 7,913 | 7,159 | +10.5% | | Depreciation and amortization | 2,013 | 1,839 | +9.5% | | Total operating costs and expenses | 34,417 | 33,954 | +1.4% | | Operating loss | $(5,051) | $(3,303) | +52.9% | | Interest expense, net | 1,212 | 1,132 | +7.1% | | Loss before income taxes | $(6,263) | $(4,409) | +42.1% | | Income tax (benefit) expense | 565 | (249) | N/A | | Net loss | $(6,828) | $(4,160) | +64.1% | | Loss per share, basic and diluted | $(0.15) | $(0.09) | +66.7% | | Weighted average ordinary shares outstanding | 45,791,271 | 45,134,267 | +1.5% | Segment Revenue and Gross Profit B2B revenue significantly decreased by 58.8% to $5.1 million, while B2C revenue grew by 32.7% to $24.3 million, leading to a decrease in total segment contribution despite improved B2C margin Segment Revenue and Gross Profit (Unaudited, in thousands) | Metric | March 31, 2025 | March 31, 2024 | YoY Change | | :-------------------------- | :------------- | :------------- | :--------- | | Revenue | | | | | B2B Platform and content license fees | $4,259 | $9,667 | -55.9% | | B2B Development services and other | $828 | $2,680 | -69.1% | | Total B2B revenue | $5,087 | $12,347 | -58.8% | | Total B2C revenue (Gaming) | $24,279 | $18,304 | +32.7% | | Total revenue | $29,366 | $30,651 | -4.2% | | Gross Profit | | | | | B2B Cost of revenue | $2,191 | $2,081 | +5.3% | | B2B segment contribution | $2,896 | $10,266 | -71.8% | | B2B segment contribution margin | 56.9% | 83.1% | -26.2 pp | | B2C Cost of revenue | $8,518 | $7,242 | +17.6% | | B2C segment contribution | $15,761 | $11,062 | +42.5% | | B2C segment contribution margin | 64.9% | 60.4% | +4.5 pp | | Total segment contribution | $18,657 | $21,328 | -12.5% | | Total segment contribution margin | 63.5% | 69.6% | -6.1 pp | Revenue by Geography Revenue from the United States decreased significantly, while Europe and Latin America showed strong growth, aligning with the B2C segment's performance Revenue by Geography (Unaudited, in thousands) | Region | March 31, 2025 | March 31, 2024 | YoY Change | | :------------- | :------------- | :------------- | :--------- | | United States | $4,735 | $9,092 | -47.9% | | Europe | $15,466 | $11,604 | +33.3% | | Latin America | $8,414 | $6,896 | +22.0% | | Rest of the world | $751 | $3,059 | -75.5% | | Total | $29,366 | $30,651 | -4.2% | - Revenue is segmented based on the location of the Company's customer[24] Key Performance Indicators and Non-GAAP Financial Measures Definitions This section provides definitions for various non-GAAP financial measures and key performance indicators used by GAN to assess its financial and operational performance, emphasizing their supplementary nature to U.S. GAAP - The Company uses certain non-GAAP financial measures to supplement U.S. GAAP results, which are not substitutes for or superior to comparable U.S. GAAP measures[10] B2B Gross Operator Revenue (GOR) This metric represents the total gross revenue generated by B2B corporate customers from various gaming offerings, indicating transaction volume - B2B Gross Operator Revenue is defined as the sum of B2B corporate customers' gross revenue from virtual simulated gaming (SIM), gross gaming revenue from RMiG, and gross sports wins from sportsbook offerings[12] - This metric indicates the extent of transactions processed through the Company's B2B corporate customers' platforms[12] B2B Take Rate This metric measures the proportion of B2B segment revenue retained by the Company relative to the total Gross Operator Revenue generated by its B2B customers - B2B Take Rate is defined as the quotient of B2B segment revenue retained by the Company over the total Gross Operator Revenue generated by our B2B corporate customers[13] - This metric indicates the impact of statutory and commercial terms on the business[13] B2C Active Customers This metric tracks the number of unique users who placed a wager during the period, aiding in monitoring customer growth and platform traffic - B2C Active Customers are defined as users that place a wager during the period[14] - This metric helps management monitor customer segmentation, growth drivers, and platform traffic[14] B2C Marketing Spend Ratio This ratio assesses the effectiveness of B2C direct marketing expenses by comparing them to total B2C revenues, indicating return on marketing investment - B2C Marketing Spend Ratio is defined as total B2C direct marketing expense for the period divided by total B2C revenues[15] - This metric measures the success of marketing costs and indicates return on marketing investment[15] B2C Sports Margin This metric evaluates sportsbook performance by comparing wagers minus winnings to total amounts wagered, adjusted for open wagers - B2C Sports Margin is defined as the ratio of wagers minus winnings to total amount wagered, adjusted for open wagers at period end[16] - This metric measures sportsbook performance against its expected outcome[16] Adjusted EBITDA Adjusted EBITDA is a non-GAAP measure used by management to assess core business performance by excluding non-operating and non-cash items - Adjusted EBITDA is defined 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 infrequent or unusual items[17] - Management uses Adjusted EBITDA to compare operating performance period-to-period and assess core business performance against industry peers by removing effects not directly from core operations or differences in capital structure, depreciation, tax, and unusual events[17] Adjusted EBITDA Reconciliation The reconciliation shows an Adjusted EBITDA of $(1.5) million for Q1 2025, a decrease from $(0.6) million in Q1 2024, reflecting the impact of lower B2B revenues and other factors Adjusted EBITDA Reconciliation (Unaudited, in thousands) | Metric | March 31, 2025 | March 31, 2024 | | :------------------------------------ | :------------- | :------------- | | Net loss | $(6,828) | $(4,160) | | Income tax (benefit) expense | 565 | (249) | | Interest expense, net | 1,212 | 1,132 | | Depreciation and amortization | 2,013 | 1,839 | | Share-based compensation and related expense | 752 | 869 | | Credit reserve on PSP | 753 | — | | Transaction related costs | 22 | — | | Adjusted EBITDA | $(1,511) | $(569) | Historical Sports Margin The actual sports margin for Q1 2025 was 8.6%, showing a positive trend compared to previous quarters, indicating improved sportsbook performance Historical Sports Margin (Unaudited) | Period | Sports Margin | | :------------- | :------------ | | March 31, 2025 | 8.6% | | December 31, 2024 | 8.5% | | September 30, 2024 | 7.2% | | June 30, 2024 | 5.7% |