GAN(US:GAN)2023-04-13 16:00Financial Performance - The company incurred a net loss of $197.5 million for the year ended December 31, 2022, compared to a net loss of $30.6 million for 2021, resulting in an accumulated deficit of $151.0 million [104]. - Total revenue for the year ended December 31, 2022, was $141,528,000, representing an increase of 14% from $124,163,000 in 2021 [296]. - The net loss for 2022 was $197,498,000, compared to a net loss of $30,594,000 in 2021, indicating a significant increase in losses [299]. - Operating costs and expenses totaled $334,037,000 in 2022, up from $155,376,000 in 2021, primarily driven by impairment costs of $166,010,000 [296]. - The company reported a loss per share of $4.66 for 2022, compared to a loss per share of $0.73 in 2021 [296]. - The company incurred $1,771,000 in restructuring costs during 2022, indicating ongoing adjustments to its operational strategy [296]. - The company’s total liabilities increased to $82,312,000 in 2022 from $36,873,000 in 2021, largely due to the addition of long-term debt [294]. - The company reported a net foreign currency transaction loss of $969,000 for the year ended December 31, 2022 [318]. Customer Concentration and Revenue Risks - The largest customer, FanDuel, accounted for 20.9% of total revenue in 2022, up from 14.8% in 2021, but the company anticipates a significant decline in future revenues as exclusive rights ended in January 2023 [115]. - The company relies on a small number of customers for a substantial portion of its revenues, which increases the risk of significant revenue loss if key customers are lost [115]. - The company reported a potential decrease in revenues during economic downturns, as discretionary consumer spending declines, affecting participation in iGaming and sports betting [122]. Operational Challenges and Market Conditions - The company operates in a highly competitive online gaming industry, facing risks of price reductions, reduced margins, and loss of market share due to competitors with greater resources [108]. - The company faces substantial variability in business operations, making it difficult to forecast financial results and increasing the risk of volatility in share prices [110]. - The company is sensitive to macroeconomic conditions, which could adversely affect its business and financial condition, particularly regarding consumer discretionary spending [320]. - The company anticipates substantial growth in its customer base, particularly in the U.S. iGaming and sports betting market, which may strain its operational resources [131]. - The company may face increased costs and operational disruptions due to health epidemics or public health crises, impacting its business operations [141]. Regulatory and Compliance Risks - The online gaming industry is heavily regulated, and failure to comply with licensing requirements could adversely affect operations and financial viability [103]. - The online gaming industry is heavily regulated, and failure to obtain or maintain necessary licenses could disrupt operations and adversely impact financial results [146]. - The company generates a significant portion of its revenues from unregulated markets, and changes in regulation could lead to increased costs or loss of business [155]. - Compliance with evolving data privacy regulations may incur additional expenses and violations could damage reputation or result in fines [157]. - Regulatory compliance costs are expected to continue to be significant due to the company's transition to U.S. public company standards [161]. - The company has faced fines related to non-compliance with license conditions, which could lead to further disciplinary actions affecting operations [151]. Impairment and Asset Management - The company recognized significant non-cash impairment charges totaling $166 million, including $136.9 million for goodwill and $19.1 million for intangible assets during the year ended December 31, 2022 [132]. - The Company recognized a goodwill impairment of $108.0 million as a result of its impairment test performed as of December 31, 2022, contributing to a total impairment of $136.9 million for the year [365]. - The Company recognized an impairment of $19.1 million to its intangible assets and $10.0 million to capitalized software development costs during the year ended December 31, 2022 [371]. - Total capitalized software development costs decreased from $32,037,000 in 2021 to $7,589,000 in 2022, reflecting a significant reduction in development activities [391]. Internal Controls and Governance - A material weakness in internal control over financial reporting was identified, which, if not remediated, could adversely affect the company's reputation and stock price [162]. - The company has implemented measures to improve internal control over financial reporting, including formalizing policies and enhancing management review controls [164]. - The company is subject to ongoing reporting and disclosure obligations, which may increase operational costs and divert management's focus from product development [160]. - The company's by-laws restrict shareholders from bringing legal actions against officers and directors, limiting recourse for shareholders [180]. - Provisions in the by-laws may discourage third-party acquisitions, potentially limiting shareholder ability to obtain a premium for their shares [181]. Strategic Initiatives and Future Outlook - The business strategy includes expanding the customer base and entering new geographic markets, following the acquisition of Coolbet, which diversified the customer base [116]. - The company anticipates significant investments in software development to maintain competitiveness, but these investments may not yield immediate revenue [106]. - The Company revised its 2023 budget and long-term plan due to material reductions in expected future cash flows from its B2B segment and a strategic decision to not pursue further investment in its original content strategy [360]. - The dynamic evolution of the online gaming industry makes strategic planning challenging, particularly regarding product launches in new jurisdictions [154]. Cybersecurity and Fraud Risks - Cybersecurity risks pose a threat to the company's operations, potentially leading to reputational damage and financial losses due to breaches or service disruptions [125]. - The company is exposed to risks related to fraud and theft, which could result in operational losses and damage to its reputation [124]. - The company faces risks related to corporate social responsibility, responsible gaming, and reputation, which could adversely affect business operations and cash flows [144].