GAN Limited's Financial Review for 2023

Quick Intro

GAN’s client base predominantly comprises U.S. casino operators keen on venturing into the online gaming sphere, encompassing online sports betting (OSB), iCasino, or both. GAN delivers services for Real Money Gaming (RMiG) within regulated U.S. markets, facilitating actual online gambling, as well as offering Simulated Gaming (SimGam) for non-regulated, sweepstakes casino gambling where participants can buy fictitious chips for entertainment or practice purposes. While GAN primarily operates in the business-to-business (B2B) sector, providing Software-as-a-Service (SaaS) solutions in the U.S. by offering platform services to gaming operators, it expanded its portfolio by acquiring Vincent Group plc (“Coolbet”) on January 4, 2021. Coolbet specializes in business-to-consumer (B2C) gambling services across the globe, with a strong presence in Europe, Latin America, and Canada.

Furthermore, GAN is enhancing its B2B offerings in the U.S. by integrating Coolbet’s renowned sports betting engine technology. This expansion enables GAN to supply a comprehensive suite of SaaS solutions to its partners, supporting the proliferation of online gambling in the U.S. market.

In the last quarter of 2023, GAN unveiled a total revenue figure of $30.7 million, experiencing a 17% drop compared to the same timeframe in the previous year. GAN Limited, a renowned gaming solutions provider listed on NASDAQ, shared its financial achievements for the last quarter and the entirety of the year ending December 31, 2023. Although the company faced a downturn in revenue, it managed to mitigate its net losses, showcasing a varied annual performance.

A Detailed Look into Revenue Decline across Segments

The final quarter of 2023 saw GAN reporting a total revenue of $30.7 million, a 17% reduction when juxtaposed against the same quarter in 2022. This downturn spanned both its Business-to-Business (B2B) and Business-to-Consumer (B2C) operations.

In detail, the B2B segment’s revenue was $11.8 million, a 16.5% decrease, and the B2C segment’s revenue totaled $18.9 million, a 17.1% decline. While revenue from Europe saw an upswing, reaching $12.1 million, other regions like the US, Latin America, and various global markets witnessed revenue reductions.

Quarterly operating expenses decreased to $39.3 million, largely due to diminished impairment charges relative to the prior year. This resulted in a pre-tax loss of $9.6 million, a stark improvement over the $145.5 million loss noted in the corresponding quarter of 2022.

However, Adjusted EBITDA saw a downturn, posting a loss of $3.9 million compared to a loss of $368,000 in Q4 of 2022. Nonetheless, the net loss saw a substantial reduction from $147.7 million to just $9.4 million.

Across the entirety of 2023, GAN’s total revenue amounted to $129.4 million, marking an 8.6% fall from the previous year. The B2B segment’s revenue saw a 20.2% reduction to $43.2 million, whereas B2C revenues slightly dipped by 1.4% to $86.3 million. The B2B revenue drop was attributed to contractual modifications, and the B2C decrease was tied to fewer active customers in Latin America.

GAN’s Forward-Looking Strategies and Impending Sega Sammy Acquisition

The annual adjusted EBITDA moved to a loss of $8.4 million from a positive $6 million in 2022, mainly due to dwindling revenue and developmental ventures within the B2B sector.

The year concluded with a significantly decreased net loss of $34.4 million, down from $197.5 million, owing to lesser impairment charges than the previous year.

Significantly, Sega Sammy Holdings is set to acquire GAN Limited for $84.4 million via a Bermuda-based special purpose entity, with the deal anticipated to finalize by the third quarter of the fiscal year ending March 2025.

This strategic acquisition is poised to bolster Sega Sammy’s growth trajectory, aiming to amplify its gaming division, especially in the U.S., by harnessing GAN’s technological offerings and market presence.

GAN shareholders are slated to receive $1.97 per share in cash, with GAN slated to be the merged entity’s surviving corporation.

Despite the hurdles faced in revenue generation, GAN’s strategic endeavors and the upcoming merger with Sega Sammy highlight its dedication to scaling and broadening its footprint in the global gaming landscape.