Results

GAN takes legal action against MGM Resorts as share price tumbles 18% on Q4 financial results

By Conor Mulheir - 23 Mar, 2022

The share price of Nasdaq-listed GAN has fallen by 18% in pre-market trading today (23 March) after the supplier reported full-year 2021 revenue of $125.4m.

The annual growth, which more than tripled year-on-year, was driven by the acquisition of B2C sports betting business Coolbet, which GAN bought in January 2021 for €149.1m.

In full-year 2020, when the business operated exclusively on a B2B basis, total revenue came to just $35.2m.

For 2021, most of GAN’s revenue was generated by its B2C segment at $78.6m. This operating division was created after the integration of Coolbet, an Estonian sportsbook built on its own proprietary technology stack.

B2B revenue for the year totalled $46.8m, a 33.2% increase on 2020, mostly driven by a $10.7m increase in platform and content fees.

Despite declaring a gross profit of $84.1m for the year, GAN’s adjusted EBITDA loss came to $84,000, while net losses reached $24.9m – up from $20.2m in 2020.

During Q4 2021 specifically, the business generated $30.5m in revenue, consisting of $11.3m in B2B and $19.2m in B2C revenue.

While there is no year-on-year Q4 comparison to be made due to the acquisition of Coolbet, Q4 2021 revenue represented a 5.5% downturn quarter-on-quarter from a Q3 total of $32.3m.

Adjusted EBITDA loss for Q4 was $5.0m, while net losses came to $8.5m, compared to positive EBITDA of $39,000 and a net loss of $7.9m in Q3.

“Our fourth quarter financial results were adversely affected by the volatile sports margin in our B2C segment consistent with other international operators, which was partially offset by continued strong new customer growth,” said GAN CEO Dermot Smurfit.

“However, our fourth quarter was highlighted by strategically important wins for GAN along with new state launches for clients such as FanDuel in Connecticut and our entrance into Ontario when iGaming and online sports betting officially goes live.”

The business also completed its acquisition of online casino developer Silverback Gaming during the fourth quarter, which it said would help to solidify its future as a B2B gaming supplier.

“Looking out to 2022, we envision a year of improved financial performance driven by existing growth in B2C, the launch of Ontario, new state launches in the US and continued momentum behind our key initiatives like SuperRGS, and GAN Sports,” Smurfit continued.

“We are acutely focused on our profitability in 2022 and have taken decisive actions to improve our profitability metrics and margins.”

GAN recently filed a lawsuit against MGM Resorts over the alleged infringement of one of its patents relating to the use of customer loyalty software linking land-based and online gaming accounts.

“This is something that we, of course, prefer not to do of long-standing industry participants,” Smurfit said on GAN’s Q4 earnings call. “But as the situation calls for it, we’re certainly not afraid to take legal action.”

GAN CFO Karen Flores is predicting full-year 2022 revenue of between $155m and $165m and adjusted EBITDA in the range of $15m to $20m.

“We are entering the new year with encouraging momentum around the launch of new clients and the advancement of initiatives such as SuperRGS and GAN Sports while strategically focused on implementing cost controls to accelerate profitability to help drive improved shareholder returns in 2022,” Flores added.