B2C decline pushes revenue down 12.5% at GAN in Q1

Q1 was a tale of two segments for GAN, with B2C revenue down 23.4% but B2B revenue rising 8.9%. As B2C is GAN’s primary revenue source, a downturn here inevitably led to an overall decline.

GAN was also able to reduce operating costs during the quarter, but this was not enough to secure net profit. Instead, GAN slipped to a net loss, although last year’s net profit was helped by a one-time gain associated with an amended content licensing agreement.

“Q1 saw strong B2B revenue growth of nearly 10% as well as successful ongoing cost initiatives to reduce our overall operating expenses by 20%,” GAN CEO Seamus McGill said.

“Our B2C revenues were impacted by a lower sports margin, although we are excited about the pending rollout of new products such as pre-built parlay bets and the upcoming major events like the European Championship as well as Copa America – one of the largest soccer tournaments in Latin America where Coolbet is particularly strong.”

Sega Sammy acquisition edges closer in Q1

Incidentally, the reduction in costs relates to GAN’s pending acquisition by Sega Sammy. The Japan-based gaming heavyweight agreed to acquire GAN in November last year through its Sega Sammy Creation (SSC). The deal is valued at $107.6m.

Under the deal, GAN will merge with SSC’s new special purpose company, with GAN the surviving corporation after this merger. The acquisition took a step closer during Q1 when GAN shareholders overwhelmingly voted to approve the deal. 

With this approval, GAN CEO Seamus McGill said the acquisition is on track to complete as early as late 2024.

“We continue to optimise how we operate the business as we work toward a successful closing of our merger with Sega Sammy,” McGill said. “GAN shareholders overwhelmingly approved the merger in February and, more recently, we have submitted our application to the Committee on Foreign Investment in the US well as all applications with relevant gaming regulatory authorities. 

“We continue to expect the transaction to close in late 2024 or early 2025.”

Mixed quarter for GAN

Breaking down segmental performance in Q1, B2C revenue fell from $28.5m to $18.3m. All revenue from this business is generated by gaming activities, with this falling due to reduced player activity and lower sports margins.

GAN also noted a decline in active B2C customers in Q1, declining 13.6% to 222,000.

As for B2B, there was better news for GAN, with revenue rising from $11.3m to $12.3m. The provider said this was mainly due to an expansion of its B2B offerings in Nevada.

Some $9.7m of all B2C revenue came from platform and content licence fees, up 12.8%. A further $2.7m in B2C revenue was generated by development services and other activity, level year-on-year.

As for geographical performance, GAN again drew most revenue from Europe, with activity here generating $11.6m, down 8.7%. US revenue was up 7.1% to $9.1m but Latin America revenue dropped 38.9%. A further $3.1m came from operations in the rest of world, a rise of 14.8%.

GAN slips to net loss despite lower costs

In terms of spending, as noted, operating costs were reduced, with total expenses down 17.3% to $34.0m. This was a result of lower compensation costs and reduced headcount, realised as part of ongoing cost saving initiatives. GAN also noted lower depreciation and amortisation with intangible assets fully amortising in the previous year.

The provider noted a further $1.1m in finance costs, leaving a pre-tax loss of $4.4m for the quarter, in contrast to a $1.5m profit in 2023. However, last year’s results were helped by a one-time $9.3m gain from an amended content licensing agreement.

After paying $249,000 in income tax, GAN ended Q1 with a net loss of $4.2m, compared to a $1.5m net profit in 2023. In addition, adjusted EBITDA came in at a loss of $569,000, while last year, this was positive $39,000.