GAN announced a 12.5% decline in revenues to $30.7m in Q1 due to a drop within the B2C sector. The provider also revealed that its acquisition by Sega Sammy is on schedule to be completed as planned.
GAN’s Q1 saw a story of two segments, as B2C revenues fell by 23.4% while B2B revenues rose 8.9%. B2C revenue is GAN’s main source of income, so a decline here would inevitably lead to a general drop.
GAN also managed to lower operating costs, but it wasn’t enough to achieve a net profit. GAN instead slipped into a loss. Last year, however, the net profit of GAN was boosted by an one-time gain related to an amended licensing agreement.
Seamus McGill, CEO of GAN said that Q1 had a strong B2B growth rate (nearly 10%) and successful cost reduction initiatives.
Coolbet’s B2C revenue was impacted due to a smaller sports margin. However, we are very excited for the new parlay products and upcoming events such as the European Championships as well as Copa America.
Sega Sammy to be acquired in Q1
In fact, this cost reduction is due to the imminent acquisition of GAN by Sega Sammy. In November of last year, the Japan-based gaming giant agreed to purchase GAN through Sega Sammy Creation. This deal has a value of $107,6m.
GAN and SSC will merge into a new company with a special purpose, leaving GAN as the only surviving entity. During Q1, GAN shareholders approved the acquisition by a large majority.
Seamus McGill, CEO of GAN, said that the GAN acquisition could be completed as soon as 2024.
McGill stated, “We are continuing to optimize how we run the business in order to close our merger successfully with Sega Sammy.” McGill said that the GAN shareholders approved the merger overwhelmingly in February. We have also submitted all relevant applications to gaming regulator authorities and the Committee on Foreign Investment in America.
We continue to anticipate that the transaction will close by late 2024, or in early 2025.
GAN Mixed Quarter
B2C revenues fell by $18,3m in Q1 when segmented. This business generates all revenue through gaming, which has fallen due to lower player activity and sports margins.
GAN reported a decrease in B2C active customers, down 13.6% in the first quarter to 222,000.
GAN had better news in B2B. Revenues increased from $11.3m up to $12m. This was due to the provider’s expansion of B2B services in Nevada.
Platform and content licensing fees accounted for $9.7 million of the total B2C revenues, an increase of 12.8%. B2C revenues were also generated at $2.7m by other services, development and activities.
GAN’s geographic performance shows that Europe generated the most revenue, bringing in $11.6m (down 8.7%) from its activities. US revenues increased 7.1%, to $9.1m. However, Latin America’s revenue fell 38.9%. The rest of the world contributed another $3.1m, which represents a 14.8% increase.
GAN slips to net loss despite lower costs
As noted above, the operating costs have been reduced. Total expenses are down by 17.3%, to $34.0m. The lower headcount and compensation costs were a direct result of the ongoing initiatives to reduce cost. GAN reported lower amortisation and depreciation, with all intangibles fully amortized in the prior year.
A further $1.1m was spent on finance, resulting in a loss pre-tax of $4.4m, compared to $1.5m profits in 2023. Last year’s performance was boosted by an one-off $9.3m profit from a modified content licensing contract.
GAN’s Q1 net loss was $4.2m after paying income tax of $249,000, as opposed to $1.5m in 2023. The adjusted EBITDA also came out at a loss, $569,000 in comparison to last year’s $39,000.
