GAN to initiate strategic review and reallocation of capital

GAN is to embark on a strategic review to assess “a range of strategic alternatives” in a bid to maximise shareholder value, as well as disclosing a reallocation of capital towards what are dubbed as “more appropriate growth strategies”.

Regarding the latter, CEO Dermot Smurfit noted that “it has become apparent” that certain initiatives, such as SuperRGS and competitive sports betting markets like Ontario, “do not provide a path toward achieving an acceptable ROI in a reasonable period of time”.

“As such, we have elected to allocate capital away from these endeavours and toward more appropriate growth strategies,” he commented.

“Accordingly, we are focused on leaning into the value that GAN Sports has demonstrated thus far and being a market leader in emerging Latin American markets through our B2C operations.”

In addition, a strategic review to maximise value is to be completed “in a timely fashion,” however, it is suggested that there can be no assurance that the process will result in pursuing or completing any transaction.

Smurfit said: “Lastly, as part of our commitment to improving our returns for shareholders, we have launched a formal strategic review process to evaluate options available to hasten our path to better profitability metrics and a more attractive return profile. 

“We hope to complete this process in a timely manner and will certainly provide updates as appropriate.”

This comes as the company reports its performance figures during the fourth quarter and full-year of 2022, with Q4 revenue up 21 per cent to $36.9m (2021: $30.42m).

B2B contributed $14.1m, up 26 per cent from $11.2m, due to an increase in platform and content licence fee revenue from existing clients and new launches by existing and new customers.

The B2C reporting segment climbed to $22.8m (2021: $19.2m), which is aligned to a 49 per cent growth in Latin America.

Net loss swelled significantly to $147.7m (2021: $12.6m), which is put down to increased operating expenses and $133.6m in non-cash impairment charges, while adjusted EBITDA loss dropped from $6m to $400,000. This was primarily related to improved segment contribution and cost saving initiatives implemented throughout the year,

Operating expenses swelled to $172.4m (2021: $35.3m), with GAN putting this down to the aforementioned impairment and increased depreciation and amortisation due to content licensing intangible assets.

“Our fourth quarter continued to show strong B2C KPIs as we grew active customers by nearly 50 per cent,” Smurfit commented. 

“We also ended the year with solid momentum in our B2B sports betting business as we announced our partnership to support WynnBet at Encore Boston Harbor and had a highly successful launch last month. 

“This marks our third GAN Sports client in the US and we maintain a healthy pipeline of potential future partners for the platform.”

Across the year, improvements across each core division saw total revenue increase 14 per cent YoY from $124.16m to $141.52m.

B2B grew 19 per cent to $54m (2021: $45.6m) due to organic growth with US real money igaming, while B2C increased 11.32 per cent to $87.5m (2021: $78.6m).

Net loss for the year soared to $197.5m (2021: $30.6m) due to $162.5m in non-cash impairment charges, partially offset by increased B2B and B2C segment contributions, with AEBITDA swinging from a loss of $2.8m in 2021 to $6m. Operating expenses were $292.4m (2021: $114m).

Brian Chang, Interim CFO of GAN, added: “Given the range of potential outcomes related to the strategic review, we do not feel that we currently have an adequate level of visibility to confidently provide guidance for 2023 within a reasonable range. 

“That said, we do expect a relatively swift resolution to the strategic review process and hope to be in a position to provide our financial outlook for 2023 at some point in the near future. 

“In the meantime, we are acutely focused on supporting our key initiatives such as GAN Sports and seeking additional ways to manage our cost structure and improve our return profile.”