GAN Q4 Earnings summary

I had posted on GAN earlier. See here for that.…

GAN reported their Q4 earnings last week. The company reported a small revenue miss (more on this below) and promptly sold off. Then got caught in the downdraft of growth stocks. Following the EC I had sent a few questions to IR. When I did not hear back and inquired I got a response from the CEO Dermot Smurfit who also ccd his CFO. This level of attention does give me more confidence in the company. Now, about the results.
In 2020 their Gross Operator Revenue (GOR) was $545M (72% up). GOR is the amount of money that flows through their platform which includes iGaming, online sports betting, and simulated gaming. GOR from Igaming was up 273% for all of 2020 and they now have 21% of the US iGaming marketshare. By my calculations, they have only a mid-single-digit percent of the OSB business (dropped because of the loss of FanDuel’s OSB business) and with their Coolbets acquisition, their goal is to get it to over 20% in the next few years.
In 2020 they did not have any patent license rev whereas in 2019 they had $4M in patent license rev. The patent license rev is related to their iBridge patent which allows retail casino members to collect points with online gaming. Their patent license discussions closed in Feb. 2021 resulting in $3M in rev. Had that closed in Dec. they would not have had a revenue miss for 2020.
Among the B2B online casino technology vendors, they have a 68% market share. Michigan roll out in Jan. went very well (MI was expected to roll out in Dec. and also explains the Q4 rev miss). Their weekly GOR in mid-March was up 100% from the weekly GOR in Dec. 2020 thanks to the strong rollout in MI. Even if you exclude MI their weekly GOR went up by 40%.
They are projecting $24-25M rev for Q1 2021 and also increased the Full-year 2021 projections to $100-105M. Overall the company is projecting 2021 GOR of $900M+ which is 65% above that of 2020. If you pencil in their 2020 take rate of 6.4% you get $58M. You add the $3M in patent license they got in Feb. and Coolbet rev contribution of $50M you end up with $110M+ for 2021 which is what I am projecting. Their 2020 rev was $35.2M. So, GAN will have an organic rev growth of 70% in 2021.
Few other notes from the EC:

  1. Any B2C operator with true multistate scale ambition will need one single mobile app in the app stores, supported by the true one account, any product, any state capability.
  2. They have 8 U.S. real money gambling clients of which all-but-one are U.S. retail casino operators vs. online-only. They have several more U.S. casino clients of Simulated Gaming. They have grown from just 1 client in 2017 to 2 U.S. real money online gambling clients in 2018 and now 8.
    3.Coolbet CEO stays as global head of sports
    In summary, this is a company with a marketcap of $700M with a 2021 projected rev. of $105M+ with organic growth. OSB and iGaming is a space I want to be in and this company seems like a good option at this point for 3.4% of my port.

Hi Tex,

thanks for posting your summary. GAN is on my list… been in and out of it a few times with trial position… so I am following it but not very convinced yet.

I understand sudden drop in price this week due to 4Q patent revenue moved to 1Q and creating optics issue.

On one hand, this company looks like simultaneously completing multiple transformations AND positioned very well for a coming boom. As you mentioned 70% organic growth with overall almost tripling revenue in 2021 would be fantastic opportunity.

However, I am trying to get higher level understanding of the company, business but most importantly management and wondering your opinion on following.

  1. First I thought the whole UK to US transition was somewhat opaque and if you dig into it, the CEO ended up making insane amount of money on the back of investors, through some special investment deals. I don’t have specifics handy right now but if you look at their SEC filings through the transition, you will find that.

  2. Almost always for last three quarters, I find myself surprised on their earnings detail. Like this one $3M patent deal this quarter… if you look back, it would be losing part of the FanDuel business… or something else…
    Does not look like issues that came up overnight… Just seems like management does not tell upfront on issues on the horizon.

So to a lot of extent I understand the investor reaction to this $3M shift in revenue… it just seems they had a shortfall in their projection and they explained it away…

Now I am not saying that this is shady management… I just cant find enough interest to go back and verify their new explanation on every call if they had warned against something in the past.

May be this is an issue of spending enough DD efforts or just teething issues in a emerging company in very dynamic industry.

I am curious on your level of conviction on management.

thanks for your help.



I share some of your doubts and hence kept the position small. I am not aware of the details about the CEO getting a huge windfall for closing their UK B2C business. The closing of UK’s B2C operations happened in Jan. 2020. Perhaps that is why you don’t see it being mentioned much in the EC after the company went public in May 2020.

The $3M patent license deal is with Parx Casino and the company is expecting more such deals in 2021.…

Yes, the deal releases Parx from having to release on GAN’s platform, sounds like attrition - something to be watched for sure. They have added many new customers in 2020 including 10-year deals with Wynn. They were overly reliant on FanDuel in 2020 and have confirmed that going forward they don’t expect any customer with more than 15% rev. contribution.…

My main concern was that the GOR went up from $316M in 2019 to $545M in 2020 (72% rise) and they are projecting GOR to up by about the same amount in 2021. But 2020 rev growth was only 17% mainly due to the closing of the UK B2C operation and the lack of any patent license deal in 2020. The natural question is will we see this repeat in 2021. But in 2020 they did not have any patent license rev and management has not informed of any potential B2C business closing (they do have some Italian business not sure if it is B2C). In any case, their 2021 rev projections do not indicate any more shoes dropping and organic rev growth should be in line with GOR growth albeit lower as simulated gaming which has a higher take rate than iGaming and OSB forms a smaller part of the GOR.

Another thing that is unclear is Coolbet’s potential for future growth outside the US.

Management did mention that they will no longer get FanDuel’s OSB business from Sep. 1, 2020. You will see that in their Q2 EC onwards. To summarize this the online gaming field in the US will have substantial tailwinds over the next few years, not unlike CTV. Draftkings may be a better play but I don’t like their valuation. If GAN executes the company and stock price should do well this year.