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GAN Releases CY2016 Annual Results

May 30, 2017

LONDON & DUBLIN--(BUSINESS WIRE)-- GAN plc (“GAN” or the “Group”), a leading B2B supplier of Internet gaming enterprise software-as-a-service solutions to the US land-based casino Industry, announces results for the twelve months ended December 31, 2016.

The full Chairman’s Report and Financial and Operational Review are available on GAN’s website at www.gan.com.

Financial Overview

  • Net Revenue of £7.8m (2015: £6.0m) an increase of 30% on 2015.
  • Clean EBITDA1 loss of £0.9m (2015: £3.0m) a reduction of 70% on 2015.
  • Loss before tax of £5.2m (2015: £5.6m) and loss per share of £0.06 (2015: £0.09)
  • Loss after tax of £3.8m (2015: £5.0m)
  • Cash and cash equivalents at the end of the year of £3.2m (2015: £3.8m)
  • Net Assets at the end of the year of £10.9m (2015: £10.2m)
  • Raised Gross Proceeds of £4.4m in 2016 from share placings and an additional £2m in April 2017 through an unsecured 9% convertible loan note positioning the Group for further growth

Strategic & Operating Developments

  • Launched Simulated Gaming™ in the US for three (3) new US casino clients (2015: 4)
  • Signed five (5) new US casino clients for Simulated Gaming™ (2015: 5)
  • Continued delivery of Betfair’s fast-growing New Jersey Internet casino business BetfairCasino.com supported by GAN’s Internet gaming platform, content & supporting services. The New Jersey Internet gaming market grew gross gaming revenues by 32% to $197m in 2016
  • Post period end signed one (1) further client of both Simulated Gaming and real money Regulated Gaming in the US, bringing total to thirteen (13) US casino operator clients representing seventy-five (75) casino properties coast to coast
  • GAN’s Simulated Gaming™ clients together generate $9bn (13%) of the land-based US casino Industry's annual gaming revenues of $68bn2
  • Continued investment in US infrastructure: licensing, offices and people
  • Post period end launched four (4) new client operators of Simulated Gaming™ bringing to thirteen (13) the total number of US casinos operating Simulated Gaming™ online in reliance on GAN
  • Post period end launch of a selection of IGT casino slot and video poker games for Simulated Gaming™ now available for end user players of Parx Casino’s Simulated Gaming™ website ParxOnline.com, mobile iOS app and mobile Android app (search ‘Parx Casino’ in app stores)
  • Post period end award of a full Casino Service Industry Enterprise in New Jersey, issued by the New Jersey Division of Gaming Enforcement following a multi-year licensing process
  • Post period end an amended version of HB 271 was passed by the Pennsylvanian Senate on May 24, 2017 which may lead to Pennsylvania being the fourth US state to regulate after a three (3) year hiatus on regulation of real money Regulated Gaming. GAN is already providing Simulated Gaming™ to Parx Casino, Pennsylvania’s largest casino, and is contracted to provide real money Internet gaming services should regulation occur.

Dermot Smurfit, CEO of GAN commented:

“2016 has continued the period of investment for GAN, and, performance to-date in 2017 is in line with our expectations.

GAN has continued to position its business to capture growth in emerging online gaming markets in the US. 2016 saw significant progress with Simulated Gaming™, together with a number of significant commercial and strategic developments.

Real-money Internet gaming in New Jersey and the pace of regulation in the US market has remained slower than expected although growth in New Jersey out-performed our full year expectations with gross gaming revenues up 32% year on year to $197m. We are confident in the long-term prospects for real-money gaming.

For 2017 we believe that the opportunity for GAN with Simulated Gaming™ will more than adequately compensate for the delays in regulating real-money Internet gaming in the US which also positions GAN to serve existing clients of Simulated Gaming with real money Regulated Gaming in the event their casino properties’ host State does regulate.

The State of Pennsylvania appears to be in the process of regulating Internet gaming with a number of legislative bills actively considered in 2016, of which derivative bills have been the subjects of legislative action in 2017 with the latest bill regulating real money Internet gaming being approved by the Pennsylvanian Senate just last week. GAN has been selected as the exclusive platform for both Simulated Gaming™ and regulated real-money Internet gaming by Parx Casino, the leading casino operator in Pennsylvania, and is positioned for substantial growth in regulated real-money gaming should suitable legislation be enacted in 2017.

Throughout 2016 GAN’s Simulated Gaming™ enterprise solution continued to prove its ability to support the core on-property gaming business of US casino clients, lending impetus to new client signings. GAN’s increasing body of evidence demonstrated that Simulated Gaming™ together with GAN’s US-patented reward points integration system is a highly cost effective marketing tool for land-based casinos, which supports on-property gaming rather than cannibalizing. The combination of GAN’s compelling Internet gaming-as-entertainment experience and GAN’s US-patented ability to integrate with land-based loyalty programs works to reactivate long-term lapsed patrons on-property, increase on-property visitation by existing patrons and generate incremental income online for GAN and the casino clients whilst also increasing land-based gaming revenues.

Simulated Gaming™ continues to represents a US market opportunity estimated at $250m in 2017 which is immediately addressable and not contingent on the pace of regulation nor dependent on US casino clients’ making material investment in digital user acquisition as the majority of Simulated Gaming™ revenues are derived from the casino clients’ existing patrons.

In 2016, the majority of GAN’s US casino clients commenced marketing strategies to bring both existing and new patrons online, principally in the later months of the year. As this happens, GAN’s US casino clients typically rely heavily on our team of marketing specialists. Marketing Services provided to US casino clients represents a significant opportunity for GAN not only to increase professional service fees but also to support casino clients in scaling their Simulated Gaming™ business online in the regions where their land-based gaming brands are recognized. Supported by GAN’s Marketing Services Team, GAN’s US casino operator clients also have the opportunity to significantly increase digital user acquisition in order to secure a share of the $2.5bn US Social Casino market as well as serve their existing patrons.

In 2016 GAN signed contracts with some of the largest multi-property US casino operators in the market including JACK Entertainment, Chickasaw Nation and Station Casinos each with annual land-based gaming revenues in excess of $1bn. As GAN’s product offering, marketing and CRM strategies matured, performance metrics for Simulated Gaming ™ have made steady progress and the prospects for this business are very encouraging.

Our investment in the business continues and we have grown our team and expanded our technical expertise, US infrastructure and gaming content portfolio throughout 2016. Consistent with earlier statements, the US patent awarded to GAN in September 2015 has served to provide material benefit to the Simulated Gaming™ business as we grew in the US market in 2016.

We remain confident in our prospects for 2017 and beyond. For 2017, we forecast material growth of Simulated Gaming™ from the launches of TEN Atlantic City in New Jersey, Oneida Nation’s Turning Stone Casino in the State of New York, the Chickasaw Nation’s WinStar World Casino in Oklahoma, Station Casinos in Nevada and MGM Resorts’ The Borgata in New Jersey. We also recently completed GAN’s first debt capital raise as a publicly-traded company with gross proceeds of £2m which will prepare the Company for Regulated Gaming in Pennsylvania and support the commencement of a US patent licensing program in 2017 which may represent a new source of patent licensing revenues for GAN.

We believe our Company has achieved critical mass in the US market with 13 major US casinos as clients of Simulated Gaming™ each of which has licensed GAN’s Internet gaming system and our US patent and that the Company is well-positioned to secure additional profitable opportunities from incremental US States which regulated real money Internet gaming over time.”

Notes

1. Clean EBITDA is a non-GAAP company specific measure and excludes interest, tax, depreciation, amortisation, share-based payment expense and other items, which the directors consider to be non-recurring and one time in nature.

2. The US land-based casino gaming Industry generated $67.6bn in total US casino gaming revenues in calendar year 2015 of which $29.3bn was derived from 459 Native American-owned casino properties growing at 3.1% annually and $38.3bn from 580 commercially-owned casino properties located in 24 States and growing at 2.3% annually (source: RubinBrown LLP, March 2016).

Note regarding forward-looking statements

This announcement includes forward-looking statements, including statements concerning current expectations about future financial performance and economic and market conditions which GAN believes are reasonable. However, these statements are neither promises nor guarantees, but are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated.

Results Conference Call

The GAN management team will host a conference call for analysts & institutional investors at 11.00 ET / 08:00 PT (16.00 BST) on May 30, 2017 the timing of which reflects the significantly increased holdings of GAN’s publicly traded equity by US-based institutional investors. Those wishing to dial in should contact The Equity Group on the details below:

GAN
Dermot Smurfit
Chief Executive Officer
+44 (0) 20 7292 6262
[email protected]
or
Desmond Glass
Chief Financial Officer
+44 (0) 20 7292 6272
[email protected]
or
Davy (Nominated Adviser, ESM Adviser and Joint Broker)
John Frain / Barry Murphy
+353 1 679 6363
or
Liberum (Joint Broker)
Neil Patel / Cameron Duncan
+44 (0) 20 3100 2000
or
The Equity Group
Adam Prior / Kyle King
+1 212 371 8660
[email protected] / [email protected]

Source: GAN plc