Earnings call transcript Q3 2022

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Operator

Greetings, and welcome to the GAN’s Third Quarter 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Robert Shore, Vice President of Investor Relations. sir. you, Thank

begin. You may

Robert Shore

With and accompany note earnings good closed third Maria, set slides Karen at everyone. is President PowerPoint Dermot and of CEO; prepared we afternoon, was issued have remarks. XXXX and gan.com. website release company's market CFO. on quarter today today are posted Smurfit, our Please Thanks, Flores, the GAN's will me that after and a that the provided

section these of access You slides Investor Relations website. on our may the

I'd our posted release. are portion forward-looking number make to by on comparisons qualified we website otherwise Safe may and like which case in to year, last earnings Federal legal the of the one like on our slide talks I'd noted. and and corresponding remind call to direct we call are on make protected you unless audience disclosures. our forward-looking the presentation lines, Securities that The each in Along Harbor our that late laws, the of -- today statements have forward-looking period are statement of the IR these we disclaimers the contained in our today

growth framework of underlying rates will to currency We also same constant where the how in currency as business growth only. a currency growth refer constant provide fluctuations, available for before, when foreign excluding of rate effect our existing the rate to

discussed with call. depreciation, our and the all filings today's to figures payroll stock-based discuss also will refer of as and expense the any taxes of how Please understand to non-recurring note amortization we that metrics calculate as Please related in compensation SEC they charges. our well exclude

Dermot go over that, to please. call our the With Smurfit. turn Dermot, CEO, ahead I'll

Dermot Smurfit

results. the which a $XX.X and Bobby, and segment flat, our to constant currency was discuss performance start compared of to quarterly results. revenue quarter presentation XX% the Thank year of with million, the join generated basis. slide We on and consolidated everyone. XXXX on operating financial I'll prior our good third Please second me you, afternoon, roughly up

foreign revenue, As quarter. for headwind note, positively a our quick expenses currency impacted a this operating was but

quarter EBITDA our and $XX was heavily expenditures, effect foreign this in capital commitments in as number the on of including of the We quarter quarter positive million gaming lower every year. and million, Mexico. approximately from impacted $X of licenses required territories by investments ended cash, as to soon was Adjusted both currencies, for with the prior for million launched timing regulated Nevada be $X.X well delivering a which

free second towards However, are making of cash cash important we for sustained achieving operating flow quarter since first the time the progress positive positive XXXX. flow being with

cost operating is well. in our Additionally, as quarter seasonally flow results. initiatives We that positive cash the QX yielding and quarter are anticipate reduction strongest positive fourth the with combined

we QX expenditures will with be Lastly, in lowest the capital anticipate complete of investments year. licenses, quarter gaming the our and for for the largely PP&E year content,

range uncertain a when betting in of Turning despite to World an currency positive headwinds upcoming full-year wide creating and our in constant all-time handle impact record we basis. on Cup BXC the of are potential performance, start on fourth quarter FX sports on experienced monthly October a business the outcomes, a

to on at previously revenue As not deliver operational all, we the improvements all this what structure provided take to and or not quarter. a fourth had and this ownership on our making year. ensure as providing be I at the will I'm with a result, healthy CEO and sheet. expectations adjusting further we balance pleased Not we'll cost street of EBITDA for be adjusted delivering guidance not

year robust underlying BXC. segments, $XX.X in million with business prior was versus increasing where returns $XX.X tend but year. amount active two skewing remain XX% consistent. our now The The shift of the investments and in remains customers customers Looking Latin towards European and on mix begin the turnover in wages marketing acquisition is countries, prior with to average rapid million period. the of be segment at Revenue user with I'll the wagered from America, increasing XX% lower the health than

The prior by to the relative impacted couple year of items. results were main a

is Firstly, on impact the X% the To versus a growth of X%. saw actual decline a the year-over-year because international of currency constant dollar. revenue million, of business currency foreign note, U.S. of negative coolbet.com strengthening to basis, $X.X revenue of

American challenges Secondly, Latin marketing certain competition in emerged markets markets. European in certain continued and increased

in year. The $XX.X XX% side, increase driven in the XX% by was increase from On million operator generated increase revenue. $XX.X BXB gross million in revenue revenue, a was which prior we the a

by Our this metric on volatile XX Over offerings, points our depending revenue, of revenue however, all our increase intend gross mix revenue to to quarter. to driven basis take was due but X.X%, take BXB rate value gaming the on operator time, digital quarter-to-quarter chain expect rate to expanded that mix. from the shift down be we the during

Slipping number slide, next three. now onto please slide the

continue and deployment or leading company, product underlying sports online gaming on in trends existing both growth of product and we were aggregation Sports, in gambling solutions. service or Super key of our GAN there operation a retail simulated like new side, to iGaming BXB BXB to line our content we offerings platform for initiatives make and into and segments. strong gaming positive strides the a ushered business for strategic prior On course RGS, the the Notably, of regulation our PAM, completing quarter

here by PAM all the believe from PAM We solution your ranging the we U.S. Jigsaw here enterprise our and online whether in needs sports are complete or the to to pieces need we retail our Puzzle of gaming, you in driven services all U.S., trading the just a team, stop proven have the one for managed shop now BXB

a kicks excitement with of Ecuador. Looking Sunday lot there's Cup, versus the which for this ahead, World off Quikr

international the revenue impossible later a be teams for nearly this season is event the round. huge BXC industry, from commentary pinpointing will to given factors, the tournament the what including peers, similar advanced impact multitude of While our to earnings

and XXXX outcome depositing customers quarter closes featured optimistic second European doubled the the the to new Cooper back looking in over events for up that which similar a months, the current our context, operator us some prior more than be Championships, the versus For quarter.

timing now gaming While Ontario, has legislation, I'm approvals timing side and XX licenses pleased well acceleration strong state Canada. trends in and delayed on Sports, progression our GAN U.S. the state by in generally as the with by the the revenue possess particularly iGaming. We as regulatory the underlying of BXB business States, on the state of been of

and assets real and well entry as today regulatory the previously, relationships privileged significant competition. licenses noted create a in As very for to represent these barrier both as future,

focus these absolutely for BXC return There's will all a other into achieved the continuing items as expense job by on deliver measures line operating our generative, interim, control reallocate profitability. can't highest organization, along must more our opportunity we While nimble better and marketing only states coming new an laser our in This we improve of to we cash of do as with can spend wait we online. drive on clients. our cash to to to year. also dynamics the be heading regions profitable an to generation next be staying And while

the know Eric before of in here take on I gaming the premier in capital on, space as Green BXB the expertise markets invaluable leadership and to provider call Board. I'll in Mr. the U.S. of becoming moving execute technology to has be To independent he welcome our we Board know U.S. the assist fact will important our our Directors. strategy and in this to and opportunity some Eric. task this Eric’s may

have leadership plan ensure expertise drive support and Directors Our structure continue right our and of composition will and value. the evaluate shareholder Board its growth to to to we

next Moving number now four. on to slide the slide,

five highly debuted outperformed content, of so clients initial quarter. launched titles the new sportsbook market. delivered game release. And its last has expected we end the in now which titles app and recently metrics the five Studios, acquired each new live Ontario has we Silverback more Coolbet by our slot new we additional December, an with subsequent encouraging are first slot The performance online and

before Tiki not any that but of launch reels after will spin, Bonanza, this features title which lock unique they debut without players excited reels losing and we an to-date. that to five change with spin these to any take their again, locks. stakes December, their also lock will to allow very is only be The this team title expectation In release Silverback strongest a the

in quarter course the Mississippi our markets Resort. games of Oaklawn the Island Casino the with our We debut two of and Arkansas with launch and in sports the retail new in platform Casino of View entered at

my would product BXB we to service actually view, GAN's created a success from kiosk than Gulf on the here history. near-term switching While more sports leading revenue in that in Coast be on product Mississippi material XX betting sports considerable go driver, matters in a any to U.S. launch and We expect betting this

is or simply Sports GANgsters customization great market. GAN the to product creating Expo While Vegas. use, contracts the to and of announce formalized. live month user and expect from received interface operator too personalization differentiated at there's GAN the efforts plant feedback I'd when to Gaming ease everyone the end hybrid Las truly thank in last user into the employees Global given for are directly involved models The across personally globe, to many like GAN getting name their we of and ranging Sports new partners the

that impact Coolbet potential to national a marketing native for It's Hockey, setting said, too that channels the tell the being management the them country's but sport, open Ontario line North in given market. the early does XX-year just new team in the of border, and it to well limited data, risk success bodes Moving business. Ice history That market. launched in also Coolbet’s of [indiscernible] the

wagering be business. now to five. World we'll quarter BXC the new customer ups, metrics will fourth up be key day-by-day other an watching FIFA near-term, it Cup, for Wrapping exciting I'm volumes slide see and our sign on with looking

XXXX, platform two providing market. addition, the in we'll And BXC Red Rock will markets Mexico. local As Resorts in in Las the brand go sports new entering BXB be Coolbet Vegas with live we head into our

revenue what's EBITDA is delivering critical growth healthy business. drive However, a flow to positive adjusted free and and cash

as focused to acceleration be in our where and spending drive We on revenues. prudent will cutting cost performance await nicely bottom line we appropriate

overall back really to iGaming Retail small permitted revenue states speak Currently, XXXX larger estimated moment majority Jersey, the massive are XX in are just a the six in and clients. XXXX. $X.X days what's State in in allowed take the be and from can accomplish billion iGaming. $X.X to in opportunity Pennsylvania, really billion U.S. and this states step what day-out This three with gaming just which commercial the operates process me really sportsbooks states, for the earliest online operators. Union. in exciting and its We XX is or for for in of of generate the driving New Let sportsbooks the for states, expected key currently combined Michigan still a of GAN of to with day-in tribal

positioned a competitor truly clients of provide uniquely here type range enterprise this the that true full I perspective, gets to can of in comprehensive is a them winning. suite that U.S. running this GAN offering of From solutions no believe at and GAN deliver is with there really up,

so pinpoint, it of tangible major GAN this that and is remain the real to opportunity. ever. of as And a timing as I beneficiary while challenging be the will confident opportunity remains

our CFO, over with Karen Flores. And hand Karen? to that, I'll

Karen Flores

declined good and seven, BXC and consolidated was Starting results million increased afternoon, XX% year. million the $XX.X QX of on Thank BXB Dermot, with compared prior you, X%. of of slide to revenue $XX.X flat revenue revenue everyone. million financial $XX.X our

foreign exchange, currency, Adjusting for our of revenue year-over-year realized impact, constant $X.X a segment. currency BXC XX% the normalizing primarily effect in million in increased

and revenue BXC for Excluding this and impact, X% BXB increased respectively. XX%

declines $XXX,XXX $X.X our euro workforce year internationally million global was in now the nearly FX of approximate we was prior larger to EBITDA observed the loss based XX% employees this expenses our operating The revenue period. Adjusted both headwind in XXX of or versus and pound. quarter-over-quarter on and benefit a tailwind are as a quarter

year range, each That normalized XXXX. BXC's the seasonally margin continue the we quarter and our next I'll of providing first, the OpEx business, to said, the will the commitment the on be of a generate the for impact EBITDA year. quarter mentioned, not our on Dermot into our But uncertainty improvements on outcomes expect guidance we fourth as range on deeper be of to given our do quarter the of FX Cup holding to within this bit to fourth positive dive fourth slide. strongest and adjusted deliver World

dig into on Let's this the next slide.

a tailwinds profit has cost a the proud discipline The the and from loss coupled year-over-year. to that demonstrably as left are adjusted revenue cost year-over-year. of our we continued have EBITDA with an our measures shifted trajectory Our structure FX on impacted margins chart profit percent

You growth below lesser of points to will see GXE. the increased the XXX revenue. our to organic business a industry supporting spend This shows XX.X% ratio the of related timing is where includes mainly peer marketing of spend attributable this well spend marketing quarter extent, is basis and such still and of this to also as trade group XX% BXC

full This actively regions, focused and evaluating to over control on is for are the and a capital highest ensure ROI have spend we dial that we opportunities XXXX. channels allocations is

year basis over operating primarily category benefits. prior each our other being sales, expense cost FX the on every and controls XXX spend, declined or of cost period, versus marketing personnel, OpEx other points Excluding

our XX% to we've progress points towards and X of gain and made total, as of to see structure non-cost expense revenue, profitability. this from sales percentage the scale XX% we In declined great commitments achieve

XXXX. versus into since prior Turning third on we to doubled on by adjusted chart Quarter-to-date, EBITDA we've sustained quarter we reversing incurred reversing again year. the the flow. expect cash of loss. right adjusted delivering we we EBITDA the maintain profit The illustrates the Year-to-date, EBITDA the positive trajectory ultimately to a and in side, have adjusted translate improved year are will growth this hand loss been in we last free path full-year the this

slide, next take metrics some path I'll our to the quarter key sustain moment nine. flow. Moving cash positive a number and on free highlight slide to to this

First, we BXC have a business. growing cash generative CapEx light

under pure the BXC media in through scale allows And recurring to value dollars, launch. social market As market which we've of the importantly, rather time marketing player a but campaign, spend us business big digital strictly the is flash And and Mexico discussed focused invest a is driving U.S. do we as team our stage employees. as early operation proof a for entry cut market, point, the the than our the rather chain. marketing XX before, into over in gaming take to a a BXB enter the digital playbook play not

Second, nature. cost without for tangible insurance objectives. there made fixed near-term cost have Items such been corporate room as corporate which continued for refinement savings bringing of growth impacting essentially and strides for in base, with in-house professional our our is opportunities

fact, of in already capitalized some and some of In these opportunities we've quarter. see this benefit on starting we'll cost reductions

In for cash I'll expenditures both Third, in cash. we burdened gaming of view which as licenses capital upcoming touch timing on CapEx, FX and new our required burn markets. PP&E and unfavorable investments our by and QX, the

the exclusive de quarter should for our for PP&E the CapEx fourth complete with cost sequentially year. licenses, gaming minimis be forward, lowest the invest the lower and and Looking of content year largely gaming

initiatives in results, that we anticipate reinforce cost reduction operating combined To flow and our strongest QX. yielding said earlier, are cash quarter what positive is Dermot the seasonally with QX positive

to balance to goals the positive sheet to ensure runway healthy achieved. sustain ensuring these adjust flow a continue cash free and We are are we'll structure cost and committed to

better segment, our as Las by our business wrap profit. ultimately next must of on there lot control. currency quickly To to a business of did refine actions are forward to we EBITDA look Red segment positives areas profit higher my Vegas taking much adjusted These in constant current GANSports remarks and is There in noted, and the ahead possible progress our conversion scale. BXC the the opportunities up off as be And our BXB to with further the a a $X million able cost launch all this that as in and slide flow market to to Dermot deliver we market, We a lot entry Rock of as making to Cup focus we our were kicking will our in this locals should on into basis growth as into the we delivered World cash -- continue structure weekend. commitments as the while gaming translate revenue and quarter, shareholders. haven't the our free and our of online quarters with $XXX Mexico on of and million possible

to turn to line now operator back it up I'll Maria, that, With the the open over for back questions. you. to

Operator

proceed We from will now a with [Operator first conducting question-and-answer be Our with Jefferies. question. Instructions] Please session. comes Katz David question your

Cassandra Lee

David. laid of within Cassandra And longer company? longer this to you just updated aspirations XXXX. $XXX term is space. change revenue to thoughts million This behalf I I understand your to you mid target in about for ago, by on I taking of, get can Lee a million year hear of my for a especially want kind year, out a Hi. Thank $XXX this lot one on, question. term

Karen Flores

Yes. Thank you, Cassandra.

and to First important a we things was that and of of and note the first currently But that happening, around evaluating the on it's target did call, to are likely which timing number call. operational GANSports launch with say earnings contingent on we're of additional quarter all, XXXX during fourth conference our quarter include said, our that states provide that XXXX also regulating. guidance

Cassandra Lee

are California California sports like, to, recently more and XXXX? longer like also kind Great. term in and thinking on what -- maybe about kind next Florida? How there cycle And rejected But you betting. how of are opportunities the the thinking of we propositions about States

Dermot Smurfit

at disappointing Thanks, boat. California that for propositions the it Yes. many, effectively looked mean, was we but split Cassandra. two I as

call. out up core capability stakeholders and many possible both but for XXXX our here we're as very, course, growth GANSports any in particularly So based be value We've in BXC of contracts made of there's firm demand we opportunity finalized. for organic I levels and additional high plenty which it's, the this come we'll America, believers a online. for and progress and proposition, year-to-date markets, one in crucially and are targets the different to international revenue the great meantime, we XXXX, of both new and GANSports would forward in proposition retail listeners seeing perhaps Latin to client ramp are on announcement see In of that on is very BXB U.S. relief think when coming various look which making the

Cassandra Lee

taking for my you Thank Great. question.

Dermot Smurfit

you. Thank

Operator

Beynon from question. Our next Chad with question comes Macquarie. your proceed with Please

Chad Beynon

question. BXC growth know Hi, to I FX for believe the a I a kind same-store I the believe but rates. focusing Thanks said guess rate double-digit I thought ask grower. good I'm growth taking quarter. was afternoon. the had on bit about the adjusted I being wanted we margin little certainly my about this you of handle. gross X% third in light,

look in As Norway, where kind you we operate, markets the America. kind Sweden doing then Latin what of, at you of know, you're and Finland,

know, sought what's Can markets? in talk you you growth And on about, core out kind to Thanks. some Are what the at originally of looking seeing you rates the market achieve? financials? down Latin the Is BXC that of broadly? are that what's America the overall you on the in rates going growth bringing

Dermot Smurfit

we establishments. than Yes, gaming Chad tailwind of our certain of and that. in anticipated COVID in of greater particularly America markets and gaming fact, theer, QX lockdowns, XXXX, Latin thanks retail for COVID from had and a key

unexpectedly and But BXC of of year-over-year strong. ’XX prospects one effectively I be that QX percentage quarter. tailwind a that impacted the generally, about growth was the going was you that with forward. would should way business think growth think year-over-year, thinking that had We natural So most a teen factor

any Karen, color? additional

Karen Flores

really year. another opportunity of the Copa we mean, had of since I year in Yes. customer America acquisition haven't QX last the major

tournament. pretty of throughout least to the World customers we'll We all So that and Cup. it's perspective. at have going again, XXXX, reactivate to looking then forward a think opportunities from major we're acquired acquisition we've underlying KPI customer opportunity, during be And the to those

in quarter. for fourth So to is what we're the come excited

Chad Beynon

that both. you, to then hear the from Thank reiterating allocation, you're Okay. cash flow the positive capital And good QX on operations.

repo? did a Were press you know you repurchase I up how that any And in quarter, there of you during expect the on share release the there quarter? remainder the that On spending during to the the period? on was end blackout early how Thanks. should out share acquire what's front, of we much

Karen Flores

in laser in Sure. did We we a occurred cash right QX, flow, are quarter. flow did sustained have third now just And the cash positive on purchases have that purchases we focus runway. not achieving any

additional at we'll this we capital purchases, So at course and needs. be opportunistic point, discussing we're of look as XXXX actively not but

Chad Beynon

Okay.

for of third decision? that internal So quarter on the you blackout weren't any was

Karen Flores

Correct.

Chad Beynon

Okay.

much. Appreciate it. very you Thank Okay.

Operator

[Operator Instructions] proceed Sigdahl Ryan question Our with from with question. Craig-Hallum Group. next comes your Capital Please

Ryan Sigdahl

again relative want three it your Cup or I think for to assumptions guys. comfortable I'm and And then I think to knowing today about get I guidepost expected be volatility? as guidance, QX, you're internal guess guidance? that guess I afternoon, standpoint, I wouldn't expectations just guidance the what withdrawn previous a volatility, about giving versus about good start as when greater in anything ago, the and with Good that but us range months to that with is curious there for assuming we think World changed

Karen Flores

Yes.

Ryan the World The the is say thing I first outcomes that Cup. range of it's not would just for

bound. to that of looking quarter, dollar. also are at we're the we're seen the movements. more in the has confidence and of strengthening also really that And throughout things the degrade continued terms third We it Of FX weighing the course, so with we've those that saw just

of of the you currency of World been revenue. million -- if the low from range just fourth because cetera. results, $XX.X end the So both an talking et do quarter as constant previous math get really FX It and guidance for standpoint to outcomes to we've the Cup of about is

looking withdrawing the reason again that main is of the we're FX, and potential that just the we're guidance. the impact of outcome Cup at So World

Dermot Smurfit

transition their it's BXC division on required they not there a is guidance just leadership BXC to Ryan, of you just this but you awareness Cup as there's the I sports been public to of isn't has history, being the World good company, required if aspect a group which make and interesting, in certainty events. experienced level private in think, which calls major think capable order to develop very, is And tenured company, division. a I another a have the very And saying, don't you quarter. the know for the the be World Cup the grown has to leadership ups with in team never know that reality commended bookies, what, maintain revenue guidance about being the of level certainty for for fourth and

commend and So, today. grown way for them considered us in enabled again, these I'll make being they've ups that being the very to statements

Ryan Sigdahl

the Then extend XXXX, and provider January follow-up on elements. on through various Can for but with that acknowledging their an PAM operations XXXX relationship does platform second here. my are provide in the gaming gaming casino -- just of you ending again given you update FanDuel with the contract exclusive

So curious January? with in kind of how the negotiation that is ending going here exclusivity

Dermot Smurfit

something market out. the that Ryan, when for update date we with. change we'll would say have now, see relationship mean, simply the you called through update we'll don't surprised the operational that as in be Right, as go to January you I the we any you market

So which operating in into Ontario we're course north the partnership. quo the we're happy significant of and expanded the very online are nature border we and of comfortable the great casino, with with them very of with for U.S. them and very relationship status

Ryan Sigdahl

Thanks, Dermot.

A - Dermot Smurfit

you. Thank

Operator

for comments. now the to over back would like have turn We Smurfit question-and-answer session. floor Dermot end the reached closing our I to of

Dermot Smurfit

S. our today are of joining course lot company. of Thank your solutions interest a All to term in which monetize us in in sports to its and for here regulated and infancy. mid remains U. everyone in things an business about for longer There and gambling upcoming be our excited to you technology massive the opportunity enterprise right. iGaming GAN opportunity the our for

you as to we the forward challenging identify Thank work early our look enterprise much very navigate will environment. opportunities continue maximize shareholder through New we this value our possible, In all business operate Year. macro the to to this ultimately you and basis, updating On efficiently again. as in to interim,

Operator

concludes for conference. This today's you your participation. Thank

your disconnect now may You lines.

GAN Limited (GAN) 14 Nov 222022 Q3 Earnings call transcript