FX costs wipe out Q3 revenue growth at GAN as company withdraws 2022 earnings guidance

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GAN’s Q3 revenue declined by 0.5% in real terms to $32.1m as costs relating to the translation of foreign currencies wiped out the gains of an otherwise successful quarter.

On a constant currency basis, the firm said, revenue was up around 8% year-on-year.

The business also turned adjusted EBITDA positive to the tune of $2.1m, compared to an $870,000 EBITDA loss in the prior-year period.

Still, GAN recorded a net loss of $6.9m for the quarter, though that is an improvement of 20% over Q3 2021’s $8.7m net loss.

The majority of the firm’s revenue came from its B2C segment, at $19.4m or 60.5% of the total. That represents a decline in real terms of 7.9% compared to the prior-year period, which again GAN said was the result of losses on the translation of foreign currencies against a continuously strengthening dollar.

The remaining $12.7m of revenue came from GAN’s B2B operations, as the business segment grew by 13.5% year-on-year.

Broken down by region, 32.9% of GAN’s revenue came from Europe in Q3, with a further 32.1% coming from the US and 29.6% from Latam.

The Rest of the World generated the remaining 5.4%. Of all the geographical regions reported on, the US was the only one to see significant growth in real terms year-on-year.

GAN CEO Dermot Smurfit said: “Our third quarter was highlighted by our launch of B2B sports betting technology and managed trading services in the US along with continued progress toward the domestic launch of GAMESTACK 2.0. 

“Customer feedback around GAN Sports as well as the unique value of our Super RGS portfolio remain key differentiators for GAN as we enhance our status of a leading provider of a true omnichannel gaming experience. 

“We are looking forward to what we expect to be a strong launch cadence of GAN Sports, the upcoming FIFA World Cup, as well as our entrance into the Mexico market.”

While foreign exchange costs led to a real-term decline in revenue, they also helped reduce the operating expenses paid out by the business, by some 2.8% to $27.8m.

GAN ended the quarter with $41.8m in cash, which was adversely affected to the tune of $3.4m relating to foreign exchange rates and a further $1.1m relating to fees associated with gaming licences for a new market entry.

GAN CFO Karen Flores: “Although we are expecting a significant increase in activity for the World Cup, the unique nature of the event and the wide range of potential outcomes for the quarter have led us to elect to suspend our guidance for the full year.”

While the business said that major sporting events such as the upcoming FIFA World Cup are generally positive events for gambling firms, uncertainty around the effects of the tournament have led it to suspend its previously issued earnings guidance for full-year 2022.

Following the release of its Q2 results in August, GAN revised its full-year revenue guidance from a prior high of $165m down to $152.5m, while EBITDA forecasts fell to between $10m and $15m, compared to prior estimates of $15m and $20m.

“We remain focused on cost rationalisation efforts in order to protect our margins during a volatile and difficult macroeconomic backdrop while ensuring our organic investment behind our key initiatives such as GAN Sports and Super RGS,” said GAN CFO Karen Flores.

“While we are excited about the launch of GAN Sports and progress around other initiatives, as expected, a continued difficult foreign exchange environment and European headwinds impacted our third quarter performance, and we expect those factors to impact our fourth quarter as well. 

“Although we are expecting a significant increase in activity for the World Cup, the unique nature of the event and the wide range of potential outcomes for the quarter have led us to elect to suspend our guidance for the full year.”

About the author

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Conor Mulheir

Conor entered the gaming industry in 2018 producing high-level live event content for audiences in London, Amsterdam and São Paulo. From 2020, he went on to report news and commission exclusive content for various gaming media brands before joining iGaming NEXT as editor in January 2022.

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