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Golden Nugget Online Gaming (GNOG) has reported a 40.7% revenue rise to $128.2m for full-year 2021 amid an annual operating loss of $30m.

The bulk of revenue was provided by the operator’s core gaming segment, which grew by 41.8% year-on-year to $113.4m.

Other, which encompasses market-access agreements, live dealer contracts and royalties, contributed the remaining $14.9m thanks to annual growth of 33%.

The revenue rise was driven by the launch of GNOG operations in Michigan in January 2021, while the operator also went live in Virginia and West Virginia during Q3 of that year.

This saw the cost of revenue increase by $24.7m, or 67.5%, to $61.2m due to increased gaming taxes and market-access fees as the firm expanded into new states.

The business slumped to an operating loss of $30m for 2021, compared to a $24.5m profit in 2020.

The two main drivers of this were a 253% uptick in advertising and promotion costs to $61.7m and a 247.1% increase in general and administrative expenses to $28.8m.

The rising marketing costs were almost entirely attributable to the operator’s Michigan launch, while stock-based compensation of $12m, compared to $0m in the prior year, was responsible for the jump in general and administrative expenses.

Elsewhere, M&A expenses rose by 53.1% to $6.3m as the company gears up to merge with DraftKings after agreeing to a $1.56bn all-stock offer from the betting operator in August.

That agreement has led to class-action lawsuits being lodged in a New York federal court after plaintiff investor Peter Wong claimed terms of the sale were unfair to shareholders.

If the DraftKings merger does not complete by 31 May 2022, which was automatically extended beyond the initial date of 28 February 2022, either party may choose to terminate the merger agreement.

Outlining potential risks to the business in its annual report, GNOG said the termination of the DraftKings agreement could negatively impact the company, resulting in a termination fee of $55m if the deal is terminated in connection with a material breach of obligations.

“If the DraftKings merger agreement is terminated and the company determines to seek another business combination or strategic opportunity, the company may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the DraftKings merger,” the report reads.

There is no indication that the merger will not proceed as planned. In fact, the deal is set to close this quarter and GNOG has already wheeled out a new DraftKings-powered sportsbook offering in Arizona.

DraftKings has acquired GNOG to expand its iGaming offering and diversify its product portfolio which is geared towards online sports betting and DFS.

During a recent fireside chat with Bank of America, DraftKings CFO Jason Park said: “The DraftKings brand just doesn’t resonate with that casino-first customer nearly as much as Golden Nugget does and we looked at multiple opportunities.

“We looked at building our own casino-first brand and we got very excited about the Golden Nugget brand. We will very likely maintain the Golden Nugget brand. It’s a brand that resonates with a different demographic that we don’t have today,” he added.

DraftKings’ share price has plummeted by 64% since the all-stock deal was agreed on 9 August 2021 to a closing price of $18.99 per share as of 17 March 2022.

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