GAN has reported a year-on-year drop in revenue and profit for the first quarter, primarily due to the impact of the novel coronavirus (Covid-19) pandemic on the gambling software business.
Revenue for the three months to 31 March totalled $7.7m, down 19.8% from €9.6m in the corresponding period last year.
GAN noted that the previous year’s figure included $4.9m in other revenue as a result of both hardware sales and the licensing of GAN’s strategic US patent. It said these exceptional items in Q1 2019 contributed to the year-over-year decline.
Excluding these exceptional items, GAN said that revenue for the first quarter grew by 64.0%, driven by a 108.8% hike in real money internet gaming software as a service (SaaS) revenue and a 63.0% jump in real money internet gaming service revenue.
GAN also reported an increase in its US customer base, which in turn grew its business in the country, with the provider benefiting from more states passing laws to permit online real money gaming and sports betting.
Looking at geographical performance and the US was by far the primary source of income for GAN in Q1, with the market generating $6.3m in revenue, down 24.1% on the previous year.
Italian revenue remained level at $1.2m, while UK and Irish revenue increased from just $3,000 to $210,000, but revenue from the rest of the world fell from $45,000 to just $9,000 in Q1,
In terms of spending for the quarter, GAN recorded $4.4m in operating expenses, an increase of 33.3% on the same period last year. GAN said this was a result of costs incurred in connection with its US initial public offering (IPO).
Incidentally, the IPO generated $62.4m, significantly more than the $34.5m it had initially anticipated raising through the float.
GAN also attributed additional spending to ongoing expenses associated with its operations as a US reporting company, as well as the expansion of operations to support an anticipated rise in both clients and revenue, and higher share-based compensation.
However, the overall increase in costs was partially offset by a $80,000 rise in foreign currency exchange gains as the US Dollar strengthened against the British Pound and Bulgarian Lev.
Higher spending and lower revenue in Q1 left GAN with $702,000 in operating profit, down 70.4% year-on-year, while net finance costs of $24,000 meant GAN posted $678,000 in net profit before taxes.
After taking into account $145,000 in income tax expenses, GAN finished Q1 with a $533,000 net profit, a decline of 75.7% compared to $2.2m in the opening quarter of 2019.
Chief executive Dermot Smurfit said that GAN had been operating in line with expectations for the quarter and had it not been for the Covid-19 pandemic, then the provider would have reported year-on-year growth for the period.
However, at the same time, the outbreak and subsequent closure of land-based gambling venues pushed more players to GAN’s online platforms.
“Substantially all of our land-based casino customers had to close their physical operations in March due to the global pandemic, which helped to drive an increase in online gaming,” Smurfit said.
“We saw a notable increase in internet gaming win in both New Jersey and Pennsylvania for the months of March, April and May, and have seen a similar shift from retail gambling to online gambling in our other key market of Italy.”
Smurfit also noted the postponement or cancellation of almost all major sporting events and the negative impact of this on GAN, but also said the provider’s sports betting business had historically been driven by the NFL, and this is anticipated to return in September.
In addition, he praised the ongoing success of its simulated gaming business, which has remained largely unaffected by the pandemic.
Other key highlights for GAN in the quarter included the provider stepping up preparations for entry to Michigan’s igaming market from 2021, in partnership with the Sault Tribe of Chippewa Indians and an anonymous casino client. Into Q2 and GAN also agreed to support Cordish Gaming Group with the launch of its new online gambling offering in Pennsylvania.
As such, GAN again reiterated its full-year 2020 revenue guidance of between $37m and $39m.
“It is an exciting time for GAN, and we look forward to capitalising on the immense opportunity,” Smurfit added.