The owner of Coolbet says wagering at its online sports betting sites hit an all-time monthly high in October, but that uncertainty created by the World Cup and unfavorable foreign-exchange rates are making it tough to project its future financial results.
Irvine, Calif.-based GAN Ltd. announced on Monday that it would not be providing guidance for revenue or adjusted earnings for the remainder of 2022 and said the massive international soccer tournament was a big reason why.
“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,” GAN’s chief financial officer, Karen Flores, said in a press release.
A grownup conversation
GAN CEO Dermot Smurfit said that “FX headwinds and the uncertain impact of the upcoming World Cup” gave the company’s business-to-consumer (B2C) unit pause. That was true even after sports wagering with Coolbet reached an all-time monthly high in October on a constant-currency basis, Smurfit added. The CEO didn't disclose the exact amount of handle for the month.
“I’m not at all pleased with not delivering on what we've previously provided to the Street this year, not at all,” Smurfit said during the company’s conference call to discuss their third-quarter results. “I take ownership of this as CEO and we'll be further adjusting our cost structure and making operational improvements to deliver on expectations and ensure a healthy balance sheet.”
The move by GAN comes just days ahead of the start of the World Cup, which is set to be a major-wagering event for legal sportsbooks in the United States and around the world. According to American Gaming Association research, 20.5 million adults in the U.S. are expected to bet a total of $1.8 billion on their World Cup picks.
GAN has gaming licenses in 19 U.S. states and in Ontario, Canada's most populous province. However, things have changed for GAN since the last time bookies were setting World Cup odds in 2018.
One major change is that the company conducted an initial public offering of its shares in the United States, putting it under a lot more scrutiny from analysts and investors. GAN then acquired Coolbet, putting the B2C unit under similar scrutiny.
Smurfit on Monday gave the leaders of the B2C division credit for being “grownups” who acknowledged that even though the World Cup is typically good for bookmakers, the uncertainty about the outcome for Coolbet was creating uncertainty about the company’s revenue guidance.
The bottom line
GAN also reported on Monday that it generated total revenue of $32.1 million for the three months ended September 30, which was "relatively flat" compared to a year earlier.
Receipts for its business-to-business (B2B) segment were $12.7 million for the third quarter, up from $11.2 million for Q3 of 2021, while revenue from its B2C unit, which includes Coolbet, fell to $19.4 million from $21.1 million a year ago. The $1.7-million dip in B2C revenue was "primarily due to unfavorable foreign currency fluctuations, and to a lesser extent a lower sports margin," GAN said.
FX fluctuations take a toll on GAN because nearly 90% of its approximately 700-person workforce is based outside the United States, Flores said during the conference call.
Customers actively placing wagers with Coolbet during the third quarter ticked up to around 261,000, compared to 260,000 for the second quarter and 199,000 a year earlier. Coolbet's sports-wagering handle for the third quarter was $160.2 million, up 3% compared to 2021, while iGaming turnover was $396.3 million, down 3% from 2021.
GAN Ltd. says its @Coolbet_ sportsbook and casino now has more than 1.2 million registered customers around the world, approximately 750,000 of which have deposited.
— Geoff Zochodne (@GeoffZochodne) November 14, 2022
Around 261,000 Coolbet customers were actively placing wagers as of Sept. 30 as well.https://t.co/rJzZmMZClT pic.twitter.com/Z7X7E7fi3i
GAN booked a net loss of $6.9 million for the quarter, an improvement over the $8.7-million hit for Q3 of 2021. Adjusted earnings, though, were positive, at $2.1 million for the third quarter, compared to an $870,000 loss in 2021.
Despite the lack of updated guidance, GAN said in August that its full-year revenue and adjusted EBITDA for 2022 would be between $142.5 million and $152.5 million and $10 million and $15 million, respectively. At the same time, GAN said its strongest quarter of the year would be the fourth, as the World Cup would take place in November and December.
Smurfit noted Coolbet “was still in its infancy” during the 2018 World Cup, with fewer than 40,000 active customers on a quarterly basis. Now, the bookmaker boasts more than 260,000 users making bets.
“In addition to the potential 4Q revenue and adjusted EBITDA lift, we anticipate the event will be both a key customer acquisition event as well as a significant reactivation event,” Smurfit added in August. “We’re excited to introduce a new cohort of players to Coolbet’s brand and leading technology offering.”
