Q3 2020 Gan Ltd Earnings Call
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As a reminder gets tougher sales being recorded it is now my pleasure to introduce your host Chief Legal Officer, Todd Mactavish. Thank you you may be GAAP.
Thank you Daryl and good morning, everyone.
Dan <unk> third quarter earnings release was issued today after market and its pushed from the Companys website at GE again Dot com.
With me representing the company today are Dermot Smurfit, Chief Executive Officer, and Karen for as Chief Financial Officer before again, we'd like to remind you that except from factual statements made today.
From ration contained in this conference call, including any financial and related guidance to be provided consist of forward looking statements that involve risks uncertainties and assumptions that are difficult to predict.
Words, and expressions, reflecting optimism and satisfaction with current prospects as well as statements in the future trends identify forward looking statements that are absence does not mean that a statement is not forward looking forward looking statements should not be interpreted as a guarantee of future performance or results.
As such statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or share just by the forward looking statements.
Important factors that could cause such differences are discussed in the risk factors section of games IPO prospectus dated may 5th 2020.
Forward looking statements speak only as of the day. The statements are made and the company assumes no obligation to update forward looking statements to reflect actual results changes in assumptions or changes in other factors affecting forward looking information except to the extent required by applicable securities laws.
With that I'd like to turn the floor over to Karen for opening remarks. Please.
Please go ahead share.
Thank you Todd afford during that takes the floor I will take the opportunity to briefly summarize the key financial highlights, which will set the stage from both our detailed commentary first.
First we executed on continued growth momentum delivering revenue of 10.3 million on growth operator revenue of 142 million with growth in online casino gaming as well as the resumption of sports betting throughout the quarter.
Second we have invested to expand our capability to deliver on being the leading technology and content supplier for internet gambling together with our corporate infrastructure to ensure governance aligned with the requirements of NASDAQ. This.
This means we have logically invested to resource today for Tomorrow's opportunity, having one substantial new clients since the date of our admission to NASDAQ. This.
This is the nature of our rapid growth model and positions us for a rollout of expanded multi state line operations dropped 2021 and beyond.
Finally, the transformative acquisition of Vincent Group plc, better known as well, but is now underway with an expected close in early Q1 to bring their sports capability on line and the U.S. and the managed <unk> sports offering.
Integrated into our market leading platform.
We believe this acquisition is being undertaken at a highly attractive valuation relative to the opportunity to rollout b to B sports betting services in the U.S. we.
We have undertaken to acquire pullback from <unk>.
At least 175 million, which represents three and a half times 2021 forecasted revenue.
We believe this is a compelling purchase in light of industry comparable valuations.
The transaction will be satisfied through approximately 95 million in cash and 80 million in equity to be issued at closing with the equity tranche subject destruction shareholder lockup periods.
We will seek new capital in the coming weeks to ensure Gan maintains a strong balance sheet post closing of this transaction.
We intend to use a combination of cash on hand, and an equity capital raise subject to market conditions.
I look forward to delivering the 2021 growth opportunity equipped with our pull that partners. Thank.
Thank you and I'll now invite Dermot to take the floor.
Thank you Karen and good afternoon, everyone.
John delivered revenue of $10.3 million in the third quarter up 23% quarter on quarter and up 86% year on year.
Oh these quarterly revenue.
Eight per cent originated from our key strategic markets of the United States.
And by the resumption of U.S. sports betting rapid growth in on line casino gaming and multiple deployments of our platform in anticipation of the upcoming Michigan market activation.
These results were also driven by $142 million in grid, operator revenue up 76% versus the third quarter and 2090.
Underlying performance was impressive year on year on year growth in online casino. The group's operating revenue from casino games jumping from $26 million in the third quarter last year from more than $95 million in the third quarter. This year.
Year to date, we delivered $413 million in gross operating revenue.
Our clients by the end of September which was up 112% from the same nine months in 2019.
When looking deeper into our year to date performance the ramp up in gross operating revenue from one line casino gaming is highly impressive with 306% growth year over year to $246 million compared to $60 million interest Sina gross operating revenue in the same period of 2019.
Although the consumer attention and client demand remains focused on sports betting the real core of the U.S. Internet gambling profit opportunity lies inherently within the online casino, which is only a lot by the mass market appeal of sports betting peanut technical and operational capability, we will shortly possess in house.
From a return to shortly.
That's been up a level, it's worth noting that the vast majority of all internet gambling revenues are generated to date and just two states, New Jersey, and Pennsylvania, but the third major market of Michigan poised to commence.
Pennsylvania, the ramp up of Internet gambling personal freedom revenue continues to surpass expectations set in early 2019 predictably centered around growth in online casino gaming.
The neighbor in New Jersey, we have just reported a new all time monthly reported from weight casino gaming revenues of $91 million, reflecting a 109% growth year on year.
When you combine only casino gaming with Internet poker and of course Internet sports betting New Jersey generated in excess of $132 million a personal free to revenue in that single state in a single month October.
This amount would have seem implausible just two years ago.
Jersey is now on a path, where internet gambling revenues could be on a monthly run rate to exceed precluded retail gaming revenue by the end of 2022, okay.
Oh state. This again because it is incredibly important for everyone to understand the magnitude of the structural shift in the retail casino industry.
Jerseys internet gambling market, there's only growth path to exceed pre committed mostly retail casino gaming revenue within 18 months, possibly less.
This all points to a bright line a true the coup that combined with the advent of Internet sports betting and the associated strong also sports gamblers into one line casino gaming has manifestly altered expected future growth opportunities in this industry for decades to come.
Its processing the first legal only because you know that in New Jersey back in November 2013, John has spent several years developing the U.S. internet gambling opportunity for the benefit of our shareholders today and we remain at the forefront of this expansionary wave.
Two strong recent client wins served as high profile illustrative examples.
First of all we're supporting the national ambitions of the Venerable Churchill Downs will be kicking off shortly in Michigan with significant existing digital and retail gaming assets to leverage on line.
Then there is the highly exciting 10 year contract. We closed in Q3 with Wynn Resorts Interactive Division, who we will also bring on line in Michigan, which selected expansion opportunities and other incremental states already in discussion between the parties.
Thank you know when it is worth noting we licensed our average patterns to them as part of our commercial deal structure, ensuring we secured above market pricing throughout the unprecedented 10 year contract term.
Based on our experience a day, Pennsylvania, we've seen on average 75 per cent more value in aggregate deposits from those online gamblers, who was linked to the retail reward cards to their regulated online gambling accounts versus those who have not linked any reward cards.
Proving out the massive volume from value proposition of our average patent in real money in an accounting Justice. We proved the same for simulated gaming over many years.
However, the largest events in 2020 for our shareholders appears not to beat our admission to trading on NASDAQ, but the inflection point represented by our now announced acquisition of cool that with regulated operations in both Europe and Latin America.
This acquisition accelerates, our previously announced pathway to $100 million in top line revenue.
It unlocks the shareholder value opportunity to become a BT sports betting provider in the U.S.
And provides us with a fast growing into mill into international strategy, which is entirely incremental to our existing international market activity in Italy.
By way of T. and recent performance highlights cool that is net operating income breakeven year to date, despite the cobot sports impact in the second and third quarters of 2020 and is operating a significant levels of scale internationally.
Last month cool that served more than 50000 active customers on line. The vast majority. That's you know both international and he was sports events, where their sports book, retaining just under 10% on their sports channel.
Their internet gambling operations generated gross operating revenue of approximately $29 million from the nine months to September 30, with more than $90 million and all my bets processed last month alone.
Well that is now want to from annual run rate to deliver $50 million in top line revenue to gas combined piano in 2021 and has exciting performance momentum in these final weeks of 2020.
When combined gains overall headcount as a group will exceed 400 total $65 million in the trailing 12 months revenue.
As background to this transaction since launching announced day, we commenced an exhaustive review of numerous sports betting technology owners.
We surveyed more than 16 companies at various stages of maturity and in doing so learns diverse critical truths about the sports betting industry.
In order to best serve managed sports betting to our current and future clients in the U.S., we needed to find no just sports technology, but also the people who stand behind that technology as the knowledgeable operators.
The sports traders, who know how to take positions in sporting events.
Those who know how to trade all sports, including you esports, we know how to manage risk and ultimately who understand how to generate profit from a volatile sports environment.
Only by acquiring an owner operator of sports betting technology with Gan secure the necessary Tech engineering and trading skills talent and their associated intellectual capital.
Working with our advisors identified this acquisition as a rare industrial opportunity due to the symmetry of their technology was ours.
Permitting rapid integration transport and deployment into the U.S. and 2021.
More importantly, we identified a can do culture very much in line Gan zone culture formed under challenging circumstances, leading to weather and success.
By teaming up with cool that's experienced leadership Gan will be equipped with state of the art Micro services based technology, which has driven their award winning sports betting experience user interface and product from overseas users. It.
It is this capability, which will not permit gan to offer sports betting in the U.S. as a managed service as soon as reasonably possible in 2021, alongside a market leading platform and extensive library of only casino games.
Other perhaps timely reminder, in our last earnings call I took the opportunity to outline the parameters of any sports acquisition, we might consider.
Adding a sports capability is a logical way to rapidly expand our share of clients grid, operator revenue flow through our platform and this acquisition will prove immediately accretive to both revenue and earnings.
More importantly, we believe the culture cool that aligns closely again and there was a real share an excitement to bring their sports capability to America next year.
And so in making this acquisition. It is important to indicate now that we only intend to bring cool that to the U.S. as a b to b product and service that we are not planning to bring cool that's b to C platform to the domestic market at this time.
Equally important to net is that Gan will continue to work alongside existing and value to third party sports betting vendors, who have integrated and accounts platform at the request of our clients.
So sports betting and casino gaming go hand in hand in America, just as they have done in Europe, and Asia from more than two decades.
We therefore foresee substantial incremental regulation of Internet casino gaming by sports our mistakes in the future.
Particularly those in need of incremental tax revenues to support their state budgets badly damaged and is continuing current environment.
Shifting gear briefly and an equally important strategic development for Gan during the third quarter. We also launched our Super Rgs from casino content delivery in New Jersey, and Pennsylvania, and we also prepared for launch in Michigan as well.
This super Rgs delivers our market leading portfolio of proprietary casino games third party casino games developed inherently within our platform and aggregated content from multiple rgs providers.
All told we are now delivering in excess of 800 casino games to our clients, who maintain leadership positions in the market.
The significance of the Super Rgs is that it will permit internet gambling companies, who are operating on a proprietary or competing third party platform integrate Gan Super Rgs launch our entire games work on their website and mobile apps.
This creates a technical and commercial vehicle for Gan to deliver its casino content across the entirety of the relevant the U.S. interest rate markets and not just onto our platform clients websites and mobile apps.
We believe this will be an exciting incremental new market offering in 2021, particularly for new market entrants seeking one technical integration to catch up with major operators.
We will also allow existing operators to fill the gaps in their content portfolio by integrating Gan Super Rgs.
Went successfully commercialized Gan Super Rgs should materially contribute to our gross operated revenues and generate high margin content licensing revenue weighted towards the second half of 2021.
We remain very much focused on executing against our growth strategy. While also investing in the people required to deliver on that business objectives of our clients.
As Karen mentioned, we've been Resourcing today for tomorrow as opportunity.
As a reminder, since listing on NASDAQ we have acquired from multiple new additional clients for platform, including Penn National per simulated gaining Churchill downs for nationwide rollout of real money Internet sports and casino gaming as well as secure index unprecedented 10 year deal to bring when interactive online from Michigan with expansion opportunities outside Michigan already on the day.
Skus.
And looking ahead, a few weeks into the into this current quarter, we do anticipate the launch Michigan with technical deployment from re clients completed and our license applications very much and good order book.
Date of launch is now in the hands of the regulatory process with potential clarification anticipated shortly after Thanksgiving.
It's worth noting the environment for retail commercial gaming in Michigan has darkened somewhat overnight as Michigan's governor has border Detroit's casinos to close this coming Wednesday.
This together with industry stakeholder support and vendor readiness suggest we will see the first that placed on line in Michigan before years end some months before originally anticipated.
I'll now take this opportunity to thank.
Thank our shareholders for their continuing support all Gan as the leading provider of Vienna price offer solutions for us land based casino operators we.
We anticipate maintaining and strengthening our leadership position as we move rapidly into 2021 and deliver on the opportunity represented by Michigan with Wynn resorts Churchill Downs and sandal.
Also our continuing mission is clearly stated to bring retail casinos on line with our technology platform focused principally on delivering all forms of its and accounts and content, including casino gaming and sports betting.
Our retail casinos in those states for that Internet gambling legislation, we offer simulated gaming now with the opportunity to upgrade to real money Internet gambling, a state by state regulation continues to emerge.
This simulated gaming product continues to generate new business and new relationships for us and in the quarter, we expanded the scope assuming that the gaming from compass simulated sports betting.
This has proven popular amongst Ohio residents and serves as an excellent way to acquire ohioans substantially in advance of regulated real many sports betting widely anticipated in 2021, not unlike the marketing advantage enjoyed by daily fantasy sports operators.
And so we continue to see COVID-19, accelerating interest a regulation of internet gambling.
Americans continue to spend more time consuming online entertainment all kinds of many states politicians continue to search for incremental revenue opportunities to replace lost tax income.
We see all of this as continuing the favorable climate for incremental regulation of Internet gambling and we welcome to market expansion in Maryland, Louisiana, and South Dakota in the wake of our recent elections.
In planning for a post code that industry environments, we have invested in our people by expanding our leadership bench to support our corporate infrastructure as a NASDAQ listed company and continuing to invest in creating the first of all engineering resources required to deploy games that platform for existing and new clients.
The challenge remains to increase our capabilities of delivering multiple clients online simultaneously across multiple states delivering on the expansion objectives of our clients and we are very proud to have three clients lined up from day, one on line operations in Michigan.
Robust bandwidth amongst our engineering groups worldwide continues to remain a high priority.
[noise] Vegas continues to be fertile ground as we execute on rapid controlled expansion.
I'm extremely proud of how hard our team worked to deliver record results this quarter and serve our clients. This great team will soon be complemented by the great people accrual that with whom we look forward to a prosperous 2021.
And so with that I will turn the star look back over to our CFO and board member Karen floors.
Thanks, Jeremy.
The announcement of our pending acquisition of coal that again, yet another exciting chapter in Gan history for the first time, we will be welcoming another organization into the company and we'll embark on this journey together.
The potential of creating the premier global online sports betting and gaming technology supplier ecosystem.
Well that has successfully scale their business over the last several years and will provide gan near turnkey capabilities and online sports betting does.
This acquisition is just one example of our unwavering commitment to deliver shareholder value and we remain laser focused on this objective in Q3.
Before discussing our third quarter results in detail I'd like to focus on two key highlights.
First since early summer, we put significant attention and effort towards evaluating both our technology stack and our organization and determining how best to deploy the capital we raised during the IPO to lay the foundation for our future success. We concluded on call that not only for the proprietary technology they've built but also from.
The seamless cultural fit.
We are thrilled to welcome the entire call that organization again.
Second forging ahead on our journey and being able to capitalize on opportunities as they arise such as coal that demands that we strengthen our corporate enterprise.
We have made tremendous progress in shoring up areas of our infrastructure that has been historically challenged onboarding more than 60 employees since the start of coated kicking off numerous core projects in the areas of product technology infrastructure and compliance the.
The investment and achieving operational excellence is not contained to just our people the NASDAQ uplisting coupled with our M&A strategy has resulted in an elevated level of professional advisory services for short term period.
This primarily includes accounting and tax advisory capital markets advisory and outside legal in connection with corporate infrastructure expansion and additional compliance requirements as a result of becoming the U.S. public company. This past may.
We anticipate that this investment will continue through the first quarter of 2021 and will put us in a great position to achieve our long term objectives.
Now turning to a discussion of our third quarter results.
Excited to report continued positive momentum with revenue of 10.3 million, an increase of 86% comparatively and 23% sequentially.
Year over year, our combined simulated and real money gaming SaaS revenue increased by 75%, while both comparatively sequentially contributing growth factor was our most recent client wins and the related deployment of multiple instances of the.
Rich platform to Michigan in preparation for a December go lives.
We are excited to soon be launching three partners in the state.
Additionally, the lift we experienced in the second quarter in our online simulated in casino and gaming segments as casinos were shuttered during cobot, what's sustained during Q3 in both categories, we observed 20% plus quarter over quarter increases and act of clarity. However, our demonetization declined slightly as it related to content mix shifts within.
Corridor balancing out the increase in active clarity.
For simulated the launch at Penn National Mid August was also a contributing positive factor and we look forward to scaling this business further over the coming months.
Turning to growth margin quarter over quarter over quarter, we saw compression of two point.
As it relates to increased hardware revenue. However, on a year to date basis versus 2019, we have seen a substantial increase in operating leverage with margins increasing from 47% to 64%.
As our 2019 results include $4 million passes patent licensing revenue the operating leverage is even more significant excluding this with margins increasing almost twofold from 33% to 64% admit.
Administrative expenses from the third quarter of 2020 were 10.4 million compared to 4.1 million for the third quarter of 2019.
The year over year increase in administrative expenses was primarily attributable to our growing stuff expanded share based compensation as related to the IPO and increased professional services as I mentioned in my opening comments.
On a year to date basis, we have incurred 6.8 million worth of share based compensation related expense that will not recur in 2021.
With respect to the strengthening of our corporate infrastructure. The company performed an audit of its global tax position, which has resulted in a 900000 of nonrecurring charges related to estimated tax provisions.
He is estimated provision pertain to the AG as well as the potential application of the wafer Supreme Court decision in 2018 as related to you as sales and use tax on our simulating gaming business.
Adjusted EBITDA increased slightly year over year from a loss of 400000 to a loss of 100000.
Again this reflects our current level of investment in product technology infrastructure and U.S. public company compliance.
Our balance sheet remains strong with cash and cash equivalents of 57.5 million at quarter end and we continued to remain debt free.
At this time, we are reiterating our full year revenue guidance.
A 37 day 39 million.
Based on commercialization of our intellectual property subject to timing.
With respect to 2021 guidance, we're still in the process of finalizing our plans, which will of course now included. The addition of coal that we will continue to refine our internal budgets as we move through Q4.
Issue formal 2021 revenue guidance on our Q4 and full year earnings call from.
From it back to you for closing comments.
Thank you all for joining today for third earnings call is that give US listed company again, we would like to thank all of our investors, who backed our market leadership position, which we intend to extend in the coming period with the support of our colleagues at cool but.
Our team is executing well to expand our client base and bring our existing clients online and you intrastate markets. Despite the challenges presented by curve in 19 and limitations on business travel as well as unpredictable regulatory processes.
Our technology team continues to growth here in the United States and we remain one of the few active employers in horses local economies such as Las Vegas.
Our future represents the future of American gambling or oil growth will likely be predominantly in the online channel for many years to come.
We very much look forward to speaking with you all again early in 2021.
They say wherever you may be.
Operator, we'll now take questions.
Thank you we will now be conducting a question and answer session share.
I would like to ask a question. Please press star one on your telephone keypad.
Information to all indicate your line is in the question queue.
May press Star two if you would like to remove your question from MCU per participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for your questions.
Our first question comes from the line of Chad Beynon with Macquarie. Please proceed with your questions.
Thanks, Good afternoon.
Congrats on the announcement.
I wanted to start with that so you noted that you'll be bringing the b to b product of cool bed to U.S.. So just so we can understand it.
One stats implement and Youre essentially have a full turn key sports betting product with risk trading the betting on Jan.
I guess, what you're offering will be comparable to some of the.
The comprehensive operate offerings like an ASP could GBC cambia et cetera, just trying to understand if there are still major pieces that you'll have to outsource or you essentially be able to do everything at that point. Thanks.
Yes, great question appreciate it and cool that wasn't fact, didnt do you develop stages, a plenty there and b to b offering services for deployment in the U.S.. So our timing was.
Not just lucky, but usually convenient folks from both sides of the transaction.
Yes, it will be a turnkey managed service will be fully did provisioned average traded with a significant experience existing and has experienced of use sports betting. So we do think we're free for a highly competitive offering at the sports betting engine trading the risk management level. Furthermore, we're also bringing a award winning mobile Frontend purpose built.
For sports gambling into the U.S., that's one of the few areas, where I think the U.S., sometimes lag state of the art in Europe and Asia.
So we're very much looking for to bring these guys and their superior product into the U.S. for existing and future clients.
Great. Okay, and then on the on the BDC ribs, or B to C. Biz for cool, but outside of the U.S. are there markets that you expect you'll have to ex it if there.
Gray or do you believe that all of the markets that cool that operates on right now.
You will be.
Understand those markets.
Yes, so again, a key criteria as part of our review of the market was ensuring that we had a similar attitude towards regulation in regulated markets.
Cool that have substantial b to C operations in Estonia under license, the Sweden under license the and of course through Malta.
So we're very happy with the compliance profile with cool beds overall b to C business and.
And we look forward to significant expansion in 2021.
Okay, and then lastly, just for the quarter adjusted for the the fan do owe us be shift.
Do you believe that your market share.
Maintain Q3 versus Q2 are actually increase do you have a sense of kind of how that looked in the quarter. That's all from me. Thanks.
Yes, pretty pretty much consistent channel coming sports betting share obviously decreased in the quarter EPS, we missed the September ramp up for an adult.
Ticked off again.
But in terms of online casino, we've seen we have seen a fairly consistent market share. So no particular change that.
Thank you very much.
Thank you. Our next question comes from the line of Ryan said, Don with Craig Hallum. Please proceed with your questions.
Great. Good afternoon, guys and congrats on the business developments.
Just wanted to be on the call that topic for you here to start.
You mentioned that sports betting technology being integrated in the second half of 2021, having a full end to end offering.
Well your customers have the option to continue using can be or other third party offerings for the sports betting engine, where will you be transitioning everyone basically onto your.
GAAP full end to end solution.
So.
Great question I've made it pretty clear my narrative that we're going to be open to continuing to work with our value third party.
Sports betting vendors already integrated into our platform, it's very much going to be at the choice of our existing and future clients as to whether or not they want to bring the cool that sports offering. We do believe we have significant competitive advantages over the choices available to them today.
And we certainly hope that over time, some of our existing clients will choose to deploy the cool, but technology and displacement of existing sports betting vendors, but.
Ladies and eating and we're very excited to bring this to market early in 2021.
Gotcha, Thanks apologies for us from missing that earlier.
Then just as far as bringing cool beds technology to the you asked for on a b to B is there any license considerations, we should keep in mind, there or since Gan has to licenses can you basically integrate them and up and running.
Yeah, that's exactly right. So it gets folded under the umbrella gaming licenses privilege gaming licenses that we've secured over the years, we are not expecting any turbulence when it comes to gaming license or or regulatory considerations. So it should be a pretty smooth entry into the U.S. under the the.
Very conservative compliance profile operated by GAAP, which will of course come ticking.
And then one last one on cool, but then I'm going to switch over to the corpus of for one.
Are you able to share which regions are the largest per cool and then any approximate market share by those regions.
Regionally, northern Europe, including a stone yet we have a substantial business and certain Latin American markets, but in terms of market share. We're not we're not in a position to disclose individual market share positions.
Got it and then just switching over the core business.
Expenses were a little bit higher than we're expecting on the quarter mentioned professional fees the public company et cetera.
Should we think about EBITDA for the next several quarters I think you mentioned an elevated costs through Q1. So as is breakeven EBITDA rate assumption or just any directional commentary to kind of help with puts and takes there.
Yeah. So we are going to be as I mentioned, having.
Continued advisory services through the fourth quarter and into Q1 as we're in profit on a number of project, which also includes convey.
Converting our financials on a GAAP and then anything associated specifically with the transaction. So we do anticipate that.
Q4, and Q1 will look similar to this quarter.
Good day, one more from me then I'll turn it over your line.
Mentioned commercialization efforts on your patent.
Words integration framework good day.
Hear correctly, you said when it's using net.
In Michigan or we'll use that is that correct. One and then can you talk about kind of the pipeline and how many.
Operator assumptions, you're assuming in your Q4 guidance. Thanks Good luck.
But having to come from the winter has licensed patents and we will be deploying the ibridge patented capability other and touched on we saw an incredible uplift in online gamblers in Pennsylvania, the rewards card. They basically deposit 75 per cent more than people, who don't think the rewards card.
The old very logical and symmetrical with our experience in simulated gaming.
In terms of patent licensing Weve got multiple proposals out there at the moment.
And the only thing.
We're not limited income.
Are you able to say how many are in there and make the guidance once noted in your press.
That's true.
So again, our our earnings guidance is.
Clinton zone on it.
Based on continued per.
Personalization of our patents.
So from a portion of that is in the fourth quarter.
Great I'll turn it over thanks, guys. Good luck. Thanks.
Thanks.
Thank you. Our next question comes from the line of Josh Nichols with B. Riley FBR. Please proceed with your questions.
Thanks for taking my questions just wanted to hit on a little bit of people have been talking about cool bed, but it also does broaden gans opportunities to move outside the U.S. as well a little bit given their current for the whole could you elaborate on that a little bit and then provide a little bit more color on just what you think the tech advantage that cool but has it.
Really a track to do that business relative to some of the competing offerings.
Yes. Thanks, just that's a great question so as touched on we looked at 16 and lesser greater detail depending on the.
The scope the merits of each individual sports can we operate it we actually find a lot of Bdcs sports operators that didnt really have proprietary sports betting types at all that kind of Leds overly lean or relied on third parties sports betting providers. So there is a that does does a what I describe as the Mirage would be to see operators in Europe, who does inside.
Today any proprietary sports capability, that's that's worth noting.
Cool that's got extensive in house capability at all levels. They represent a full turnkey solution for deployment in the U.S., we believe they're extremely successful bearing in mind day.
Hypercompetitive markets of certain mature northern European markets the.
There are also excitingly positioned for structural growth in South America. This tonnage.
Non of opportunity in South America, there's a structural opportunity.
Opportunity for growth not just today, but as markets regulate from time to time, that's of course, where we see us.
From the significant synergies and deploying gams regulated markets platform coupled to cool that's a very compelling sports betting product proposition, which has won multiple awards over the last few years in these competitive European markets.
<unk>.
Thanks, and then I just wanted to hit on of course second half being seasonally stronger than the first typically could you provide any kind of outlook or what thoughts are from potential gross operating revenue for the fourth quarter or how things are potentially trending on that front.
A little bit too early to comment specifically Joel shipping weighted restarting being happy with most parts of the business in Q4, and we're looking forward to hopefully taking the first at home line in Michigan by mid December but of course, we are in the hands of the regulatory goals.
Thanks, guys I'll hop back in the queue.
Thank you.
Thank you. Our next question is coming from the line of Greg gave us of Northland Securities. Please proceed with your questions.
Good afternoon, German Karen Thanks for taking the questions and congrats on the acquisition.
I guess, just a follow up on Qubec, if I could I think you said about 50 million in revenue ex expected in 2021.
How should we think about the company's margin profile, maybe how its opex additions will impact your opex. After the integration is complete.
Yes, we gave a little bit of insight relative to their current cost structure I think on the call. We mentioned that they were operating and they are operating net operating income breakeven on a year to date basis.
And they have about 175 employees.
So.
Moving forward I mean, they're doing an excellent job in managing the growth of the business.
And we anticipate that the trajectory that they are currently on will continue into 2021 in terms of revenue and.
Profitability, which is why we're saying it's immediately accretive.
Okay got it. Thanks, thanks for the color there and if I could follow up on from your prepared remarks.
Regarding the partnership of when is it.
Pretty reasonable to assume that you know as they roll out their online gaming offering and other markets outside of Michigan that.
What really make as much sense to go with different providers and every state I guess, how are you thinking about that logically and then.
Our core your discussions going with them. You said you are talking about those opportunities, but I guess, how can you give us anything more in terms of how those opportunities.
Present themselves in additional markets.
Yeah, I would hope that when executives wouldn't be upset with me for saying they seem to be indicating a broad sense of satisfaction with the way they have been working with Gan to get ready from Michigan. So obviously been under.
Texting timelines across the the whole enterprise our side of those and yes, there are expansionary opportunities.
With an for wind and additional states, but as with all things when are ready, we'll announce whatever may come off that.
You pointed on on perhaps a default logic that perhaps you would want to use multiple platforms in multiple states, but I do believe Gan has a very competitive positioning with the focus on conversions from integration of the rewards programs and of course, when with a fabulous properties in Las Vegas, and Massachusetts actually has a very substantial database of Michigan residents, who we are.
Hope would be very per pad to leap on line with them from a sports AG because here.
Okay got it Thats a good line.
And then I guess lastly, just to kind of follow up on the assumptions that go into guidance.
I know you don't like to comment on revenue share expectations, but just wondering you know how you should think about how we should think about kind.
Kind of you are or.
Maybe how individual markets are expected to trend on a sequential basis or I guess, what's implied in your guidance.
Yes, again, we have talked about continued ongoing growth with with all of our customers and so we are seeing expansion from the market derma touched on that relative.
In New Jersey, and so we are expecting our current market shares to continue at steady state and grow with those markets of course, we're looking forward to the launch of Michigan.
Focused on continued commercialization of the patents and we've talked about that.
The last two calls as being part of the ongoing guidance as well and so I think we're you know this year, it's really about.
Setting us up for cash.
Continued significant growth going into 2021, and a portion of that is organic and all of the claims that were signing and the pipeline for 2021 continues to be robust and the sports book technology offering will help accelerate our $100 million target as we've stated.
Got it thank you.
Thank you there are no further questions at this time on behalf of the Gan limited team. Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time.