Q4 2020 Gan Ltd Earnings Call
Okay.
Thank you for calling income conferencing. The next available operator will be with you momentarily.
Okay.
[music].
Thank you for calling income conferencing.
The next available operator will be with you momentarily.
Okay.
Okay.
[music].
Yes.
Thank you for calling income conferencing.
The next available operator will be with you momentarily.
Sure.
Really.
Okay.
Okay.
[music].
Yes.
Thank you for calling income conferencing.
Thanks available operator will be with you momentarily.
Okay.
Really.
[music].
Okay.
Thank you for calling income.
Okay.
Comprehensive available operator will be with you momentarily.
Yes.
[music].
Thank you for calling income.
Company. The next available operator will be with you momentarily.
<unk>.
[music].
Okay.
Thank you for calling income conferencing.
Yes.
The next available operator will be with you momentary.
Okay.
Yes.
Really.
[music].
Good day.
Yes.
Income.
I'm confident it will be with you momentarily.
Okay.
Really.
[music].
Every day.
Hi, Rachel Smith.
Which conference Rachel.
Yeah.
Yeah.
Okay.
All of it.
Yes, Scott.
Gan.
Sure.
Great.
The euro.
Right.
My belief.
For your 2020 earnings release was issued today up to more.
Okay.
So on the company's website.
<unk> Dot com.
The representing the company today are dormant market price.
And Chief Executive Officer.
The term for as executive Vice President and Chief Financial Officer.
Before we begin we'd like to remind you of that sort of put the factual statements made today. The information contained in this conference call, including any financial and related guidance. We provided consist of forward looking statements that involve risks uncertainties.
Functions that are difficult to per day.
Words, and expressions, reflecting optimism satisfaction with current prospects as well as statements of the future tense identify forward looking statements.
There are options does not mean for the statement is not forward looking.
Forward looking statements should not be interpreted as the guarantee of future performance or results of such statements are subject to risks and uncertainties that could cause actual performance of results to differ materially from those expressed in or suggested by the forward looking statements. So important factors that could cause.
Cause such differences are discussed in the risk factors section of cans are pure perspective state of it may 5th 2020.
Forward looking statements speak only as of the day. The statements are made from 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 statements except to the extent required by applicable securities laws with that.
Like the term for over the German smurfit for opening remarks.
Please go ahead gentlemen.
Thank you Tony and good afternoon, everyone.
Please join me if you will on the third slide of our presentation released earlier today.
All of our U S. NASDAQ listing completed just 10 months ago. We have now made the investments required to deliver on the promise of 2021 opportunity to exceed $100 billion in revenues with strong full year EBITDA margins and a swift return to solid cash generation in the coming quarters.
Our investment decisions in 2020, particularly in the second half the preferably resource for the U S opportunity and create the first of all bandwidth and our software engineering capability have already proven extremely beneficial in early 2021.
As were 84 days into the new year and firmly in the grip of record online activity. We believe that it is necessary to comment on expectations for the first full quarter of 2021, where we've already delivered $194 million and gross operating revenue toward the <unk> clients not including cool that's newly consolidated.
David and incremental revenues.
I'd say with just a few days left of the current quarter, our Q1, 2021 visibility and therefore Q1 revenue guidance is firm at between 24 million to $25 million I'll leave our CFO, Karen Florida as to comment further on full year guidance in detail later in this presentation.
I'm also extremely happy to announce today our newest.
U S retail casino operator client for real money in and of gambling, that's Westgate resorts of major Las Vegas Casino and operator of the largest retail sports book in America best known as the Super book.
As of now engaged scanned the roll out of our platform for their Internet Sports book in Colorado, and both Internet Sports and online Casino gaming in New Jersey later this year.
Welcome Super book.
And so at the 2020 full year results on the.
Behalf of everyone across the large and still growing Gan group I'm proud to report to shareholders that we remain America's number one enterprise software provider for powering of America's significant surge in the online gambling.
And of 2020 was the year again achieved what we term escape velocity and we define the escape velocity as delivering on all of promises we have one of major new clients here in the U S. We have rapidly grown our recurring revenues, while reducing our customer concentration.
We have again licensed our patents for considerable value.
We have executed on our successful M&A strategy to secure scarce capability and online sports betting for deployment of here in the U S.
These are all the things we said, we could do and since May of 2020, we've gone and done them.
Looking back at 2000 2075 per cent of our revenues were recurring in nature of these core software as the service revenue is growing 67% year on year to $26 million up from 15 5 million the prior year.
This growth rate would be exceptional for any software provider in any regulated industry.
The dig one level deeper and it reveals that our U S. Recurring revenue grew 86% year on year with particular strength in U S real money online gambling.
<unk> revenues grew 92% year on year.
Predictably than perhaps the U S remains at the center of growth for our business and our market leadership position range firm with $545 million in gross operating revenue is delivered to clients in 2020 up 73% year on year, but which attaches even greater prospective to the more than two.
$200 million and gross operating revenue, which will be delivered to our clients. In this the first quarter with March madness already contributing towards the strong end to a strong first quarter during which we've experienced more than $20 million per week gross operating revenue.
Briefly turning to the next the fourth slide it's worth acknowledging the shareholder value creation of both our U S. NASDAQ listing which took six months straddling the end of 2019 and early 2020.
Combined with the logical strategic acquisition of cool debt announced last November the.
That transaction appears to be undertaken at both an attractive entry point.
And extreme fair value relative to the growth profile and strategic sports betting capability now forming part of Gan overall product proposition and of course, the early 2021 contribution of significant revenue and EBITDA.
I'd like to thank everyone of cool debt for their outstanding work in integrating our businesses, so quickly and seamlessly not least the cool that founder Mr. Jan <unk>, who has now taken on a long term position as Gan as global head of sports.
Okay.
Turning to slide five it's worth revisiting the rationale behind those competitive advantages, which drive our new client wins, but the secured in 2020 since our NASDAQ listing and those already secured year to date.
We've spoken at length on the strategic U S patents and the retail casinos to link on the property of rewards to online gambling and.
In terms of licensing our patents, we consummated of key licensing deal earlier, this year, which moved $3 million in the licensing revenues from Q4 2020 into Q1 2021. The key reason for the delay was all of that pricing, ensuring we secure the landmark pricing on a granular pearling basis.
Going forwards each reward card being linked to an online gammon account in the U S isn't that price by Gan at $75 per link for new licensees.
From our vantage this points to potential value in pursuing additional patent licensing deals with additional operators of retail casinos.
With our online businesses may already be infringing on our intellectual property or who publicly state the intends to implement infringing capability.
In both categories, we are and will continue to pursue a remedy through commercial licensing deals and anticipate additional patent license deals in 2021.
As a brief reminder, the incremental patent licensing revenue opportunity remains unpredictable at the timing, but retail casino operators all operate on property rewards and they all logically seek to deliver retail the online convergence and offering rewards to the patrons.
Gan patented I bridge framework capability delivers a proven material uplift in online gambling revenues from retail carded patrons, who linked their existing retailer of awards the camp to the new online gambling account.
We are also of course spoken about the superior capabilities relating to the marketing conversion funnel, which enable our clients to spend their marketing capital more efficiently on Gan the non competing technology platforms.
Our recently launched client Churchill Downs took the opportunity to discuss our experienced launching and the operating on Gan technology in the recent earnings call I'll.
I'll take the opportunity here to think of them for the positive commentary, which confirmed publicly what we already knew internally the.
The Gan technology offers superior performance and we deliver on time and challenging regulatory environments.
Another key component of our differential between competitors is our industry, leading analytics framework, which is powered by considerable and rapidly growing U S dataset.
He will become a more visible service for clients as we progress through this year low.
Labeled analytics. This service is increasingly available to our clients post launch to predict the future behavior of their own line gamblers, and thereby surface actionable marketing recommendations to prevent customer churn extend the lifetime values and minimize problem gambling.
Gan analytics Leverages, our cutting edge machine learning the framework and the latest in artificial intelligence techniques to drive these predictive analytics, which we believe represents a compelling competitive advantage for Gan as well as our operator clients.
These data driven knowledge services are available to existing clients of Gan on a subscription basis, which we anticipate will generate incremental and new subscription based revenues from our clients throughout the course of this year with the opportunity to offer these services to the entire industry over time.
This means we now have increasingly coveted technical capability, which represents and evolved form of scarcity here in the U S.
This includes what we call the one account any product any state capability, which allude some of the even the largest BDC operators today, and which Gan first rolled out in 2019 for Fandel group across New Jersey, Pennsylvania and Indiana.
More recently this capability has rolled out for Churchill Downs twin spires Dot com online gambling operation now operating live across both the Michigan and Tennessee with incremental state of extensions coming for Colorado, Pennsylvania, Indiana, and New Jersey in the coming quarters.
I'll take this brief opportunity to offer an extended inside here on our one account any product any state capability, which as always appears simple and logical to the end user online gambler, but in fact is fiendishly difficult to design deliver and typically operate in these highly regulated and intra.
It's interest eight markets of America.
Downloading of single App onto the end user gamblers mobile phone crazy of verified online account and depositing money into the single account enables this individual gamblers to seamlessly debt cross state lines on sports or play Casino games.
More importantly, this gambler has a single account balance maintained in the Gan technology operating framework and exacting compliance with the increasingly divergent framework of requirements imposed by each state.
By the end of the second quarter, the Churchill Downs twin spires Dot Com sports book and Casino App will support the functionality across <unk>.
Michigan, Tennessee, Colorado, Pennsylvania, and Indiana.
This represents a continuing in the scarce technical capability, we're proud to surface again in the U S marketplace as we rollout across diverse states for selected clients.
Those sports gamblers in one state can visit another and continue betting on sports and perhaps also engage in plane in the online casino is supporting local legislation permits just as those of New Jersey could cross the state line into Pennsylvania, and continue betting on sports or casino games. These past two years.
The strategic significance of Gan capability cannot be overstated as more states regulate in close geographic proximity to each other this true one account any product any state capability combined with our first of all bandwidth required the launch and all of those states anticipated would be coming online in the near term.
Will become an increasingly critical driver of our clients' success and therefore, our own success.
Operators in certain geographically isolated states like Colorado can get away with suboptimal technology in the short term however, certain regulated states such as New Jersey, Pennsylvania, and West Virginia are already geographically conjoined as our Michigan, Indiana, and Illinois and soon enough we will see the.
80 of the eastern Seaboard, and the Midwest linked together as the patchwork quilt of interest state regulation knits together.
All too soon if.
If not already any beta is the operator with true multistate scale ambition will need one single mobile app in the App stores supported by the true one account any product any state capability, which can uniquely offers in the U S. Today as the leading <unk> enterprise technology provider.
Okay.
On slide six of the slightly more granular analysis of Michigan.
The third great state to launch online gambling in the in the U S, which delivered of well publicized big Bang market launch on January the 20 of those.
This included nine betas the operators launch that day three of them operating Gan technology, including the fan dual online casino the Churchill Downs twin spires Dot Com online sports book and Casino and of course of the Wynn resorts when bets online sports book in Casino.
So far we've been very impressed by the value of online Gamblers Cross sold from twin spires existing national database and look forward of serving the anticipated high demand surrounding the Kentucky Derby Festival week, starting late next month.
We've also been impressed by the underlying key performance indicators associated with of Wynn resorts brand, which attracts more online that's per day per unique active gambler than any other client in any other state to date. This underscores the of men's customer loyalty commanded by the Majestic when retail casino gaming brand when transposed into the online channel.
But perhaps the most impressive client launch of Michigan has been the <unk> group, whose online casino operating on the Gan platform has already commanded substantial gaming market share.
This speaks to their commitment to pre marketing undertaken several weeks before the Michigan market commenced enabling of Big Bang event, which is both sustained and grown in the intervening weeks since launch.
As set out here, we believe Gan has captured the bulk of the <unk> revenue opportunity in Michigan relative to our <unk> peers, and we look forward to maintaining a keen watch on how those relative to the market share has changed overtime.
Vandals online casino will continue to be a podium player alongside droppings and bet MGM, but we can already see against other Michigan clients growing their online business rapidly and being committed to continuing growth in Michigan centered on the online casino opportunity in the short term, while preparing for the customer acquisition opportunities associated with the 2021 NFL season.
Starting up again late summer of this year.
All told we're upgrading our expectations for online gambling in Michigan in 2021 of which previously had been forecast at just $439 million and gross operating revenue share it amongst all because the operators almost split evenly between Internet sports and online casino.
Today, we believe the Michigan market will be substantially larger sooner than originally forecast and in consultation with our advisors Regulus partners. We are moving our 2021 estimate up by 81% from $4 $39 million to $795 million with I gaming accounting for $620 million or <unk> 70.
The 8% of total with online sports betting generated the balance of the $175 million.
This remains perhaps conservative relative to third party forecasts, but we remain excited to witness such a large and rapid contribution from Michigan to the overall U S total addressable market.
Michigan. Therefore represents the third largest market to go live here in the U S and the rapidity of taxation delivered to the Michigan. The state Treasury strongly suggests other states will adopt the Michigan marketing playbook and permit BDC operators to conduct pre market customer acquisition to register verify.
And fund online gambling accounts well before the first that is allowed on line and therefore, enabling yet more big Bang moments in the future states.
If this comes to pass we foresee increased pressure on BDC operators technology vendors to be launch ready some months, even before the market actually commences as well as an acceleration of gross operating revenues rendering the U S total addressable market larger sooner than generally forecast.
As always we will continue to monitor events and look forward to updating our total addressable market forecast in quarters to come as 2021 unfolds.
The U S online gambling opportunity remains perhaps more exciting than ever as a direct result of the Michigan marketing playbook, which we would suggest wasn't inadvertent positive consequence of multiple regulatory delays to the Michigan original launch window penciled into our industry calendars during full of last year.
Okay, I'm going to move on to slide seven.
So here, we are standing already on the cusp of our second quarter 2021, so let's enjoy the brief opportunity to take stock and look forward through the balance of this year.
Firstly, we now have the burst of all bandwidth and engineering to deliver multiple operators live in multiple states just as we proved in Michigan in January of this year with three simultaneous client launches, which would have been impossible to deliver just a year ago.
Today, we have 600 people worldwide with the majority of being technical specialists singularly focused on the U S marketplace and supporting our clients to capture the U S online gambling opportunity.
Secondly, we now have the credibility of required not just to win but also to deliver from major new clients such as Penn National when the resorts and Churchill Downs.
These new client wins of continued into 2021 was Seneca gaming in New York, and Gila River and Arizona, both for simulate of gaming and of course today is the announced new client win the Las Vegas Casino Heavyweight Westgate resorts on the Super book, the largest physical sports book in America, which will be launching real money in and of sports and <unk>.
On gas platform later this summer in both Colorado, and New Jersey for the Colorado deployment of Internet sports only being a competitive replacement of an existing platform provider.
Thirdly, we're making strong progress marketing, the new Super Rgs, which aggregate several hundred online casino games for deployment here in the U S via one single technical integration.
This is now available in Michigan, with New Jersey, and Pennsylvania coming online soon and we look forward to announcing our first clients of the Super Rgs in the coming months.
On a related note our content strategy to increase scan the share of our clients' online casino revenue is now well advanced in the coming weeks, we look forward to disclosing the U S relevant portfolios of I gaming content, which will be exclusively joining gans already formidable arsenal.
As a final but important point of this.
This preview.
Let's also consider the significant contribution from our newly acquired cool the International operating division, which will contribute approximately half of our revenue in the first quarter of 2021, the majority of that from online sports betting.
Cool that's year ahead, as Nick Sunny one with more global sports events packed into 2021, the enduring any other year on record in the main due to reschedule of Covid impacted sports delayed from last year.
In the last earnings call I took the opportunity to outline the logic driving our acquisition of cool debt.
Adding the sports capability is a perfectly logical way to rapidly expand our share of clients gross operating revenues from sports flowing through our platform and this acquisition has proven immediately accretive to both revenue and earnings more importantly, we believe the culture of cool that aligns closely with Gan and there was a real shared excitement.
To bring the sports capability to America later this year.
As a timely reminder, it is important to indicate yet again that we are only bringing cool that to the U S. B to b product and service and we are not planning to bring cool that's b to C platform to the domestic market.
Equally important to note as I can we will continue to work alongside existing and valued third party sports by the vendors who are integrated into the <unk> platform at the request of our clients.
<unk> has already contributed.
Significant sports expertise and global trading and risk management.
Also they contributed the uniquely compelling sports gambling product capability and the benefit of the fast growing international business to perfectly complement our domestic U S business.
Despite only operating in a handful of international markets, they've proven their ability to lead through superior sports product and trading today enjoying number one market leadership status in three of the eight markets they serve.
Having closed on the acquisition on January of the first of this year. The more closely we work together the more we realize the quality and scope of the opportunity to bring the cool beds capabilities here to the United States. Later this year and we look forward to updating the market on progress on the next quarterly earnings call in May.
I'm extremely proud of how hard our team has worked to deliver Michigan online earlier this quarter.
The best serve our clients macro commercial objectives to be online in Michigan on day, one and the new and exciting market.
This great team is non complemented complemented by the equally great people of cool debt with whom we're already collaborating well and we jointly look forward to a prosperous 2021.
And so with that I will turn this dialogue over to our CFO of Board member Karen Flores.
Thank you Darren and Hello to everyone on the call today.
Our first earnings call in 2020 marked a significant milestone for the company.
We had just completed the IPO of NASDAQ listing.
Our first earnings call of this year marks another significant milestone our acquisition of call that just closed on the Earth day, and while today's discussion will be focused on Gan Standalone 2020 of results we couldn't be more excited to end our prepared remarks with our 2021 full year.
First quarter guidance inclusive of call debt.
Before I jump into the financials, let me take a moment to briefly summarize the key highlights that will frame our 2020 full year result.
First we moved out of an unrelenting pace to execute against our core growth strategy to build long term partnerships with best in class of operators servicing them through best in class technology.
Hands down Gan continues to be the number one because the I gaming platform provider in the U S. GAAP.
Gan technology power, 21% of the total U S gaming market in 2020.
And we also command in excess of the 60% share of the <unk> gaming supplier market.
We anticipate that our expanded customer roster, which now include the brand name clients like Wynn and Shoretel will continue to grow the share with the recent launches of Michigan and Tennessee.
In support of our growth strategy, the IPO and follow on offerings.
Allowed us to deploy capital to expand resources.
In the corporate and enterprise to achieve scale and execute the transformative accretive acquisition of Quebec online sports, the technology and capabilities and international DTC operations as Dermot outlined 2020, where the truly foundational year for Gan and while the investments required to position us for continued.
Expansion of reduced our profitability. We believe the majority of these expenses are now largely in our rearview mirror.
Second on our path to achieving scale and diversification there are aspects of our revenues and EBITDA that will make comparative challenging the.
Timing or extraordinary circumstances as the.
Relevant to our discussion today, it's important to note. Our 2019 results included $8 5 million of revenue of $8 million of EBITDA that did not recur in 2020, more specifically for $5 million of revenue and $4 million of EBITDA from our UK day to see.
Operations with Winstar World Casino that ceased in 2020 and separately $4 million of revenue and EBITDA from recognition of of patent licensing fees.
Today, I will be speaking to our 2020 performance, both including and excluding the 2019 items, which will help set the stage for the organic growth of <unk> in the first quarter of 2021.
Additionally, on our last earnings call, we discussed our intellectual property monetization strategy and reiterated our full year guidance subject to timing of this revenue.
Last month, we reached an agreement to license games patents at average technology for a total of licensing fee of $3 million. As a result of this agreement we will recognize the licensing fee during the first quarter of 2021 instead of the fourth quarter of 2020 as was previously anticipated had the patent licensing revenue been pull forward into Q.
For our revenue results would have been on target with consensus estimates.
Lastly, I'd like to emphasize that needed the I gaming and stimulated gaming represent our core <unk> business and we are now in a growth phase relative to our <unk> online sports betting segment.
In the third quarter of 2020, we migrated the sandal online sports betting where all of our system.
For the fourth quarter of 2020, specifically the OSB migration had a significant effect on comparative and sequential trending and again I will be referring to the business performance, both including and excluding the online sports betting revenue and EBITDA.
That said the good news is that our strong market share gains and our I gaming business more than offset the OSB locked.
In the fourth quarter total gross operating revenue of $132 million is that 9% comparatively in cleaning the OSB. However, excluding the OSB. The organic growth is the 150, 156% with no new markets our clients.
The better news is that we see a tremendous opportunity to keep winning market share overtime.
In particular through our new operating partnership and the Gambit of esports Tech offering, which we anticipate launching this summer.
And now to dig into the numbers on slide nine.
Looking first at our full year revenue drivers and Kpis.
Total gross operating revenue increased 73% year on year from 316 million to $545 million. This.
This increase was primarily driven by outperformance of our U S. I gaming related business, which increased 273% year over year outpacing the total addressable market growth of 230 per cent. As we also enjoyed increased market share, which expanded from 18% in 2019.
The 21% in 2020, we are extremely proud of surpassing half of billions of operator revenue processed through our platform as we continue to manage the performance and execution of our partnership claims businesses.
We also saw a very healthy 89% year over year increase in simulated gaming gross operating revenue as well as the resilient, 15% year on year increase in Italy.
Online sports betting declined 21% year on year as it related to the impact of both of the pandemic on professional live sporting events as well as the Fanjul OSB migration in the third quarter.
Now turning to full year top line performance as outlined on slide 10.
Total revenue of $35 2 million increased 17% versus 2019.
Looking at organic growth, excluding the 2019 impact of U K B to C and patent licensing revenue increased 62% year over year.
Our core <unk> business, which drives recurring platform and content fees performed extremely well, increasing $6 2 million or 31% versus prior year, including the 2019 impact of U K D to C and $10 4 million or 67% excluding that the.
Strength of our credit platform and content. The revenue was driven by a 173% year on year increase in gaming, 77% increase of simulate of gaming, 17% increase in Italy and of 5% year over year decline in OSB I mentioned previously.
The note OSB declined as a percentage of our overall revenue as well.
From 10, 1% in 2019 to eight 2% from 2020.
And on the strength of our launches with Penn National Agua Caliente Route 66 in Snoqualmie stimulate of gaming increased as an overall percentage from 19% in 2019 to 27 per cent in 2020.
The development services and other which includes $4 million of patent licensing revenue in 2019 declined year on year from 10 million to $9 million in 2020.
As I mentioned in my opening remarks, we recently reached an agreement to license and patented hybrid technology for $3 million and we will recognize the licensing fees. During the first quarter of 2021, instead of the fourth quarter of 2020 as previously anticipated.
Sequentially and comparatively our fourth quarter of revenue declined, 16% and 17% respectively. As both prior periods include standard OSB revenue prior to the third quarter of 2020 migration in the fourth quarter of 2019 also includes $4 $5 million of revenue from our UK PTC operate.
Excluding these items, our core business recurring platform and content fee revenue increased 16% sequentially and 76% comparatively.
Moving on to adjusted EBITDA on Slide 11.
Adjusted EBITDA declined year over year from a profit of $7 9 million in 2019, two of loss of $2 3 million in 2020, including the 2019 impact of U K b to B to C and patent licensing.
Putting these items the adjusted EBITDA loss increased by $2 1 million in our core business as the investment in our year long journey of graduating to the NASDAQ investing in our people and infrastructure to achieve scale and acquiring the pullback was substantially offset by strong organic growth.
Year over year of gross profit in our core business, excluding the 2019 impact of UK BTC and patent licensing increased by $11 3 million or 107%.
The related adjusted gross margin also increased from 49% to 62% with the revenue mix shift towards the highest margin recurring platform and content fees.
This healthy increase helped to mitigate the temporary and permanent increases in our cost structure from.
From 2020, we incurred an elevated level of professional advisory services and other related costs as we executed against our NASDAQ and M&A strategies, but we also invested and will continue to invest in operational excellence through the continued expansion of resources to enable our long term object.
Yes.
Sequentially, our adjusted EBITDA declined from a loss of 400000 in the third quarter two of the loss of 6 million in the fourth quarter. As the result of the top line shaft that I previously discussed execution of the cold that acquisition and our ongoing investments and Resourcing and infrastructure.
The IPO and follow on offerings contributed to our ending cash balance of $153 million.
And we continue to operate without any debt.
A portion of the capital raised what's the point the software development as we continue to enhance the platform and our capabilities. For example, the continued development of one account any product any state, which recently power of the launch of twin spires Dotcom in Michigan and Tennessee.
Overall, our capital expenditures increased from $2 9 million in 2019, the $5 9 million from 2020.
It is of critical time to innovate and advance our platform and we will continue to invest in proprietary software development to bring all of that sports offerings.
And the other critical product development to the market.
We are well capitalized to address this and our key priorities of securing market share entering new states as they legalize delivering the best platform technology to the market and exploring opportunistic and accretive M&A.
Looking forward to 2021 guidance and our current trending on slide 12.
And we look to the future. We are excited about the organic growth and momentum of our <unk> business carrying into 2021 as well as the accretive addition of call that he does he.
The launch of Michigan in January exceeded our expectations and of Dermot mentioned, we anticipate over 200 million and gross operating revenue in the first quarter, which is organic growth of approximately 62% versus the prior quarter and 170% versus the prior year ex.
Screening Fanjul OSB.
Cool that is also trending well ahead of expectations as they continue to see success across all territories.
On the strength of this momentum and our anticipated favorable Q1 results. We are guiding to an annual revenue range of $100 million to $105 million with $24 million to $25 million for the first quarter split approximately 50 50 between our b to B and B to C businesses.
We also estimate that for Q1, no customer will exceed 15 per cent of revenue and this concentration will continue to reduce with the anticipated growth in our core businesses.
We are not providing guidance for 2021 of adjusted EBITDA at this time, but we are squarely focused on a return to positive EBITDA.
Given we are now completing some of the critical growth focused investments. This should allow for solid operating leverage gains as our revenue continues to scale and we will look forward to updating the market further throughout the year as we execute this plan.
On one final and more technical note, we have now fully transitioned from foreign private issuer to domestic filer under the SEC guidelines, which means that our financial statements are now presented under U S. GAAP.
This required of heavy lift over the last few months, which is why our call with the weight of few weeks to today.
Moving forward, we will return to a more normal schedule starting with the mid May day per our Q1 earnings call as we will be adhering to the non accelerated filer of reporting calendar for the balance of 2021.
That concludes our remarks, and we will now open the line for questions.
Thank you we will now be conducting a question and answer session. At this time, if you'd like to ask the question you May Press Star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two of you would like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before.
The pressing the Star T. Our first question comes from the line of Chad Beynon with Macquarie Group. Please the chamber. Please proceed with your question Hi.
Hi, good afternoon, Thanks for taking my question.
Jeremy I just wanted to start with a high level question I know theres been a lot of.
Talk about vertical integration in the United States and Theres been some company instead of taking action. So now that you do you have the full suite of products with what's cool about coming in at the in House and I know you went through this in your prepared remarks are you still confident that there is there's a big ocean out there and Theres a lot of potential partners.
Are you guys to work with over the over the years to come and we're just seeing this trend that I was just wondering.
Sure.
Use of your updated views of have come along.
Thanks, Chad it really hasnt changed the reality is the this is very very complex and scares technology and as much as many BDC operators of U S. Internet gambling may.
<unk> called of the technology, it'll be very few who do go through that whole process and regardless of the size of any individual because the operator, they will always be reliant on a wide ecosystem of third party content, particularly in the online casino or I gaming space. So we do see that this is a broad and deep ocean. We do believe there's gonna be cigna.
Inefficient customer diversity of is gonna be a lot more operators on line and I believe.
Our generally accepted by industry analysts and I think we've just proven that again today with the announcement of Westgate resorts that.
As I believe our eighth.
Real money gambling clients here in the United States and there are many many more to come.
Great. Thanks, and then on the the 2020 one guidance is it safe to assume I know you said $12 million per cool, but in the first quarter I believe last quarter. When you announced the acquisition. You said this is roughly a 50 million dollar of revenue business is it safe to assume that out of your guidance roughly.
$50 million of school bad debt.
We should only assume the.
The $3 million Q1.
Patent license.
Certainties and then everything else is based off of G. O R. Thanks.
Yes, that's absolutely correct are the well.
Between the B to B and B to C businesses is 50 50 for the short to midterm.
Okay. Thank you very much appreciate it.
Okay.
Okay.
Our next question comes from a lot of Josh Nichols with B Riley FBR. Please proceed with your question.
Yeah. Thanks for taking my question and good to hear the Companys after such a strong start for the first quarter.
One thing I did want to ask a little bit about good to hear the integration is coming along nicely, what's the company's opportunity to expand into new states in the U S, particularly those that may just have sports betting.
Currently in the back half of in school that is integrated and is that really built into guidance or would that be of potential sources of upside.
Yeah, Josh I mean, as you know the Gan platforms got multiple different options for clients to choose from and the obviously, we'd we prefer of clients to choose the cool debt and have sports capability, but I think we need to get that up and running them at the door later on this year and be able to demonstrate the unique capabilities. The cool that brings to the Gan product proposition.
The meantime, yes, we were absolutely relevant and playing in the markets that are in the that sports only we're expecting to be in a large number of Internet sports I think we obviously just launched a few days ago in Tennessee, which is an internet of sports betting market in Italy, we're gonna be launching in Colorado.
Shortly which isn't a net of sports betting market only and.
Of course, we look at Ohio, which seem to be coming down the legislative terms like pretty quickly.
In 2021, and a large number of those states like we are of a direct pathway to both the Illinois and New York. So we absolutely have a clear play in all of the Internet sports only markets.
And look forward to growing our sports betting revenues, both through the deployment of cool, but and the deployment of third party support centers.
And just to follow up on that with respect to the guidance you can assume that there is a very low level of revenue that's embedded in the planet low seven figure.
Thanks for the the clarity on that.
And just to add on cool debt a little bit more could you any update you can provide I know that they are a big beats the focus right outside the U S. On how those markets are trending or what's the expectation on that one.
Yes, so so cool that is operating in just a relatively small.
The number of European and Latin American markets at the moment they are generating considerable profit from our significant scale and we're extremely excited by the expansionary opportunity in Latin America, We just got a secular growth profile to it from the next 10 to 12 years.
Thanks, I'll hop back in the queue.
Our next question comes from the line of Ryan <unk> with Craig Hallum. Please proceed with your question.
Good afternoon, thanks for taking the questions.
Jeremy on the last conference call, you mentioned $100 million of pro forma revenue in 2021, excluding any synergies with cool, but so I guess it sounds like we're assuming a little bit of synergies there from sports betting revenue as well as $3 million of license award getting deferred from 2020 to 2021 as well as significant increase in.
Michigan assumptions, so I guess what are the assets here what are the levers.
That maybe are coming down.
Thanks, Brian So the first thing I'd say is I mean this is based on all of our best current estimates right. So the increasing guidance is not undertaken lightly or that significant consideration, it's principally from the very.
Very rapid market launch of Michigan, which I think the whole industry is noted and we've had a record period of trading activity as we progressed through the bulk of Q1 already and we don't see any signs of that slowing down anytime soon so I think we're being conservative by lifting of guidance and Karen would you like the common for them.
Yeah, I mean, I would say that again, you know, we'll look to update the market again in the first quarter I mean, what we're coming back out with our Q1 guidance I'm in roughly six or seven weeks.
So you can expect another update relative to the full year at that point and we'll be talking about it further just based on continued performance.
Gotcha.
And then if I look at slide 17 it.
It looks like.
That form of content. These development services the bottom two bars, there the recurring pieces of the business the SaaS pieces.
Those are declining on a percentage basis I guess.
The recent deals had better pricing as well as customers, who were taking more services and there was a path to 10%. So I guess can you help walk through the year over year decline there.
Yeah. So I mean, there there is a little bit of an impact are relative to the mix of jurisdictions and the impact on the take rates of between gross operating revenue and in our revenue you have you know taxes that come into play bonuses et cetera. The.
It's going to be to the extent that there's states with higher tax rates.
That's you know the such of Pennsylvania of coming in it's going to put a little bit of downward pressure on that take rate on and then you know relative to how we're executing against that strategy. This year and looking to push out of that take rate and we've always said you know that that content and investments in content are going to continue.
The push up the take rate and that is a huge part of our focus this year. So there's that and then with the the Gan sports Tech offering three of the cold that technology and we expect those take rates to come up over time. So this year for us is really about.
Executing on the content and sports Tech strategies.
Okay and then just.
Isn't it just an additional piece of the comment I mean, we are finding that our commercial terms are trending to improve and certainly not staying static or declining.
Gotcha.
Then last question from me just on parts, thanks to see the patent license there.
But also of did remove exclusivity. So can you talk through the puts takes on the removal of the day exclusivity their launch plans in Michigan, which has played back and then kind of what that means for Pennsylvania, and New Jersey for you guys.
Yes, I mean, there's a limit on what we can disclose our bad debt relationship change, but of course, we couldn't deliver all things for all people and we had the huge heavy lift of just getting three clients' lives in Michigan. So we'd be serving parks for a long period of time, we delivered a very substantial business for them.
And it's business as usual for the type of thing.
Great. Thanks, guys I'll hop back in the queue.
Yeah.
Our next question comes from the line of Greg give us with Northland Securities. Please proceed with your question.
Hey, good afternoon, Germany, Karen Thanks for taking the questions.
Congrats on the strong Q1 guidance and everything and the.
The Westgate resorts edition like you said the eight three of them on the gain climate client.
I think that you said sports betting side in Colorado, and New Jersey, and then high gaming in New Jersey, just wondering sorry, if I missed this but you can comment on the timing of that launch and then maybe the expected gross operating revenue contribution of uplift from that and whether that's included in guidance.
Thanks, Greg Yeah, So notes of extremely exciting customer win for us. It's the eighth U S retail casino operator client of ours for real money gambling here in the United States, So very exciting.
Increase in our client roster.
Westgate resorts is extremely well known brand in the U S. Amongst sports gambling enthusiast I think they've got a strong commitment to internet sports betting.
The up and running in Colorado already so lots of competitive replacement would be launching a colorado steer you towards the back end of summer everybody wants to be line before NFL kicks off in August for the pre game season. So that's always the target of whenever you announce a client win in early part of the year, it's really focusing on a natural up and running.
Launched in time to capture the NFL user acquisition opportunities. So that's that said that's the sense of timing in terms of market share I think I will leave that for our clients to comment on in due course, but they've got a fabulous Brandon.
In the sports gambling and they've had some degree of success already online in Colorado and the alternative vendor.
Got it great.
The follow up I guess on the cool that integration.
Did you provide an update on estimated timing when we would see that the integration.
In the U S and the launch there and I guess, along those lines you know what.
What still needs to be done or completed to reach the integration in the U S markets.
Okay, well the technical integration was very much designed as part of the due diligence process in fall of last year. So the technical integration is kind of one part of it and that's in the bag already are the.
The second process is slight slight additional localization for the U S marketplace, which has already taken place.
Of course, you got to win a client for that and we've already announced we have secured our first client for cool batch capability for deploying appointments and an internet of sports only marketplace here in the U S.
And we are again referencing the earlier comment about Westgate were leaning towards a pre NFL launch of cool that here in the U S.
Great I guess the last one from me just kind of drivers of the decline in take rate sequentially and it sounds like that was kind of pushed out from the licensing fee moved to Q1.
It seems your guidance implies a pretty nice uplift in take rates just based on the gross operating revenue expectations for the year, what kind of gives you confidence I guess in that uplift.
Yeah, I mean, you don't there's already substantial momentum with our current client base and I would just make a general statement that our revenue projections.
For 2021 are primarily based on things that are already known them for the there's always going to be just a little bit of.
You know, adding of new clients in the assumptions around that but we have line of sight into much of what we're planning for 'twenty 'twenty. One in terms of the roadmap and are already seeing.
The the strong parts of the year as we talked about so there's a very high level of confidence what the the revenue estimates for the tier one.
So out of a little bit of color there, Greg that as we deploy more proprietary wholly owned.
Or exclusively licensed content will be keeping a full rev share on the deployment of the the online casino games, which means our take rate in the online casino will go up so it's not just about at the point in cool that sports of get our take rate up substantially it's also incrementally.
Lifting our take rate in the online casino side, as well and we should see some impact on that.
In Q2 and beyond.
Okay, great. Thanks very much.
There are no further questions in the queue I'd like to hand, the call back to Mr. Smith for closing remarks.
Thanks, Doug that's greatly appreciate it and thank you all for joining today, our fourth earnings call of the U S listed company.
Again, we'd like to thank all of Gan stakeholders.
Not just our shareholders.
But also crucially our employees have been incredibly resilient. During this extraordinary pandemic periods of thank you to all canisters cool or otherwise worldwide.
Also of course like the bank all of our corporate clients.
Without you guys. The magic doesn't happen so thank you to our clients.
We're not greatly extending our market leadership this year the support of everybody at cool debt as well as Gan and naturally we note. The recent acquisitive activity in the industry I remain totally satisfied that our proven the U S technology and the U S capability has increased and scarcity and therefore strategic value.
Meanwhile, we're trebling revenues in 2021, which remains our best current estimate and we've already returned the business to positive EBITDA.
The capital investment cycle is largely behind us and we offer investors a pristine balance sheet. We also know how the deeper stable of long term clients and greatly reduced customer concentration.
All of this means we have firm visibility over our domestic and international growth and solid control over our business going forward, which is now equipped with a strong balance sheet and the all important first of all bandwidth and engineering resources required to continue delivering for all of our clients.
Accordingly, we look forward to delivering on the fast scaling opportunity for all of the shareholders as we progress through 2021.
And I've said, it before and I'll say it again, our future continues to represent the future of American gambling, where growth will likely be predominantly in the online channel for many many years to come.
The forward to speaking with you all again in May Thank you.
<unk>.
Yeah.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.