Q4 2025 and year-end trading update

GiG Software delivered strong FY2025 operating improvements with Q4 revenue above €9.5m (Q4 2024: €8.8m) and Q4 adjusted EBITDA of >€1.5m (Q4 2024: €0.1m), producing FY2025 revenue of at least €37.5m (FY2024: €31.8m) and adjusted EBITDA of at least €4.1m (FY2024: -€3.0m); net cash was €9.8m at year-end. Management completed 16 brand launches in 2025, is rolling out AI-driven products and operational automation expected to deliver ~€4.5m of annualised savings, and expects underlying cash flow positive by end-H1 2026. FY2026 guidance was trimmed to €44-48m revenue and €10-13m adjusted EBITDA (previously €56-60m and ≥€15m) after a postponed Brazil launch and FX headwinds, though ~90% of 2026 revenue is reported as underpinned by agreements.

Analysis

Market structure: GiG (First North: GiG SDB; OTCQX: GIGXF) is a direct beneficiary of demand for turnkey B2B iGaming tech — AI-enabled products (AI Assistant, Xsite, middleware) increase switching costs and shorten time-to-market, supporting higher pricing power vs legacy suppliers. Near-term losers are smaller integrators and high-cost operators who cannot match automated delivery; the Brazil launch delay highlights regulatory barriers that throttle addressable demand in LATAM and create uneven regional uptake. Cross-asset: stronger EBITDA and net cash (€9.8m) should compress credit spreads for GiG peers, reduce equity implied volatility after Feb 25 results, and keep BRL exposures idiosyncratic FX risk for revenues tied to LATAM launches.

Risk assessment: Tail risks include sudden adverse Brazilian tax/regulatory decisions or a major partner cancellation that could remove 3–6% of 2026 revenue and flip 2026 cash flow expectations; operational risk exists if AI automation disrupts delivery leading to client churn. Immediate (days) market moves will track Q4 print and Feb 25 guidance detail; short-term (weeks–months) impact centers on realization of €4.5m annualized cost saves (implementation in Q1 2026); long-term (2027+) depends on successful market entries and M&A execution. Hidden dependencies: the "90% underpinned" revenue likely includes short-term commercial agreements and FX pass-throughs; deterioration in FX (EUR vs BRL/USD) could materially alter reported growth.

Trade implications: Direct long in GiG SDB is attractive sized 2–3% with tight stop-loss given positive EBITDA trajectory (FY25 adj. EBITDA ≥€4.1m to €10–13m guide for 2026); use a debit call spread (6–9 month) to lever upside while capping premium. Pair trade: long GiG SDB vs short larger exposed operator (e.g., Entain PLC, ENT.L) to express structural margin capture by B2B platform vs consumer-facing operators facing regulatory tax headwinds. Hedge BRL exposure by selling 50–70% of expected BRL cashflows/FX forward until regulatory clarity arrives; use Feb 25 results and ICE Barcelona demos as near-term catalysts.

Contrarian angles: Consensus may over-penalize revenue guide cut while underweighting margin leverage from €4.5m annualized saves—that saving alone equals ~12% of FY25 revenue and can lift EBITDA margin by >10ppt if executed. Market could be too bearish on Brazil risk; a modest acceleration in non-Brazil launches or a single marquee launch (ITV Win deepening) would re-rate multiples quickly. Watch for unintended consequence: aggressive cost reductions can impair service SLAs and slow further client migrations, so validate client KPIs post-Q1 before adding size.

Key Decisions for Investors

• Establish a 2–3% long position in GiG SDB (or OTCQX:GIGXF for US accounts) sized to portfolio risk—target +35% in 3–6 months if FY26 adj. EBITDA prints ≥€10m; hard stop-loss at -20% or if net cash drops below €6m.
• Buy a 6–9 month call spread on GiG (buy ATM call, sell +30% OTM) sized at 0.5–1% of portfolio to capture upside from Feb 25 results and ICE Barcelona product momentum while limiting premium outlay.
• Pair trade: go long GiG SDB 2% and short Entain PLC (ENT.L) 1–1.5% to express B2B margin expansion vs consumer operator margin compression; rebalance after Feb 25 or if GiG EBITDA margin <15% at FY26 midpoint.
• Hedge currency/regulatory risk: sell FX forward or buy BRL puts to cover 50–70% of anticipated BRL-denominated revenues until Brazil tax/regulatory clarity is achieved (monitor for partner reactivation within 60 days); if a Brazilian launch is confirmed within 60 days, increase GiG long to 4–5%.
• Do not add material exposure until Q4 results on 25 Feb 2026—key triggers are (a) confirmation of €4.5m annualized savings being realized in Q1 and (b) evidence revenue "90% underpinned" converts to contracted recurring revenue; if both confirmed, increase exposure by another 1–2%.