GAN Pummeled as FanDuel Sportsbooks Wave Goodbye

Posted on: August 20, 2020, 08:01h. 

Last updated on: August 21, 2020, 10:07h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Gaming technology provider GAN Ltd. (NASDAQ:GAN) was bludgeoned in Thursday’s after-hours session, tumbling nearly 14 percent after the company said FanDuel sportsbooks will no longer be clients after Aug. 31.

GAN Loses FanDuel Sportsbooks
Traders couldn’t wait to dump GAN stock Thursday night after the company said it lost FanDuel sportsbooks as a client. (Image: Reuters)

The announcement was made in concert with the UK-based company’s second-quarter results. GAN reported a loss of $8.8 million on revenue of $8.3 million. But it was positive on the basis of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) at $1.9 million, compared with a loss of $200,000 a year earlier. That revenue figure nearly doubled from the same period in 2019.

Despite the revenue surge and EBITDA gain, investors punished GAN stock on news that the company is losing the FanDuel sports business.

In addition, FanDuel deployed their proprietary digital wallet for its sports gaming business, and therefore GAN does not anticipate sports gaming revenues from FanDuel after August 31, 2020,” said GAN in a statement. “For the full year ended December 31, 2019, GAN derived $3.0 million from FanDuel’s sports gaming operations.”

That works out to be about 10 percent of the cloud computing software provider’s 2019 sales. The company reiterated 2020 revenue guidance of $37 million to $39 million.

Wild Week

Prior to the late Thursday tumble, GAN stock was higher by more than 12 percent over the week amid a spate of good news.

On Monday, the shares jumped after the company said the “PlayLive!” online casino business launched in conjunction with Cordish Group in Pennsylvania went live after being developed in just 72 days. In standard trading hours today, GAN added almost three percent after revealing Penn National Gaming’s (NASDAQ:PENN) Penn Interactive Ventures business is a new client.

The slump in GAN stock on the FanDuel news could be a case of a delayed reaction, because the sportsbook operator said earlier this month it inked a technology agreement with International Game Technology (NYSE:IGT).

FanDuel’s internet casinos business will remain a GAN client. During the June quarter, real money internet gaming (RMIG) revenue climbed 110 percent to $5.7 million, according to the software company. GAN added active player days, and average revenue per daily active user (ARPDAU) increased 18 percent and 100 percent, respectively.

Not All Bad News

The loss of FanDuel sportsbooks stings, but it wasn’t all doom and gloom in the GAN earnings report. The company said it derived 85 percent of its June quarter revenue in the fast-growing US market, and that client Parx Casino generated online gross gaming revenue (GGR) of $19.3 million in the quarter.

In addition to the aforementioned deals with Cordish and Penn, GAN this month reached an agreement with Laguna Development Corporation for simulated gaming tied to that operator’s Route 66 Casino in New Mexico. That positions GAN to be Laguna’s technology provider if that state legalizes iGaming.

GAN “continues to be the exclusive online gaming provider of FanDuel’s online casino operations throughout the United States, and anticipates launching in both West Virginia and Michigan in the immediate term. The Company has secured significant new customers that will enter Michigan on the GAN platform in Q4,” according to the cloud provider.