GAN PLC is a software company that provides online and land-based gaming operators with a turnkey technology solution for regulated real-money and simulated gaming. It is well positioned for growth as more US states legalize online gambling. GAN has established itself in the US market through several years of providing simulated gaming solutions. It is ahead of competitors and has no debt. Recent legal developments in sports betting and online gambling regulation will likely allow GAN to rapidly grow its top line revenue by 40-50% annually over the next few years.

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GAN PLC Write up (by Dennis)
I would like to first like to thank the following people:
• Mr Artem Fokin, founder and portfolio manager of Caro-Kann Capital (http://caro-
kann-capital.com/) and a long-term shareholder of GAN for providing me with his
valuable insights
• Cipto for informing me about this idea.
Curr EV/Tot Revenue (LFI/LTM): 4.81
Curr EV / 2019E Revenue: 3.47
Curr EV: 55031219
FY2018 EBITDA: -1.73M
FY2018 EBIT: -6.37M
This is a bet that GAN is likely to grow quickly as a B2B solution for landbased casino operator
as more states in the US are starting to legalise online gambling due to the monetary benefits.
GAN is debt free and is also a few years ahead of its competitors because of it’s well
established presence in the US online gambling market thanks to simulated gaming. Not to
mention that it is only trading at 5x EV/Rev.
Thesis
GAN PLC is a SAAS software company trading at ~5x EV/Rev with no debt and it is in a rapidly
growing market segment where it is at least 1 or 2 years ahead of its competitors.
The reason why it is trading at such a cheap valuation is primarily because the company is in
a unique situation where it is listed in the UK and Ireland stock exchanges when it’s main
business is in the US. As a result, it does not have a natural shareholder base and is mostly
ignored by the market. With the legalization of sports betting and the loosening regulations
surrounding online betting, it is very likely that this company is going to grow its top line
revenue by at least 40% to 50% each year over the next few years. There are also several near
term catalysts that would propel this stock to higher valuation. Those catalysts are, a US listing,
strategic partnership, and outright sale. All of which are currently being considered by the
management team right now.
Business
GAN plc develops and supplies gaming software systems and online gaming content. The
Company focuses on developing enterprise-level business-to-business gaming systems and
online gaming content (please note that gaming and gambling refers to the same thing in this
context). It offers a gaming system which licenses to online and land-based gaming operators
as a turnkey technology solution for both regulated real-money and simulated gaming. The
enterprise level solution is called GameSTACK™ Internet Gaming System (or IGS) and is
licensed to online and land-based gaming operators as a turnkey technology solution for both
regulated real money regulated gaming and Simulated Gaming™ online.
As 2/3 of their revenues originated in the U.S due to a multi year effort to build a client base
in the USA, they are now extremely well positioned to reap rewards from the loosening of
sports betting and internet gambling laws from several states. While it has businesses in
several other countries, most notably in Italy (37% of revenue), this writeup will also focus
Date of publish: 29 June 2019

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only on the USA business (62% of revenue) as that is where the explosive growth is likely to
occur in.
Company history
It is important to understand the company history to understand how GAN come to be in this
unique situation. When Dermot Smurfit took over as CEO in 2010, he realised that no land
based casinos in the US has any online gambling experience (because the laws don’t permit
it), eventhough illegal online gambling still took place to some degree. So the casinos
executives challenged Mr Smurfit to come up a solution for them to move online and engaging
with the customers (without breaking the law of course). Mr Smurfit’s solution was to provide
the land based executive with an enterprise solution called simulated gaming.
What is simulated gaming?
Simulated gaming is an online casino for land based casino owners to engage with their
customers. The purpose of doing this is for entertainment only. It works like this, the gambler
will have to buy virtual dollars from the online casino with real money, and they can’t take
cash out the virtual dollars. This is not that different from spending real money to buy virtual
credits on popular video games such as fortnite.
This may not make sense at first - why would someone spend real money on gambling with
something that they wouldn’t be able to cash out? However, it is crucial to understand the
gambler’s mentality in this scenario. They purchase fake dollars so that they can practice
online with the belief that they will be a better gambler the next time they go to an actual
casino. Also, it gives the gamblers the thrill of gambling even when they can’t get to a casino
or when they are broke.
The benefits of simulated gaming (for a casino operator/owner)
Gamblers tend to visit 2 or 3 casinos in their areas instead of just sticky to one (not too loyal).
By launching simulated gaming, the gambler’s relationship with the local casino increases and
this in turn increases the likelihood of the gamblers going to back to the casino. In other words,
customer retention and engagement is increased due to simulated gaming, and I believe that
it would be easy to see how attractive GAN’s value proposition is to a casino operator
(especially given the amount of data that they have gathered on gamblers over the past few
years of operations). If you’re a casino owner and you want to engage with your customers
online (if real money gambling is illegal in your state), you only really have 3 options; build
your own technology (which takes too long and is very expensive), acquire an existing social
casino operator such as GAN; adopt an enterprise software solution from a third-party

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provider such as GAN. The CEO of GAN has also stated that conversations with land based
casino executives are becoming easier and the company is now selective on which
companies/casinos they want to take on board. Simulated gaming as opposed social casinos
(which are free to play games on platforms such as facebook) are intended to be as close to
the actual casinos experience as possible, as a result, the KPI of simulated gaming significantly
outperformed social gaming. For example, in 2014, social gaming generated roughly $0.25 to
$0.50 per player per day whereas simulated gaming achieved around ~$2.75 per player per
day.
Real money gaming
Another segment that GAN is involved in is real money gaming. But before I get into why GAN
is strategically positioned in the market right now, I would like to give some context on the
legalization of sports betting and online gambling in the USA. This might get a little confusing
because they are closely linked. In a sense, you can say that the legalization of sports betting
is likely to 1) increase the market size of internet gambling in the USA, 2) fasten the pace of
legalization of internet gambling in each state because it is much more profitable now.
Overview on Internet gambling
The UIGEA (Unlawful Internet Gambling Enforcement Act of 2006), prohibits gambling
businesses from knowingly accepting payments in connection with the participation of
another person in a bet or wager that involves the use of the Internet and that is unlawful
under any federal or state law. In other words, It is illegal to gamble online in most of the USA
(other than 4 individual states). However, in 2011, the Obama Era DOJ gave an opinion that
the UIGEA did not pertain to online casinos and as such, several US states moved to legalise,
regulate and tax online poker and casino betting. In 2013, New Jersey, Delaware, and Nevada
all passed online gambling legalization bills and in 2017 Pennsylvania followed. Other states
are considering to follow suit.
New Jersey’s online gambling market generates about $250 million a year. Pennsylvania,
which has a population 33% larger than New Jersey’s population, probably will generate $350
million or more. Delaware and Nevada have negligible revenues from online gambling, but
California online poker would be the size of most major countries’ gaming revenues.

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For detailed explanation on Internet gambling:
https://www.bmmagazine.co.uk/business/online-gambling-markets-uk-vs-us/
Overview on Sports betting
PASPA Act of 1992 (deals with sports betting)
The Professional and Amateur Sports Protection Act of 1992 was a federal law that made it
illegal for states to sponsor, operate, advertise, promote, license, or authorize sports betting
in any form. Then in May 2018, PASPA was declared unconstitutional meaning that it will be
up to states to decide whether to allow its residents to bet on sports. As such, numerous
states in the USA are looking into legalizing online gambling and it is almost inevitable that
very soon, more states in the USA will be involved them. The primary motivation behind the
expansion will be money. The CEO of GAN gave the example that Pennsylvania made 110 mil
out of their land based casino industry by implementing gaming expansion and other states
are likely to follow suit. It is likely that since GAN has good and well established relationships
with quite a number of casino operators around the country, that it will be able to capitalise
on it in the near to mid term. Morgan Stanley also wrote that legal sports betting in the USA
could be a $216 billion industry by 2025. Most analysts believe other US states will legalize
online poker and casino sites in the coming years, especially in light the May 2018 US Supreme
Court repeal of PASPA, which opened the door for legal land-based sportsbooks and
intrastate online sports betting.
For detailed explanation on PAPSA: https://www.bettingusa.com/laws/paspa/
GAN is very well-positioned
GAN is very well positioned to take advantage of the current set up in the USA. This is an
indirect consequence/benefit of the multi year presence that GAN has due to years of
catering to clients through its simulated gaming solutions. GAN has had 5 years of experience
operating in the USA market, as such transitioning their client from simulated gaming to
actual gaming if regulations in certain states/countries allows for it is extremely easy for them.
This is because GAN & the client casinos already have all of the data (age verification and so
on) that is required to send out marketing materials to the gamblers, and since GAN’s
simulated gaming solutions is already so close to the real casino experience, there isn’t a
significant amount of hurdle needed to make the transition. The CEO stated in a 2014
interview that “in the event regulation comes to past, there is a relatively a seamless upgrade
path for that existing online [gambling] community that is already actively engaging in
simulated gaming”
The only downside to the upgrade is that their simulated gaming business probably will have
to take a backseat because they will be too busy in the meantime addressing a more lucrative
market.
States where online gambling is legal: new jersey, Nevada, Delaware, Pennsylvania, west
virginia.

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States that are considering legalizing online gambling: California, New York, Massachusetts,
Michigan.
States that GAN has clients in (essentially free options): New York and Michigan
Updates on Pennsylvania & GAN’s capabilities
In june 2019, Parx Casino launched Internet sports betting and the Internet casino gaming is
expected to launch on July 15, subject to all requisite regulatory approvals. This is what John
Dixon, the Chief Operating Officer of Greenwood Gaming & Entertainment, Inc (doing
business as Parx Casino) commented regarding the launch in Parx Casino:
“GAN has now ably demonstrated its abilities with both its overall Platform and sports betting
integration capability. By leveraging GAN’s proven Platform, Parx Casino has rapidly deployed
Internet sports betting, integrated with our XCLUB on-property rewards program, to become
the second Internet sports betting operator to launch in the Commonwealth of Pennsylvania.”
Pennsylvania has also created a framework that can now be copied by other states and copy
what they did and GAN is perhaps the best positioned company in the USA to take advantage
of it as GAN can technically just replicate what they did with in Pennsylvania. Pennsylvania is
a proof of concept on things to come and a test of how fast management team could execute.

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Real money gaming vs Simulated gaming
For real money gaming, management has stated that they expect around 70 to 75% of
revenues to flow to the bottom line, excluding upfront costs for hardware. Simulated Gaming
is coming in slightly below that.
Competitive advantage & competition
I’ve spent a huge chunk of the write up talking about how well positioned GAN is and it is
indeed my belief that no other casino software provider in the USA today is even close to GAN.
To hit on this note even harder, but this time from a more on the ground standpoint, I would
like to quote the conference call in march this year regarding their competitive advantage and
competition in the industry.
With regards to competitive advantage:
“The integration of sports was a first for GAN and required significant architectural
development as well as massive operational optimizations, which simply cannot be guessed
at. If you want to operate a platform at serious levels of scale, at Super Bowl levels of scale,
you need to have actually done it in America. Experience is everything. And the experience
we have at GAN, now imbued within our technology system, is a scarce differentiator against
competing B2B platform providers in the U.S. No other B2B provider has operated at scale
through the NFL Playoffs, the NFL Super Bowl or the NCAA March Madness tournament taking
place right now. GAN has. This capability cannot be taken away from us and represents a
massive competitive advantage as well as comforting current and future clients that we can
handle the massive utilization spikes which occur throughout
these major U.S. sporting events, while still registering new players, still accepting deposits
and still permitting players to log in and wager on sports events or gamble inside the casino.’
With regards to competition:
“I think when it comes to real money gambling in New Jersey, that's really only 1 direct
competitor that is B2B in nature as opposed to, say, a B2C operator who also wants to provide
quasi-B2B services. So there's really only 1 that's directly comparable in terms
of capability and skill set, and I won't give them the credit of naming them. When it comes to
Simulated Gaming, I think there are couple of competitors, and those competitors are either
extremely different to the proposition we offer or don't have some of the key competitive
advantages that GAN enjoys, not least of which is the now proven and now commercially
licensed U.S. strategic patents for delivering convergence to online
to offline on-property loyalty programs. So I think in Simulated Gaming, in some ways, the
white space between GAN and competing providers is growing and has been growing. And
that's evidenced by the industry peer award we received from Eilers & Krejcik Gaming, one of
the most respected research firms that voted us the top B2B social casino company, which is
the industry term for what we brand Simulated Gaming.”

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Discussion on financial statements
Income statement (thousands of euros)
FY 2018 2017 2016
gross income from gaming operations and
services 49203 41075 31675
net revenues 10569 9120 7803
distribution costs -9650 -7996 -7423
admin expenses -7289 -5526 -5600
profit on sale of intangible assets 0 303 0
total operating costs
-
16939
-
13219
-
13023
operating income, EBIT -6370 -4099
net finance (costs)/income -324 -117 21
income (loss) before tax -6694 -4216 21
EBITDA -1453 454 4288
fiscal year
% of total
revenue in
2018 2018 2017 2016
real money gaming
game website and platform development 12.5% 1321 1300 1631
revenue share and other revenue 46.7% 4933 3714 3114
Total Real Money Gaming revenue 59.2% 6254 5014 4745
Simulated gaming
game website and platform development 1.4% 147 311 595
revenue share and other revenue 39.4% 4168 3795 2463
Total Simulated Gaming revenue 40.8% 4315 4106 3058
total revenue 100.0% 10569 9120 7803
Revenues from the US market accounts for 62% of total net revenue and the Italian represent
over 37% of total net revenue. Quality of revenue is very high because the recurring revenues
accounted for 88% of total net revenue. The remaining nonrecurring revenues are more ad
hoc in nature and less predictable. The main reason why EBITDA was negative in 2018 is
because they expanded the headcount in preparation for the growth in sales pipeline which
will likely be visible in September 2019. FY2019 is very likely to be an inflection point as the
CEO pointed out that their business activity in 2018 has been executed with the sole purpose
of setting the foundation to maximize long-term growth for 2019 and beyond and to become
a long-term profitable company.

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In 2018, GAN raised 7.5 million to get rid of it’s debt of 2 mil and increase its cash position so
as to prepare for the upcoming expansion. The management team has stated that there will
be no need for more capital to carry out their expansion plan as they now have more than 7
million in cash.
Going forward
To give you an idea of how confident the management team is, let me quote the recent
conference call.
“The Company therefore expects the strong momentum achieved during H2 2018 to continue
into FY 2019. As such, management expects mid to high double-digit percentage year on year
revenue growth in FY 2019 and full year positive EBITDA, based on the current fixed cost base.”
“We offer here on this slide, for your consideration, the clear evidence of a rapid ramp-up in
revenues by setting out our first quarter 2019 forecast of GBP 4.4 million in revenue, which is
an increase of more than 110% on the first quarter of 2018… So far we are off to a great start,
as revenues came in at GBP 3.3 million for January and February, which represents a 148%
year-over-year growth for the same period in the prior year. Q1 is expected to come in at 110%
to 120% growth in 2019. The company remains focused also on growing Clean EBITDA,
primarily from the higher-margin U.S. markets, in addition to expected future growth from
Italy, in order to organically fund the group through to expected positive EBITDA in 2019… To
be very clear to all listeners, 2019 is the year we generate cash for you, our shareholders, as
well as positive EBITDA, both of which are not subject to regulatory approvals ”
With the legalization of sports betting (or internet sports betting), GAN’s market opportunity
in the USA has more than doubled. Given how the management team has delivered on their
promise over the years, I believe that this is a believable claim. In 2019, most of the growth
will be driven by Real money gaming of both casino gaming and sports betting. More
specifically, according to management, the early momentum on sports betting in New Jersey,
upcoming launches of FanDuel in West Virginia and Pennsylvania and the upcoming launches
in Parx Casino in New Jersey and Pennsylvania (already launched as of now as mentioned
above). Parx Casino has the number 1 market share in Pennsylvania today. Most of these
propositions will be launching around midyear of 2019.
Management team has stated very clearly that 2019 is the inflection point for the company.

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Updates on recent quarter, 2019 Q1
Gross Operator Revenue - comprises the sum of gross revenue from Simulated Gaming; gross
gaming revenue from real money regulated Gaming; and gross sports win from real money
regulated Sports betting, increased 148.3% year-over-year and 41.4% quarter-over-quarter
to $59.1 million. This increase was driven by strong growth in real money regulated gambling
in the US.
ARPDAU - Average Revenue Per Active Player-Day

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Base Case Scenario
The base case is likely to start playing out in September 2019 when the interim report is
released and the market realizes the suddenly & dramatic increase in both top and bottom
line. It is a fool’s errand to try and predict the actual EBITDA and revenue, but just as an
exercise, I have included the table below to show how share prices could trade at both with
and without multiple expansion (in euros). The stock is current trading at 0.70 GBP/share As
a conservative estimate, I would choose 1.31 GBP/share as my price target which represents
a 87% upside.
Strategic paths
The Board of Directors is also looking into identifying strategic alternatives for the business
to identify the best path for maximizing shareholder value.
i. US listing – as mentioned earlier, a big reason why GAN is trading at such low
valuation is because it does not have a natural shareholder base. However, a US
listing could change all that and make the US market notice this company. I’ve
provided the comparables some US and UK Enterprise software companies (in
much lower growth industries).
(taken from reuters)
ii. Strategic partnership - US Industry participant may seek to acquire a significant
minority position in GAN

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iii. Outright sale – this is the most unlikely scenario, but the company would certainly
be of interest to any other companies that would be interested to expand into the
USA online gaming market. As GAN is a highly strategic scarce asset in the industry
right now.
BlueSky Scenario
This would involve GAN getting into multiple states (both states that it already has presence
in and states that it does not) once the state is legalized. In other words, in this scenario, GAN
will become the go-to enterprise solution for all casinos in the USA (and possibly beyond)
transitioning into online gambling. If such is the case, then the company could be worth in the
billions. I feel that this blue sky scenario is actually pretty plausible in the long term, given
that GAN is so well positioned in the market. Thus, this scenario really depends on how fast
could states like California, New York, etc, legalise online gambling.
Downside case
Since recurring revenue is contractually bound, there really isn’t much of a downside case
here. The most possible downside I can think of is if they failed to execute on the transition
to RMG, or it takes longer than expected, but given how far ahead of the rest of the market
GAN is, even if they make some mistakes in the execution phase, it would not be fatal. Also,
given that it is already trading at somewhat of a discount over other SAAS companies, even if
they fail to execute, it is unlikely to affect the long term stock prices too much, because of the
low expectations imbued in the stock prices right now. However, given the low average
volume that the stock is trading at, it might cause the stock prices to be temporarily depressed
if they fail to put out the right numbers.
Risks:
• The gambling industry in general. I personally do not like the gambling (whether online
or offline) industry too much given the negative connotation surrounding gambling
and illegal activities associated with gambling. However, I really like the CEO because
of his business acumen and his integrity. After watching numerous interviews that he
has given throughout the years (starting from 2014), I believe that he is truly a man of
integrity, which really shows in that they have made it their stance to not enter any
markets where gambling is not regulated despite the fact that there might be a lot
more money in those markets (at least back when the wave of legalisation of internet
and sports gambling isn’t hitting the USA), and chose to patiently operate the USA by
providing alternative solutions to land based casinos. Now, it is their time.
• Large family ownership. A large chunk of the company is owned by the Smurfit family.
In fact, the 2 million in debt that got bought back recently was underwritten and
owned by Sir Michael Smurfit. In fact, the company was started by the Smurfit family
and the lore behind it is pretty interesting. I have provided a link if you’re interested
in reading it. As of now, the Smurfits own more than 30% of the company, which gives
them some power if they really want to shake things up. However, I see that as an
unlikely scenario.

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Story behind how GAN was started:
https://www.irishtimes.com/business/technology/playing-a-clean-game-pays-off-
for-dermot-smurfit-jnr-1.1884088
Conclusion:
To summarise it all, I think what Mr Horowitz from Palm Ventures said during the recent
conference call is succinct, so I am just going to quote him.
“The balance sheet is superb. You don't need more capital. The infrastructure is where it
needs to be, and 2019 is you're turning point, right? So that having been said, it looks like
you're very dissatisfied with what you believe is this astonishing value gap between you guys
and your peers, and you recognize that this listing is one of the key drivers of the disparity. So
I've given a bit of a long preamble here, but just so we understand, I guess, you're engaging
this adviser. There's no gun to your head. You have all the capital and all the ramp in the world.
But you need to go through this process to see if you can close that value gap, and as part of
that process, if a credible bid for all or part of the company were to materialize and you felt
that, that was superior to what you could achieve both with your business plan and the U.S.
listing, then you would have to entertain those bids.”
Near term catalyst:
Revenue uptick
Positive EBITDA
Strategic paths to maximise shareholder value (US listing, strategic partnership, sale of
company)