GAN Limited (GAN) Q4 2020 Earnings Call Transcript

GAN Limited (GAN)
Q4 2020 Earnings Call
Mar 25, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to GAN Limited fourth-quarter 2020 financial results. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Todd McTavish, chief legal officer. Thank you.

You may begin.

Todd McTavish -- Chief Legal Officer

Thank you, Doug, and good morning, everyone. GAN's fourth quarter and full-year 2020 earnings release was issued today after market and is posted on the company's website at gan.com. With me representing the company today are Dermot Smurfit, president and chief executive officer; and Karen Flores, executive vice president and chief financial officer. Before we begin, we'd like to remind you that, except for the factual statements made today, the information contained in this conference call, including any financial and related guidance to be provided, consists 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 tense, identify forward-looking statements, but their 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, and such statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Some important factors that could cause such differences are discussed in the Risk Factors section of GAN's IPO prospectus dated May 5, 2020. Forward-looking statements speak only as of the date 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 statements, except to the extent required by applicable securities laws.

With that, I'd like to turn the floor over to Dermot Smurfit for opening remarks. Please go ahead, Dermot.

Dermot Smurfit -- President and Chief Executive Officer

Thank you, Todd, and good afternoon, everyone. Please join me, if you will, on the third slide of our presentation released earlier today. All in our U.S. NASDAQ listing completed just 10 months ago, we have now made the investments required to deliver on the promised 2021 opportunity to exceed $100 million 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, to properly resource for the U.S. opportunity and create burstable bandwidth in our software engineering capability have already proven strongly beneficial in early 2021. As we're 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 in gross operating revenue to our B2B clients, not including Coolbet's newly consolidated and incremental revenues. And so with just a few days left to the current quarter, our Q1 2021 visibility, and therefore, Q1 revenue guidance is firm at between $24 million to $25 million.

And I'll leave our CFO, Karen Flores, 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 Internet gambling. That's Westgate Resorts, a major Las Vegas Casino and operator of the largest retail sportsbook in America, best known as the SuperBook, who have now engaged GAN to roll out on our platform for their Internet sportsbook in Colorado and both Internet sports and online casino gaming in New Jersey later this year.

Welcome, SuperBook. And so to 2020 full-year results. On behalf of everyone across the large and still growing GAN group, I'm proud to report to shareholders that we remain America's No. 1 enterprise software provider for powering America's significant surge in online gambling and that 2020 was the year GAN achieved what we term "escape velocity," and we define that "escape velocity" as delivering on our promises.

We have won 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 patent for considerable value. We have executed on a successful M&A strategy to secure scarce capability in online sports betting for deployment here in the U.S.

These are all the things we said we could do. And since mid of 2020, we have gone and done them. Looking back in 2020, 75% of our revenues were recurring in nature with these core software-as-a-service revenues growing 67% year on year to $26 million, up from $15.5 million the prior year. This growth rate will be exceptional for any software provider in any regulated industry.

But 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 where recurring revenues grew 92% year on year. Predictably then perhaps, the U.S.

remains the epicenter of growth for our business, and our market leadership position remains firm with $545 million in gross operator revenues delivered to clients in 2020, up 73% year on year, but which attaches even greater perspective to the more than $200 million in gross operating revenue, which will be delivered to our clients in this -- the first quarter with March Madness already contributing toward a strong end to a strong first quarter, during which we have experienced more than $20 million per week in gross operator 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 Coolbet announced last November.

The Coolbet transaction appears to be undertaken at both an attractive entry point and extreme fair value relative to their growth profile and strategic sports betting capability now forming part of GAN's overall product proposition and, of course, their early 2021 contribution of significant revenue and EBITDA. I'd like to thank everyone at Coolbet for their outstanding work in integrating our businesses so quickly and seamlessly, not least the Coolbet founder, Mr. Jan Svendsen, who has now taken on a long-term position at GAN's global head of sports. Turning to Slide 5.

It's worth revisiting the rationale behind those competitive advantages which drive our new client wins, both those secured in 2020 since our NASDAQ listing and those already secured year to date. We've spoken at length on the strategic U.S. patent, enabling retail casinos to link on property rewards to online gambling. In terms of licensing our patents, we consummated a key licensing deal earlier this year, which moved $3 million in licensing revenues from Q4 2020 into Q1 2021.

The key reason for the delay was all about pricing, ensuring we secured landmark pricing on a granular per-link basis. Going forward, each reward card being linked to an online gambling account in the U.S. is now priced by GAN at $75 per link for new licensees. For more vantage, this points to potential value in pursuing additional patent licensing deals with additional operators of retail casinos who, with our online businesses, may already be infringing on our intellectual property or who publicly state they intend 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 as to timing, but retail casino operators all operate on property rewards. And they all logically seek to deliver retail-to-online convergence in offering rewards to their patrons. GAN's patented iBridge framework capability delivers a proven material uplift in online gambling revenues from retail carded patrons who link their existing retail rewards account to the new online gambling account.

We've 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 than on competing technology platforms. Our recently launched client, Churchill Downs, took the opportunity to discuss their experience launching and operating on GAN's technology in their recent earnings call. I'll take the opportunity here to thank them for that positive commentary, which confirmed publicly what we already knew internally: that GAN technology offers superior performance, and we deliver on time in 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.

data set and will become a more visible service for clients as we progress through this year. Labeled GANalytics, this service is increasingly available to our clients post launch to predict the future behavior of their online gamblers, and thereby, surface actionable marketing recommendations to prevent customer churn, extend lifetime values and minimize problem gambling. GANalytics leverages our cutting-edge machine learning 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 an evolved form of scarcity here in the U.S. This includes what we call the one account, any product, any state capability, which eludes some of even the largest B2C operators today and which GAN first rolled out in 2019 for FanDuel Group across New Jersey, Pennsylvania and Indiana. More recently, this capability is rolled out for Churchill Downs, twinspires.com online gambling operation, now operating live across both Michigan and Tennessee with incremental state extensions coming from Colorado, Pennsylvania, Indiana and New Jersey in the coming quarters. I'll take this brief opportunity to offer an extended insight 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 technically operate in these highly regulated and intricate intrastate markets of America.

Downloading a single app onto the end-user gambler's mobile phone, creating a verified online account and depositing money into that single account enables this individual gambler to seamlessly bet across state lines on sports or play casino games. More importantly, this gambler has a single-account balance maintained in the GAN technology operating framework in exacting compliance with the increasingly divergent framework of requirements imposed by each state. By the end of the second quarter, the Churchill Downs' twinspires.com sportsbook and casino app will support this functionality across Michigan, Tennessee, Colorado, Pennsylvania and Indiana. This represents a continuing and scarce technical capability we're proud to surface again in the U.S.

marketplace as we roll out 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 playing in the online casino, if supporting local legislation permits, just as those in 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's 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 burstable bandwidth required to launch in all those states anticipated to 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 are Michigan, Indiana and Illinois. And soon enough, we'll see the majority of the Eastern seaboard and the Midwest linked together as the patchwork quilt of intrastate regulation knits together. All too soon, if not already, any B2C 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 GAN uniquely offers in the U.S.

today as the leading B2B enterprise technology provider. On Slide 6 is a slightly more granular analysis of Michigan, the third great state to launch online gambling in the U.S., which delivered a well-publicized big bang market launch on January 22. This included nine B2C operators launch that day, three of them operating GAN's technology, including the FanDuel online casino, the Churchill Downs' twinspires.com online sportsbook and casino, and of course, the Wynn Resorts' WynnBET online sports booking casino. So far, we've been very impressed by the value of online gamblers cross-sold for TwinSpires' existing national database and look forward to serving the anticipated high demand surrounding their Kentucky Derby Sustiva week starting late next month.

We've also been impressed by the underlying key performance indicators associated with the Wynn Resorts brand, which attracts more online bets per day per unique active gambler than any other client in any other state to date. This underscores the immense customer loyalty commanded by the majestic Wynn retail casino gaming brand when transposed into the online channel. But perhaps the most impressive client launch in Michigan has been the FanDuel Group, whose online casino operating on the GAN platform has already commanded substantial high gaming market share. This speaks to their commitment to premarketing undertaken several weeks before the Michigan market commenced, enabling a 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 B2B revenue opportunity in Michigan relative to our B2B peers, and we look forward to maintaining a keen watch on how those relative B2B market shares change over time. FanDuel's online casino will continue to be a podium player, alongside DraftKings and BetMGM, but we can already see GAN's 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 this year. All told, we're upgrading our expectations for online gambling in Michigan in 2021, which previously had been forecast at just $439 million in gross operator revenue shared among all B2C 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 $439 million to $795 million with iGaming accounting for $620 million or 78% of total with online sports betting generating the balance of $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 state treasury strongly suggest other states will adopt the Michigan marketing playbook and permit B2C operators to conduct premarket customer acquisition to register, verify and fund online gambling accounts well before the first bet is allowed online, and therefore, enabling yet more big bang moments in future states. If this comes to pass, we foresee increased pressure on B2C operators technology vendors to be launch-ready some months even before the market actually commences, as well as an acceleration of gross operator 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 was an inadvertent positive consequence of multiple regulatory delays to the Michigan original launch window penciled into our industry calendars during fall of last year. OK. I'm going to move on to Slide 7.

So here we are standing already on the cusp of our second quarter in 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 burstable bandwidth in 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 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 required, not just to win, but also to deliver for major new clients, such as Penn National, Wynn Resorts and Churchill Downs. These new client wins have continued into 2021 with Seneca Gaming in New York and Gila River in Arizona, both for simulated gaming, and, of course, today's just announced new client win, the Las Vegas casino heavyweight, Westgate Resorts and their SuperBook, the largest physical sportsbook in America, which will be launching real money Internet sports and casino on GAN's platform later this summer in both Colorado and New Jersey with the Colorado deployment of Internet sports only being a competitive replacement of an existing platform provider. Thirdly, we are making strong progress marketing the new super RGS, which aggregates 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 GAN's share of our clients' online casino revenue is now well advanced. And in the coming weeks, we look forward to disclosing the U.S.-relevant portfolios of iGaming content, which will be exclusively joining GAN's already formidable arsenal.

As a final but important point to this preview, let's also consider the significant contribution from our newly acquired Coolbet international operating division, which will contribute approximately half our revenue in the first quarter of 2021, the majority of that from online sports betting. Coolbet's year ahead is an exciting one with more global sports events packed into 2021 than during any other year on record in the main due to rescheduled COVID-impacted sports delayed from last year. In our last earnings call, I took the opportunity to outline the logic driving our acquisition of Coolbet. Adding a sports capability is a perfectly logical way to rapidly expand our share of clients' gross operator 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 Coolbet aligns closely with GAN's, and there is a real shared excitement to bring their sports capability to America later this year. As a timely reminder, it is important to indicate, yet again, that we are only bringing Coolbet to the U.S. as a B2B product and service and that we are not planning to bring Coolbet's B2C platform to the domestic market. Equally important to note is that GAN will continue to work alongside existing and valued third-party sports betting vendors who've integrated into to GAN's platform at the request of our clients.

Coolbet has already contributed significant sports expertise in global trading and risk management. Also, they contributed their uniquely compelling sports gambling product capability and the benefit of a 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 No.

1 market leadership status in three of the eight markets they serve. Having closed on the acquisition on January 1 this year, the more closely we work together, the more we realize the quality and scope of the opportunity to bring Coolbet's 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 and best serve our clients' macro commercial objectives to be online in Michigan on day one in a new and exciting market.

This great team is now complemented by the equally great people at Coolbet 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 and board member, Karen Flores.

Karen Flores -- Executive Vice President and Chief Financial Officer

Thank you, Dermot, and hello to everyone on the call today. Our first earnings call in 2020 marked a significant milestone for the company in which we had just completed the IPO and NASDAQ listing. Our fourth earnings call of this year marks another significant milestone. Our acquisition of Coolbet just closed on New Year's day.

And while today's discussion will be focused on GAN's stand-alone 2020 results, we couldn't be more excited to end our prepared remarks with our 2021 full year and first-quarter guidance inclusive of Coolbet. Before I jump into the financials, let me take a moment to briefly summarize the key highlights that will frame our 2020 full-year results. First, we moved at an unrelenting pace to execute against our core growth strategy to build long-term partnerships with best-in-class operators, servicing them through best-in-class technology. Hands down, GAN continues to be the No.

1 B2B iGaming platform provider in the U.S. GAN's technology powered 21% of the total U.S. iGaming market in 2020, and we also command in excess of a 60% share of the B2B iGaming supplier market. We anticipate that our expanded customer roster, which now includes brand name clients like Wynn and Churchill, will continue to grow this year 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, strengthen the corporate enterprise to achieve scale and execute a transformative accretive acquisition of Coolbet's online sportsbook technology and capabilities and international B2C operations. As Dermot outlined, 2020 was a truly foundational year for GAN. And while the investments required to position us for continued expansion 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 to our revenues and EBITDA that will make comparative challenging due to timing or extraordinary circumstances.

As relevant to our discussion today, it's important to note our 2019 results include $8.5 million of revenue and $8 million of EBITDA that did not recur in 2020, more specifically, $4.5 million of revenue and $4 million of EBITDA from our U.K. B2C operations with WinStar World Casino that ceased in 2020, and separately, $4 million of revenue and EBITDA from recognition of a patent licensing fees. Today, I will be speaking to our 2020 performance, both including and excluding these 2019 items, which will help set the stage for the organic growth we are seeing 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 GAN's patented iBridge technology for a total 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 pulled forward into Q4, our revenue results would have been on target with consensus estimates. Lastly, I'd like to emphasize that B2B iGaming and simulated gaming represent our core B2B business, and we are now in a growth phase relative to our B2B online sports betting segment.

In the third quarter of 2020, we migrated the FanDuel online sports betting wallet off 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 in our iGaming business more than offset the OSB loss.

In the fourth quarter, total gross operator revenue of $132 million is up 9% comparatively, including OSB. However, excluding OSB, the organic growth is 156% with no new market or clients. And the better news is that we see a tremendous opportunity to keep winning market share over time, in particular, through our new operator partnerships and the GAN B2B Force Tech offering, which we anticipate launching this summer. And now to dig into the numbers on Slide 9.

Looking first at our full-year revenue drivers and KPIs. Total gross operator revenue increased 73% year on year from $316 million to $545 million. This increase was primarily driven by outperformance of our U.S. iGaming-related business, which increased 273% year over year, outpacing the total addressable market growth of 230% as we also enjoyed increased market share, which expanded from 18% in 2019 to 21% in 2020.

We are extremely proud of surpassing $0.5 billion of operator revenues processed through our platform as we continue to manage the performance and execution of our partnership clients' businesses. We also saw a very healthy 89% year-over-year increase in simulated gaming gross operator revenue, as well as a resilient 15% year-on-year increase in Italy. Online sports betting declined 21% year on year as related to the impact of both the pandemic on professional live sporting events, as well as the FanDuel 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. B2C and patent licensing, revenue increased 62% year over year. Our core B2B 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.

B2C and $10.4 million or 67% excluding this. The strength of our recurring platform and content fee revenue was driven by a 173% year-on-year increase in iGaming, 77% increase in simulated gaming, 17% increase in Italy and a 5% year-over-year decline in OSB, as mentioned previously. To note, OSB declined as a percentage of our overall revenue as well from 10.1% in 2019 to 8.2% in 2020. And on the strength of our launches with Penn National, Agua Caliente, Route 66 and Snoqualmie, simulated gaming increased as an overall percentage from 19% in 2019 to 27% in 2020.

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 GAN's patented iBridge technology for $3 million, and we'll recognize this licensing fee during the first quarter of 2021 instead of the fourth quarter of 2020, as previously anticipated. Sequentially and comparatively, our fourth-quarter revenue declined 16% and 17%, respectively, as both prior periods include FanDuel OSB revenue prior to the third-quarter 2020 migration. And the fourth quarter of 2019 also includes $4.5 million of revenue from our U.K.

B2C operations. 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 to a loss of $2.3 million in 2020, including the 2019 impact of U.K.

B2C and patent licensing. Excluding 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 Coolbet was substantially offset by strong organic growth. Year-over-year gross profit in our core business, excluding the 2019 impact of U.K. B2C and patent licensing, increased by $11.3 million or 107%.

The related adjusted gross margin also increased from 49% to 62% with a revenue mix shift toward the highest-margin recurring platform and content fees. This healthy increase helped to mitigate both temporary and permanent increases in our cost structure. In 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 we'll continue to invest in operational excellence through the continued expansion of resources to enable our long-term objectives. Sequentially, our adjusted EBITDA declined from a loss of $400,000 in the third quarter to a loss of $6 million in the fourth quarter as a result of the top-line shift that I previously discussed, execution of the Coolbet acquisition and our ongoing investments in 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 will support 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 powered the launch of twinspires.com in Michigan and Tennessee. Overall, our capital expenditures increased from $2.9 million in 2019 to $5.9 million in 2020. It is a critical time to innovate and advance our platform, and we will continue to invest in proprietary software development to bring Coolbet's sports offerings and 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. As we look to the future, we are excited about the organic growth and momentum of our B2B business carrying into 2021, as well as the accretive addition of Coolbet B2C. The launch of Michigan in January exceeded our expectations.

And as Dermot mentioned, we anticipate over $200 million in gross operator revenue in the first quarter, which is organic growth of approximately 62% versus the prior quarter and 170% versus the prior year, excluding FanDuel OSB. Coolbet 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 B2B and B2C businesses. We also estimate that for Q1, no customer will exceed 15% of revenue.

And this concentration will continue to reduce with the anticipated growth in our core businesses. We are not providing guidance for 2021 adjusted EBITDA at this time, but we are squarely focused on a return to positive EBITDA. Given we are now completing some of our critical growth-focused investments, this should allow for solid operating leverage gains as our revenue continues to scale. And we'll 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 a heavy lift over the last few months, which is why our call was delayed a few weeks to today. Moving forward, we will return to a more normal schedule, starting with the Mid-may date for [Audio gap] That concludes our remarks, and we will now open the line for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from the line of Chad Beynon with Macquarie Group. Please proceed with your question.

Chad Beynon -- Macquarie Group -- Analyst

Hi. Good afternoon. Thanks for taking my question. Dermot, just want to start with a high-level question.

I know there's been a lot of talk about vertical integration in the United States, and there's been some companies that have taken action. So now that you have the full suite of products with Coolbet coming in-house, and I know you went through this in your prepared remarks, are you still confident that there's a big ocean out there and there's a lot of potential partners for you guys to work with over the years to come? We're just seeing this trend, and I was just wondering how your updated views have come along. Thanks.

Dermot Smurfit -- President and Chief Executive Officer

Thanks, Chad. It really hasn't changed. The reality is that this is very, very complex and scarce technology. And as much as many B2B operators of U.S.

Internet gambling may covet the technology, there'll be very few who do go through that whole process. And regardless of the size of the individual B2C operator, they will always be reliant on a wide ecosystem of third-party content, particularly in the online casino or iGaming space. So we do see that this is a broad and deep ocean. We do believe there's going to be a significant customer diversity.

There's going to be a lot more operators online than I believe are generally accepted by industry analysts. And I think we've just proven that again today with the announcement of Westgate Resorts. That is, I believe, our eighth real money gambling client here in the United States, and there are many, many more to come.

Chad Beynon -- Macquarie Group -- Analyst

Great. Thanks. And then on the 2021 guidance, is it safe to assume -- I know you said $12 million for Coolbet in the first quarter. I believe, last quarter, when you announced the acquisition, you said this is roughly a $50 million revenue business.

Is it safe to assume that out of your guidance, roughly $50 million is Coolbet and that we should only assume the $3 million Q1 patent license as certainties and then everything else is based on GOR? Thanks.

Karen Flores -- Executive Vice President and Chief Financial Officer

Yes. That's absolutely correct. The split between the B2B and B2C businesses is 50-50 for the short to midterm.

Chad Beynon -- Macquarie Group -- Analyst

OK. Thank you very much. Appreciate it.

Operator

Our next question comes from the line of Josh Nichols with B. Riley FBR. Please proceed with your question.

Josh Nichols -- B. Riley FBR -- Analyst

Yeah. Thanks for taking my question, and good to hear the company is off to 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, once Coolbet is integrated, and is that really built into guidance? Or would that be a potential source of upside?

Dermot Smurfit -- President and Chief Executive Officer

Yeah. Josh, I mean, as you know, the GAN platform has got multiple different options for clients to choose from. And obviously, we prefer our clients to choose the Coolbet in-house sports capability, but I think we need to get that up and running and out the door later on this year and be able to demonstrate the unique capabilities that Coolbet brings to the GAN product proposition. In the meantime, yes, we're absolutely relevant and playing in the markets that are Internet 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 sports betting market only. We're going to be launching in Colorado shortly, which is an Internet sports betting market only. And of course, we look at Ohio, which seems to be coming down the legislative term like pretty quickly in 2021 and a large number of those states like we have a direct pathway to both Illinois and New York. So we absolutely have a clear play in all the Internet sports-only markets and look forward to growing our sports betting revenues, both through the deployment of Coolbet and the deployment of third-party sports vendors.

Karen Flores -- Executive Vice President and Chief Financial Officer

Yeah. 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 plan. It's low seven figure.

Josh Nichols -- B. Riley FBR -- Analyst

Thanks for the clarity on that. And just to hit on Coolbet a little bit more. Could you -- any updates you could provide? I know that they have a big B2C focus right outside the U.S. on how those markets are trending.

Or what's the expectation on that front?

Dermot Smurfit -- President and Chief Executive Officer

Yeah. So Coolbet is operating in just a relatively small number of European and Latin American markets at the moment. They are generating considerable profits from significant scale, and we're extremely excited by the expansionary opportunity in Latin America, which has got a secular growth profile to it for the next 10 to 12 years.

Josh Nichols -- B. Riley FBR -- Analyst

Thanks. I'll hop back in the queue.

Operator

Our next question comes from the line of Ryan Sigdahl with Craig-Hallum. Please proceed with your question.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Good afternoon. Thanks for taking my question. Dermot, on the last conference call, you mentioned $100 million of pro forma revenue in 2021, excluding any synergies with Coolbet. 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 offsets here? What are the levers that maybe are coming down?

Dermot Smurfit -- President and Chief Executive Officer

Thanks, Ryan. So the first thing I'd say is, I mean, this is based on our best current estimates, right. So increasing guidance is not undertaken lightly or without significant consideration. It's principally from the very rapid market launch of Michigan, which I think the whole industry has 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 sign of that slowing down anytime soon. So I think we're being conservative by lifting our guidance. And Karen, would you like to comment further?

Karen Flores -- Executive Vice President and Chief Financial Officer

Yeah. I mean, I would say that, again, we'll look to update the market again in the first quarter. I mean, we're coming back out with our Q1 guidance 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.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Got you. Then if I look at Slide 17, it looks like platform and content fees, 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, I thought the recent deals had better pricing, as well as customers 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?

Karen Flores -- Executive Vice President and Chief Financial Officer

Yeah. So I mean, there is a little bit of an impact relative to the mix of jurisdictions and the impact on the take rate. So between gross operator revenue and our revenue, you have taxes that come into play, bonusing, etc. So it's going to be -- to the extent that there's states with higher tax rates, such as Pennsylvania coming in, it's going to put a little bit of downward pressure on that take rate.

And then relative to how we're executing against that strategy that's here and looking to push up that take rate, we've always said that that content and investments in content are going to continue to push up that take rate. And that is a huge part of our focus this year. So there's that. And then with the GAN sports tech offering through the Coolbet technology, 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.

Dermot Smurfit -- President and Chief Executive Officer

Just an additional piece of comment. I mean, we are finding that our commercial terms are trending to improve and certainly not staying static or declining.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Got you. Then last question for me, just on Parx. Nice to see the patent license there. But also, it did remove exclusivity.

So can you talk through the puts, takes on the removal of the exclusivity, their launch plans in Michigan, which is play tech, and then kind of what that means for Pennsylvania and New Jersey for you guys?

Dermot Smurfit -- President and Chief Executive Officer

Yeah. I mean, there's a limit on what we can disclose about that relationship change. But of course, we couldn't deliver all things for all people, and we had a huge heavy lift, just getting three clients live in Michigan. So we've been serving Parx for a long period of time.

We delivered a very substantial business for them, and it's business as usual for the time being.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Great. Thanks, guys. I'll hop back in the queue.

Operator

Our next question comes from the line of Greg Gibas with Northland Securities. Please proceed with your question.

Greg Gibas -- Northland Securities -- Analyst

Hey, good afternoon. Thanks for taking the questions. Congrats on the strong Q1 guidance and everything and the Westgate Resorts addition, like you said, the eighth real money gaming client, I think, that you said sports betting side in Colorado and New Jersey and then iGaming in New Jersey. Just wondering -- sorry if I missed this.

But if you could comment on the timing of that launch and then maybe the expected gross operator revenue contribution or uplift from that and whether that's included in guidance.

Dermot Smurfit -- President and Chief Executive Officer

Thanks, Greg. Yeah. So it's an 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. among sports gambling enthusiasts. I think they've got a strong commitment to Internet sports betting.

They're up and running in Colorado already. So that's a competitive replacement. We'll be launching Colorado, steer you toward the back end of summer. Everybody wants to be live before NFL kicks off in August for the pregame season.

So that's always the target whenever you announce a client win in early part of the year. It's really focusing on an actual up-and-running launch in time to capture the NFL user acquisition opportunity. So that's a 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 got a fabulous brand in sports gambling, and they've had some degree of success already online in Colorado with an alternative vendor.

Greg Gibas -- Northland Securities -- Analyst

Got it. Great. And to follow up, I guess, on the Coolbet integration. Could you provide an update on estimated timing when we'd see that integration completed in the U.S.

and the launch there? And I guess, along those lines, what still needs to be done or completed to reach integration in the U.S. markets?

Dermot Smurfit -- President and Chief Executive Officer

OK. 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. The second process is 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've secured our first client for Coolbet's capability for deployments in an Internet sports-only marketplace here in the U.S. And we are, again, referencing the earlier comment about Westgate. We are leaning toward a pre-NFL launch of Coolbet here in the U.S.

Greg Gibas -- Northland Securities -- Analyst

Great. I guess last one for me. Just kind of drivers of the decline in take rate sequentially, it sounds like that was kind of pushed out from the licensing fee move Q1. It seems your guidance implies a pretty nice uplift in take rates, just based on the gross operator revenue expectations for the year.

What kind of gives you confidence, I guess, in that uplift?

Karen Flores -- Executive Vice President and Chief Financial Officer

Yeah. I mean, there is 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. So there's always going to be just a little bit of adding new clients and assumptions around that, but we have line of sight into much of what we're planning for 2021 in terms of the road map and are already seeing the strong start to the year, as we've talked about.

So there's a very high level of confidence with the revenue estimates for this year.

Dermot Smurfit -- President and Chief Executive Officer

I'll also add a little bit of color there, Greg, that, as we deploy more proprietary, wholly owned or exclusively licensed content, we'll be keeping a full rev share on the deployment of the online casino games, which means our take rate in the online casino will go up. So it's not just about deploying Coolbet sports to 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.

Greg Gibas -- Northland Securities -- Analyst

OK, great. Thanks very much.

Operator

There are no further questions in the queue. I'd like to hand the call back to Mr. Smurfit for closing remarks.

Dermot Smurfit -- President and Chief Executive Officer

Thanks, Doug. That's greatly appreciated. And thank you all for joining today our fourth earnings call as a U.S.-listed company. Again, we would like to thank all GAN stakeholders, not just our shareholders, but also, crucially, our employees who have been incredibly resilient during this extraordinary pandemic period.

So thank you to all GAN-sters, Cool or otherwise, worldwide. I'd also, of course, like to thank all of our corporate clients. Without you guys, the magic doesn't happen. So thank you to our clients.

We're now greatly extending our market leadership this year with the support of everybody at Coolbet, as well as GAN. And naturally, we note the recent acquisitive activity in the industry and remain wholly satisfied that our proven U.S. technology and U.S. capability has increased in scarcity, and therefore, strategic value.

Meanwhile, we're trebling revenues in 2021, which remains our best current estimate, and we 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 now have a deeper stable of long-term clients and greatly reduced customer concentration. All 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 that all-important burstable 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 our 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. Look forward to speaking with you all again in May. Thank you.

Operator

[Operator signoff]

Duration: 53 minutes

Call participants:

Todd McTavish -- Chief Legal Officer

Dermot Smurfit -- President and Chief Executive Officer

Karen Flores -- Executive Vice President and Chief Financial Officer

Chad Beynon -- Macquarie Group -- Analyst

Josh Nichols -- B. Riley FBR -- Analyst

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Greg Gibas -- Northland Securities -- Analyst

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