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Tuesday, Dec 5, 2023

Gambling Tech Firm GAN All-In on Growth

Maybe you could call it the luck of the Irish.

Dermot Smurfit wanted to break into the online gambling and sports betting technology business after working as a lawyer in London for more than two years.

So, in 2003 he got financial backing from his Irish tycoon uncle, Sir Michael Smurfit, while billionaire financier and countryman Dermot Desmond also invested in the gaming tech company.

The result: today’s GAN Ltd. (Nasdaq: GAN), a technology company for casinos and others that are looking to boost their online gambling and sports betting presence, a business sector that’s become an increasingly crowded field.

While GAN’s reach is international and it has operational presence in Las Vegas, its principal executive offices are in Irvine’s 400 Spectrum Center tower.  

GAN, which went public in the U.S. in May 2020 after previously being listed on the London Stock Exchange, sports a valuation approaching $725 million. Its shares are up more than 40% from the $8.50 IPO price.

The company has been signing up a string of clients and partners for its technology platform, while its first-quarter revenue was up 263% over the year-ago period to $27.8 million, boosted by a key acquisition in January.

“We do everything technical to power websites and mobile apps, which the consumers want to download and play with,” Smurfit, now the GAN chief executive, told the Business Journal late last month.

The company enables online gambling, which is “either online sports betting, or it’s online casino games, or ideally both at once,” he said.

  He sees $30 billion in long-term annual revenue opportunities for online sports betting and “real-money” internet gaming—primarily casino gambling.

“Online sports betting tends to be about one-third of the revenues, compared to two-thirds of the revenues coming from online casino gaming,” he said.

SaaS Cluster

GAN calls itself a “business-to-business supplier of internet gambling software-as-a-service solutions (SaaS)” to the land-based casino industry in the U.S.

While OC’s presence in the gaming world is relatively modest—others here include casino marketing firm Gander Group of Costa Mesa, and Irvine’s Allied Esports Entertainment (see story, page 4)—the area counts a growing cluster of SaaS firms that serve a variety of industry sectors.

Smurfit said his firm holds a strong hand in the casino and sports betting tech industry.

“GAN has got the technology and experience that these retail casinos don’t have and can’t develop any time soon,” he said. He says it would take the casinos 10 or 15 years to develop what GAN has today.

“We design the websites, the mobile apps. We program them. We bolt them onto the top of this enormous enterprise software platform, which handles everything from the payment processing to enabling the content,” he said.

The GAN technology also includes ways to track a user’s location to make sure he or she stays within bounds of states that permit online gambling.

Smurfit said that Las Vegas-based Scientific Games Corp. and London-based International Game Technology are GAN’s main competitors.

US Move

Dermot Smurfit joined GAN (previously known as GameAccount Network) a year after the firm had been founded in the U.K., and became one of its first investors.

He quickly moved up to the position of chief operating officer, while attracting investments from Sir Michael Smurfit and Desmond, both of whom are extremely wealthy—Desmond is reported to be one of Ireland’s 10 richest people and is known for his investments in technology. About 40 others also put their money into the fledgling business.

Dermot Smurfit took over as CEO in 2010 and revamped the company’s online gaming technology business model after the two founders left the company. He first listed the company’s stock in the U.K. in 2013.  

Stymied by the lack of growth in the U.K., he moved to the U.S. around 2014-2015 and set up business in Las Vegas.

He then transferred to Irvine in search of top executive talent, which now includes the company’s chief financial officer Karen Flores, who previously counted top roles at Irvine’s Alorica Inc. and Burbank’s Walt Disney Co.

Family Ties

Sir Michael, who was born in England and whose fortune was estimated at about $483 million in 2019, built up a global empire based around packaging and investments. At one time he ranked as GAN’s  biggest shareholder, but the stake is now down to 4.9%, or less than $40 million, according to a regulatory filing in February, after a key acquisition the month before. Desmond’s current stake in the company is unknown.

Is the elder Smurfit happy to see his nephew in the online gambling business? “He’s been an investor in GAN since 2003, so I guess the answer is yes,” his nephew said.

Michael Smurfit Jr., son of Sir Michael, serves on the company’s board of directors.

Dermot Smurfit, who describes himself as being “very Irish,” studied law at the University of Exeter in the U.K. and worked as a solicitor before going into finance and eventually moving to the U.S.

30 State Goal

GAN has been growing as Internet gambling and sports betting become more widespread.

“We actually operate today in eight individual states” including New Jersey, Pennsylvania and Michigan, said Dermot Smurfit, but “sadly not my home state of California.”

The Laguna Beach resident expects to be “live” in about 10 regulated U.S. states by the end of this year.

“Beyond that, we expect—as do all the industry analysts—that there will be 25 to 30 online gambling-enabled states over the course of the next five to seven years,” he said.

“From a growth standpoint, we don’t foresee any problems whatsoever. We’ve got more business than we know what to do with at the moment.”

GAN predicts its revenue will jump to between $103 million and $108 million this year, about three times what it was in 2020.

Wynn Win

“We have an active sales pipeline and hope to continue adding new clients throughout the year,” Dermot Smurfit said.

Among recent successes, GAN signed a partnership with Wynn Resorts (Nasdaq: WYNN) in September, for a project that was launched in January.

“The majority of their U.S. online gambling revenues are running on GAN’s platform today here in the U.S,” according to Smurfit.

Last month, GAN announced it had signed the Soaring Eagle Casino & Resort of the Saginaw Chippewa Indian Tribe of Michigan.

The Soaring Eagle arrangement marks GAN’s ninth client for U.S. “real money” Internet gaming and online sports betting in the U.S.

Real money refers to actual money being wagered.

GAN said in announcing the deal on May 24 that “for investors, this new GAN client represents the core customer constituency in the U.S.—major regional casino operators, both Tribal and commercial.” 

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Kevin Costelloe
Kevin Costelloe
Tech reporter at Orange County Business Journal

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