Q&A: GiG CEO on ditching the white-label model and German regulatory impact

Last month, Gaming Innovation Group (GiG) reported a 38% year-on-year increase in normalised Q4 2020 revenue to €14.2m. EBITDA for the period reached €4.1m, up from €0.1m last year after a meteoric rise of 4,431%, on a normalised EBITDA margin of 29.2%. Below, CEO Richard Brown discusses the supplier’s new-look business model and how an internal transformation process helped to restore growth.

EGR Intel: GiG has ditched the white-label model this year, but how many clients remain on a white-label basis? Richard Brown (RB): We currently have three left and they have signed SaaS model agreements as well. But then we have Sky City, which remains on white label due to the structure of pre-regulation in New Zealand. EGR Intel: What are the big risks associated with white label and why was it right for GiG to move away from that model? RB: We wanted to remove the operational complexity of running white labels, from payments, processing, all the way through to player safety and compliance. That was operational complexity that we felt was unnecessary for our core growth. Then of course there is a risk of fines from being the licence holder. We know first-hand and from what has been shown in the last 12 months in the UK and Sweden that a licence holder would be responsible. We did not feel comfortable moving forward without complete control over a business. It is something we have been working towards for the last 18 months or so that completed in the fourth quarter. EGR Intel: You divested B2C to streamline the business and scale it down to three key operating departments in SaaS, media and sports betting. Would you also consider divesting one of those three segments? RB: No, I’m very happy with the portfolio that we have. While not immediately complementary, there are actually quite a lot of benefits, especially as we focus on the retail gambling companies moving online, which don’t often have as much experience with digital marketing. We see the media business as its own growth story. It provides significant cash to other parts of the business as the platform and sports betting are in earlier lifecycles of their own business trajectories, which means that we can continue to support those as they grow. We also know that the gambling industry changes very quickly so it’s wise for a business to have multiple revenue streams. EGR Intel: US-facing World Sports Network is doing well in the media division. Would you consider M&A to bolster your affiliate portfolio? RB: I think we need to look at that, as with all business opportunities that present themselves. We have a very strong track record in the M&A space stretching back to 2016-17 so we will always consider opportunities as any viable business should. However, I’m also very happy with how we have been developing organically over the last two to three years and I think that is our main priority and focal point for the next 12 months. EGR Intel: How will regulation in Germany have a negative short-term impact on GiG? RB: We implemented the interim regulatory regime in October and then with the game suppliers following suit in December we saw an impact in the number. It was about €250,000 in the platform business. Our business grows not only on existing businesses but on new contracts signed, and we’ve already won two contracts with operators designed for the German market. Tipwin, for instance, has 600+ shops in Germany. There’s going to be an impact in the short term but we’ve already managed to secure future revenue sources in what looks like a very attractive future market in the European marketplace.