Bragg Gaming Group, Inc. Q2 FY2024 earnings call

• Ongoing strategic review process: Board-run special committee reviewing possible strategic alternatives including sale, merger, etc., with no updates until material development. • New executive hires: Robbie Bressler as Interim CFO, Neill Whyte as Chief Commercial Officer, Garrick Morris as Senior Vice President for Commercial for U.S. and Canada, Tommaso Di Chio as Chief Legal and Compliance Officer. • U.S. rollout: Expanded into new states like Pennsylvania, launched SI Gaming content and technology with MGM and Borgata, expanded with Golden Nugget in New Jersey. • PAM and turnkey solutions: Added new PAM customers in Czech Republic and Netherlands, powered sportsbook launches for customers in the Netherlands. • Content launches: Launched 17 new exclusive games during the second quarter, expanded global distribution of online casino content with Light & Wonder, partnered with Sisal in Italy.

Total revenue for the second quarter of 2024 was €24.9 million, a record high, up 0.5% compared to Q2 2023. Gross profit decreased by 10% to €12.4 million with a gross profit margin of 49.9%. Adjusted EBITDA was down 24% to €3.6 million with an adjusted EBITDA margin of 14.5%. Revenue from content represented 80% of total revenue in Q2 2024, up from 77% in Q2 2023. PAM and turnkey revenue declined from 23% of total revenue in Q2 2023 to 20% in Q2 2024. Sequential growth was seen from Q1 to Q2 2024 with revenue up 4.4%, gross profit up 4.4%, and adjusted EBITDA up 6%.

• Reiterated full-year revenue guidance of €102 million to €109 million and adjusted EBITDA guidance of €15.2 million to €18.5 million, currently tracking to the lower end of the ranges. • Expecting robust trading in the second half of 2024. • Projected to increase U.S. distribution coverage to 90% by the end of the year. • Remaining convertible debt settled in cash post quarter end.

• Statements made may constitute forward-looking information subject to risks, uncertainties, and other factors outside the company’s control that could cause actual results to differ materially from assumptions. • Risks include market and economic conditions, business prospects, technological developments, regulatory changes affecting the company and its subsidiaries.

Q: Good morning guys. Just on the outlook. If you look beyond this year, like, where do you expect the bulk of the growth to come from? You have done a good job growing outside of North America, but like, what’s it going to take to see that similar type growth here in North America?

A: As we expand our distribution network in North America, launching new clients in United States and launching new jurisdictions, new iGaming jurisdictions in the United States. And hopefully launching new jurisdictions in both Latin America and potentially Canada, we will see growth coming from proprietary content and third-party exclusive content. And we will see growth coming from PAM and managed services, particularly in Latin America. We will also see growth in both proprietary and third-party content to exclusive content, distribution and improved positioning and improved usage of our content in Europe, and we will hope to see new regulations or new jurisdictions regulated in Europe where clients are going to use our turnkey solutions.

Q: Okay. Thanks Matevz. And like just on the customer mix, Bragg has had a couple of new PAM customers announced. I am just wondering, how does the pipeline – how does it look at this point in terms of the combination of potential PAM new customers and potential new content partners or new content customers, how is the pipeline split right now?

A: So, we have a very strong pipeline of turnkey solution clients. So, these are clients that use our PAM, our managed services, obviously use our product delivery platform hub, where we deliver aggregated content. And if that is the case, also third-party managed sportsbook. And all of these clients are automatically our proprietary content clients. So, we have a number of those types of clients in the pipeline, both in LatAm and Europe, what we call the rest of the world market. We also have a number of clients in the pipeline in both Europe and North America that are potentially taking our hub, our aggregation platform and our proprietary third-party content. And I would think that we are currently very focused on getting our content distributed primarily in North America. I think that the biggest growth is going to come from that market, but equally, obviously, trying extremely hard to win deals that are on our desks for PAM and turnkey.

Q: Thanks for that Matevz. And then just lastly, perhaps for Robbie, but in the past, it was mentioned that the company expects to return to growth on gross margin in ‘25. Is that still the plan as of today, Robbie?

A: Yes, I believe so. So, as Matevz mentioned, as we increase the concentration of PAM and managed service customers and RGS exclusive and proprietary content, we should see our profit margins increase. And I believe we are on track to start seeing that.

Q: Good morning everybody. This is Eric on for Jordan. My first question for Robbie, I know it hasn’t been long with the company, but is there anything you look to change within the business from a financial perspective?

A: Correct, it hasn’t been very long, but it has been a very busy July. I think from a financial perspective, having a good strength in our balance sheet and good optionality when it comes to opportunities we want to invest in is important. So, pending the outcome of the special committee, I think we will look to see what can be done to have those sorts of options for us. I think having the loan that we received recently has helped just with flexibility, but more medium to long-term, assuming we are operating status quo. I think the market is right for interesting opportunities potentially from a partnership or M&A perspective. And I again want to have the flexibility in our balance sheet to be able to potentially pursue something like that.

Q: Great. And just a follow-up, you guys have been speaking on the past few quarters from entering new and regulated markets. Has that progressed and should we expect a normal ramp within those markets? And separately, New Zealand is looking to legalize online gaming in some fashion? Is there any opportunity to expand there? Thank you, guys.

A: Yes. So, we have recently entered the market, the newly regulated market in Peru. We obtained the approvals and are obviously allowed to distribute content in that market. We are very, very active in the recently regulated Brazilian market. We are very, very excited about new jurisdictions such as New Zealand, Finland and some other markets in Europe that is obviously unclear as to what the timeline is going to be. And we are not only obviously closely monitoring, but actively participating in conversations with potential operators in those markets. There is hopefully going to be movement in the U.S. as well, where we hope that there are going to be new jurisdictions that are going to allow iGaming in the future. And we are very positive about our ability to deliver. We have always been on the forefront of that process and one of the first companies that have entered these markets. I mean a very good example of that is Holland, where we launched pretty much day one and have seen major success coming from that, and we are gearing up for these changes in these jurisdictions and expect to be seeing similar success in some of these jurisdictions, whether it’s going to be PAM or turnkey or just aggregation of content yet to see, but we are optimistic about that, yes.

Q: Okay. Great. Good morning. Thank you for taking my questions. Hey Matevz, maybe a question on just circling back on the U.S. U.S. revenue has been around 1, 1.5 – €1 million to €1.1 million, it looks like, in the first quarter and the second quarter. Maybe just a little more color. Do you expect this quarterly run rate of like €1 million to start picking up significantly then as your U.S. coverage kind of ramps up towards that 90% as you exit the year? Just trying to get a sense of what you expect in like a revenue actual uptick – it has been that €1 million range. Thanks.

A: Yes. So, as mentioned in my presentation, we are expected to see our wagering double this year. And we are not only focused on distribution and network. We are also very aggressively increasing our wallet share within individual operators with our activities related to placement and promotions with custom games, with exclusive games. And with closer partnerships with those operators, we are trying to deliver what these operators want, I am trying to understand what their content strategies are moving forward, and we want to be a part of that conversation and deliver the content that is going to be adopted by their audiences and allow them to use the tools that are going to increase the conversion rates, the retention rates. And at the end of the day, allow them to control the player journey, which will eventually allow us to understand the market better and deliver better content and yet again, increase the wallet share and potentially not only double the wagering amount, but see higher multipliers in the next few quarters.

Q: Okay. Got it. Thank you and helpful. And then just maybe just one more for me, I am just curious, given the Olympics season here. Just has this been impacting your customers at all? Is it a distraction, just more stuff for players to be betting on? Is it an overall benefit? Just what are your thoughts on how the Olympics is kind of impacting the current seasonality? Thanks.

A: I don’t think the Olympics have impacted the results of our operators. July, August to a certain extent September is always sort of a low season. Euro was much more important for our operators, and we have seen operators acquire and convert larger amounts of end users. And that was very positive, obviously for them and essentially for us, and we are going to see results of those – of that event of euros and possibly also Olympics, but it’s less impactful in the rest of the year.