Bragg Gaming Group Inc. (NASDAQ:BRAG) Q4 2021 Earnings Conference Call March 10, 2022 8:00 AM ET
Yaniv Spielberg – Chief Strategy Officer
Ronen Kannor – CFO
Conference Call Participants
Matthew Lee – Canaccord Genuity
Neal Gilmer – Haywood Securities
Adhir Kadve – Eight Capital
Sid Dilawari – Cormark Securities
Barry Sine – Spartan Capital Securities
Lisa Thompson – Zacks Investment
Disclaimer*: This transcript is designed for use alongside the freely obtainable audio recording on this web page. Timestamps inside the transcript are designed that will help you navigate the audio ought to the corresponding textual content be unclear. The machine-assisted output supplied is partly edited and is designed as a information.
00:04 Good morning, my title is Rob and I will probably be your convention operator at the moment. At this time, I want to welcome everybody to the Bragg Gaming Group Fourth Quarter and Full-Year 2021 Conference Call. All traces have been positioned on mute to stop any background noise. After the audio system’ remarks, there will probably be a query-and-reply session. [Operator Instructions] Thank you.
00:37 Yaniv Spielberg, Chief Strategy Officer, you might start your convention.
00:44 Good morning, everybody and thanks for becoming a member of Bragg Gaming’s fourth quarter and full-12 months 2021 outcomes. I’m joined at the moment by my pal and colleague Ronen Kannor, who will probably be internet hosting at the moment’s name. So on the second web page you guys will see the ahead-wanting assertion. And so I’d such as you all to familiarize your self with the ahead-wanting statements as some statements on this presentation will represent ahead-wanting statements for the presentation. With the [indiscernible] behind us, let me discuss what we’ll discuss this morning. I’ll present an summary of Bragg Gaming, then we’ll discuss operational and strategic highlights, we’ll then flip to enterprise efficiency, product methods, after which we’ll discuss M&A, licensing in new markets after which financials and steerage and we’ll conclude with an outlook and conclusion.
01:34 And so with that, let’s begin with the Bragg overview on web page 5. You will see an summary of the Bragg enterprise. Bragg is a quick-rising vertically built-in international enterprise-to-enterprise gaming and Content Technology Group, we’re twin-listed on the Toronto Stock Exchange and NASDAQ beneath the identical ticker BRAG. We provide a full turnkey proprietary iGaming platform and content material from our in-home studios, accomplice studios and aggregated content material. We’re operational and licensed in Europe, North America and LatAm. We have 286 workers just about all over the world with workplaces in Toronto, Los Vegas, London, Ljubljana, in Slovenia, Malte and as quickly we closed the Spin acquisition we’ll even have workplaces in Reno and Chennai in India. We’re rising rather well. We at the moment serve over 140 prospects and rising, very enthusiastic about the way forward for the corporate and the purchasers which can be approaching board.
02:35 With that allow me flip to web page 6 and discuss Bragg’s services and products. Bragg presents platform know-how content material and providers to on-line and omnichannel on line casino manufacturers in regulated markets globally. Our know-how stack consists of our participant account administration system, which is a platform for omnichannel casinos and sport e-book. We additionally provide our distant gaming server and content material distribution, and extra just lately now we have developed participant engagement instruments, we title it Fuze and it has been going fairly effectively. Data pushed participant engagement instruments which can be very favorable for operators.
03:13 We additionally provide content material video games on proprietary studios, which embody our current acquisition of Wild Streak, our newly based Atomic Slot Lab, in fact, Oryx Gaming and shortly to be upon closing the Spin Games, we provide unique video games in accomplice studios and naturally aggregated gaming content material from suppliers throughout the business and we’ll speak concerning the content material technique in a number of slides. We complement our know-how and content material providing to providers, we provide managed and operational advertising and marketing providers, enterprise intelligence and software program improvement. And so if you consider the three sides of the enterprise, know-how, content material and providers taken collectively, Bragg presents full turnkey answer, every part that’s required to run a web based on line casino operation.
3:56 On the following web page, we’ll discuss operational and strategic highlights. It’s been a really thrilling fourth quarter as you may see on web page 8. Strong development, pushed by new market technique and ongoing content material and platform enlargement. The fourth quarter robust monetary efficiency, you may see the Q4 revenues rose 14% to EUR15.8 million, Q4 2021 adjusted EBITDA rose 15.4% to EUR1.5 million and our gross revenue margins elevated by 7 foundation factors to 51% with an adjusted EBITDA margin elevated by 23% to 9.8% of the whole income.
04:34 There’s additionally been lots of thrilling enterprise highlights. We entered newly regulated markets within the Netherlands. And we’re — we have been established as a serious platform and content material provider on this market. We obtained our license to provide and launch content material within the United Kingdom, which is the world’s largest regulated iGaming market. We additionally transitioned to provide within the newly regulated German market. And the efficiency to this point is according to administration expectation. We count on that as licenses will probably be given and enforcement will begin happening, the German revenues will develop according to the market expectation.
05:12 Finally, now we have some key highlights for the quarter. I need to emphasize that our new pipeline of income for the fourth quarter elevated 500% in comparison with Q3 of ’21. We’ve finished vital investments in know-how and content material partially to develop our North American enlargement and give attention to that. And we have had continued success within the integration of Wild Streak and the quickly to be Spin acquisition into the Bragg enterprise.
05:40 With that, I’ll flip to the highlights for the complete 12 months of ’21, which has been a transformative 12 months for the enterprise and operations, M&A and capital market technique. In phrases of monetary efficiency, the complete-12 months ’21 income rose 25.6% to EUR58.3 million, the adjusted EBITDA in the identical interval rose 30% to EUR7.2 million and the gross revenue margin elevated by 5 foundation factors to 48.6% with the adjusted EBITDA margins rising by 30% to 12.3% of the whole income.
06:15 It’s been an thrilling 12 months. The enterprise highlights for the 12 months embody the uplifting to the Toronto Stock Exchange in January. And then we do listed the enterprise on the NASDAQ in August, we have additionally finished 2 acquisitions, the Wild Streak which was introduced and accomplished in June and the Spin acquisition, which was introduced in May and will probably be accomplished quickly and we’ll speak concerning the acquisition in additional element shortly. And these 2 acquisitions and the technique shift accelerated our North American market entry.
06:45 In the 12 months, we have additionally entered 5 new regulated markets with the mixed whole addressable market of $9.5 billion, additional strengthening our development within the on-line gaming house globally. The improbable efficiency of the enterprise in ‘21 paved the best way for actually good begin for 2022, we have launched our first sport from our proprietary studio Atomic Slot Lab, Egyptian Magic. There is a slide devoted to that with the case examine and we’ll discuss it in a number of slides. We additionally enter a brand new market within the Czech Republic, which is the sixth regulated market entry within the final 10 months. And in fact, I’m positive for these of you who adopted the story, we have obtained 2 new licenses in Bahamas, and the extremely anticipated Ontario market, which is planning to open April 4th to operators.
07:38 Next, I’ll flip to my pal and colleague Ronen Kannor to speak concerning the enterprise efficiency of Bragg.
07:46 Thank you, Yaniv. Good morning, everybody. I’m turning to slip quantity 11. Bragg Q4 ‘21 income efficiency and underlying income, together with regulated German market was forward of firm’s expectations. Q4 2021 reported income was EUR15.8 million, which amounted 22% above our reported steerage. The essential catalyst for the underlying efficiency was EUR2.5 million from a stronger than anticipated begin from launches of latest prospects, primarily in Netherlands pushed by PAM managed providers and content material. EUR0.3 million from a greater than anticipated current prospects, together with recurring German regulated income and Wild Streak gaining income that was stored according to expectations. The robust underlying efficiency additional robust momentum going into Q1 2022, an upgraded steerage for the complete 12 months.
08:41 Now turning to slip 12. As I discussed earlier, our entry into new markets, specifically, the Netherlands, which has been exceptionally robust coupled with new shopper wins and the ramping up with operators launched earlier within the 12 months give us a major momentum for the approaching 2022 monetary 12 months. During the quarter the 12 months 2021 enterprise income was up by 500% from Q3 to Q4, pushed by new market launches. Existing prospects income, excluding Germany has additionally seen a development in Q4 by greater than 40% on the earlier quarter. And the underlying recurring group income, together with licensed Germany elevated by 22% quarter-over-quarter.
09:24 In the next chart we offered the 2021 Bragg income break up through the quarters. As you may see on the precise hand aspect, representing the Q4 underlying income combine that’s rolling into 2022 monetary 12 months, plus implementing the headwinds from Germany for the reason that new regulatory adjustments happened in July 2021.
09:44 As a conclusion, Q4 efficiency additional grew basis to drive a major acceleration of development in ‘22 and past. Now again to you, Yaniv.
09:57 Thank you. Ronen. As you may see, the enterprise has been performing effectively. And subsequent, I need to speak concerning the product methods that underline the enterprise. First, on web page 14, we’ll discuss our content material technique, which is a wealthy portfolio of on line casino video games from in-home and accomplice studios. We actually divide internally our content material into 3 buckets. The first bucket is Bragg’s proprietary studios. These are the absolutely-owned studios which produce in-home video games, names that you understand, the Wild Streak, the Oryx, the Spin and the newly based Atomic Slot Lab. We provide on-line land based mostly and social video games, slots and desk video games. And in fact no royalties to pay on proprietary content material, which suggests increased gross revenue margin begin stick with the enterprise.
10:41 The second bucket of content material that we provide is our unique third-occasion content material, primarily it means third-occasion studios who provide video games through our distant gaming server for unique distribution by Bragg. And so we take the content material from our accomplice studios, we host it, we certify it after which we promote it. It’s diversed and localized portfolio and it caters to participant preferences in numerous markets. Some of the names which you can see on web page 14 embody Gamomat, Bluberi, Blue Guru and others that are solely distributed by means of us.
11:14 The third bucket of content material is the aggregated portfolio, the place we provide 1000’s of on-line sport titles from high studios and we constantly replace our titles each month to get the most effective new video games releases by means of our platform. And so, proprietary studio content material and unique new providing have been driving and proceed to drive our margins and increase revenues.
11:35 I need to take you thru a case examine of the sport that we launched just lately by means of our newly based Atomic Slot Lab. Atomic Slot Lab is our model new in-home studio. In Q2 of ‘21 Bragg acquired Wild Streak and appointed Wild Streak Founder and CEO, Doug Fallon because the Group Director of Content. With the assistance of Doug Fallon in Q3 of ‘21 Atomic Slot Lab was established, which is a brand new sport studio with a mission to forge a brand new era of on-line on line casino video games. Each of Atomic Slot Lab video games has at the least 2 map variations, 1 that’s tailor-made to the North American style and 1 that’s tailor-made to the European market. Atomic Slot Lab launched its first title Egyptian Magic in Europe in January of 2022, and we count on to launch on the North America later this 12 months.
12:25 The efficiency of Egyptian Magic has been phenomenal. Egyptian Magic is an all-time high 5 slot releases for Bragg’s unique content material portfolio, which incorporates over 270 video games from proprietary studios and third occasion studios. Egyptian Magic was additionally named Slot of the Week by on-line on line casino content material targeted shops SlotBeats.com. I feel this level illustrates that the launch of Atomic Slot Lab highlights the profitable execution of our new proprietary content material technique, which helps us drive increased margins and usher in new prospects to this proprietary content material that’s solely obtainable by means of our platform.
13:02 Next, I need to discuss our iGaming platform technique. Our participant account deployments allow secure lengthy-time period development for the Bragg enterprise. Our participant account administration iGaming platform is chosen fastidiously by on-line on line casino manufacturers which generally search for a accomplice to energy their on line casino for five-plus years, which signifies that now we have lengthy-time period contracts with our companions. Online on line casino taking Bragg’s participant account administration usually tend to be secure lengthy-time period companions. And in fact, we management most of their operations as a result of we’re absolutely built-in into their operations.
13:35 Player account administration is the spine our SaaS, software program as a service iGaming know-how providing. It’s encouraging and enabling the deployment of different income producing services and products, together with the unique content material from our in-home and accomplice studios, aggregated content material, platform charges for sport e-book, wagering, charges for handle and operational providers, and naturally, the brand new [indiscernible] Fuze participant engagement software units, which helps with promotions, retention and acquisition of shoppers. New regulated on-line on line casino markets current alternatives to win new PAM prospects. And speaking about newly regulated markets, I feel the most effective case examine for instance that time is the newly regulated Dutch market.
14:17 In the Netherlands, in early 2021 we secured offers for a number of native on line casino and sports activities betting manufacturers as the availability our participant account administration in anticipation of the market opening. In August of 2021 following bespoke improvement to adjust to native regulation, Bragg’s participant account administration is likely one of the first to be licensed for the Dutch market. On October 1, 2021 the Dutch regulated on-line playing and in October 2021 BetCity, which is certainly one of our prospects is likely one of the first operators to obtain a license. We launched BetCity efficiently on our participant account administration on the market opening and it has been a really, very profitable launch. Since October 2021 JACKS launched on Bragg’s participant account administration system and that iGaming platform and Bragg additionally launched content material with state operators Holland Casino and TOTO.
15:09 The operations and the execution within the Dutch market is simply an illustrative level of our agile operator pleasant iGaming platform and the Netherlands is now Bragg’s high market with very thrilling alternatives forward for a market that’s over $1 billion in whole addressable market. Our versatile trendy platform know-how places us in a powerful place to win market share in newly regulated jurisdictions. And we’re very excited concerning the just lately introduced Ontario license, which we hope will current a major alternative for us similarly to the Dutch market.
15:43 I feel the following slide is essential to speak about our continued development, which is complemented by substantial margin enlargement. We talked concerning the significance of content material, we talked concerning the significance of our participant account administration. And this slide, slide 18 illustrates why these are essential. If you take a look at our profitability margin for 2020, you may see that our gross revenue margin was 43% and our adjusted EBITDA margin was 11.9% as we have been promoting principally third-occasion content material. Third-party content material has lots of royalties hooked up to it, so the price of items offered is dearer and now we have to pay out. As we transition to extra platform and proprietary content material, you may see that in 2021 our gross revenue margins elevated by over 5% and our adjusted EBITDA elevated as effectively.
16:31 As we glance into the long run, we want to focus extra on our platform and we want to focus extra on proprietary content material, each carry a lot increased gross revenue margins by way of the profitability for the enterprise. Our goal profile for the enterprise is to attain 60% gross revenue margin and an adjusted EBITDA margin of 25%. And so, Bragg working leverage is anticipated to extend given the restricted development in worker value and different overheads.
17:00 Next, I’d like to speak about M&A licensing and new market alternatives. First, I’d like to offer an replace on the Spin Games closing. We just lately introduced that we anticipated Spin to shut in Q1 of 2022, now given regulatory delays we anticipated to in Q2 of 2022. The cause for it’s as a result of the regulators now have the purposes, they’ve concluded their investigation and it is now a matter of reviewing the investigated studies. We’re awaiting Pennsylvania Gaming Control Board award of the Bragg license, which can permit us to shut the transaction. We’ve been permitted by the New Jersey regulators with the transactional waiver and the Michigan regulator with the transactional waiver. And so, what we’re ready for is the Pennsylvania regulators to approve the license and as soon as the license is permitted we will shut the Spin transaction.
17:54 It’s essential to say that within the time that we’re ready for the regulatory approval to shut Spin transaction on paper, we have been doing the combination between Bragg’s European distant gaming server and Spin distant gaming server and that is already been accomplished. We’re additionally submitting for and dealing on certification within the varied markets that Spin is already operational in, and we anticipate a really clean go-dwell date as soon as the transaction closes. We count on that to shut in Q2 of 2022. Hopefully, someday in May of 2022, topic to regulatory approval.
18:32 And so, now that I’ve up to date on the Spin closing, I simply need to remind everybody what Spin is. Spain is our just lately introduced acquisition at May of ’21. Spin has been a longtime U.S. B2B gaming provider as effectively. They have their very own distant gaming server and content material aggregation enterprise, it in fact, accelerates Bragg’s entry into the United States. It’s a longtime supplier of proprietary and unique third-occasion on line casino content material. It was based in 2012 by Kent Young who will stay with the enterprise as a Director for Americas.
19:03 Spain’s acquisition quick forwards our U.S. rollout for Bragg’s unique content material. And we’re anticipating to rollouts Bragg’s unique content material through the Spin acquisition in Q3 of 2022. Few different fast ideas about Spin, it is license in 5 jurisdictions, New Jersey, Pennsylvania, Michigan, Connecticut and BC in Canada. Over 35 proprietary video games, over 30 prospects and as you may see the largest prospects within the United States [indiscernible] and others. We’re very excited concerning the acquisition. We are working collectively carefully as if we’re already collectively as one firm. And as soon as the acquisition will get the ultimate approval from the regulators, we’ll proceed to work collectively on rolling out Bragg’s US technique.
19:49 So if we’re speaking about licensing in new markets. The subsequent slide, web page 21 is an replace on the licensing in new markets. Bragg continues to roll out its content material and know-how in newly regulated markets, in Europe, North America and globally. In Q4 of 2021, in October excessive affect launch of our participant account administration and content material within the Dutch market as we already mentioned. In November of ‘21 Bragg obtained its UK license and we began rolling out our content material in that market. And total, 6 newly regulated markets entered between March ‘21 and January ‘22, which embody the Swiss market, the regulated German market, Greece, the Dutch market, UK and the Czech Republic.
20:33 We’ve additionally had key developments in Europe within the strategy of certifying our video games for Italy, a EUR2.3 billion iGaming market. We even have license pending in Belgium, which is a smaller market and now we have our sport licensed and have been pending launch within the Portuguese market. With respect to North American progress, as we have already mentioned, we utilized for licenses within the US, in New Jersey, Pennsylvania, Michigan and Connecticut, we count on the whole addressable market development of about $4 billion by the point we get the licenses, which may be very quickly, as I discussed. In February of this 12 months we introduced that we are going to get hold of our Bahamian gaming license or Bahamian provider gaming license and just lately, a few days in the past we introduced that we have been one of many first B2B corporations to be granted our Ontario gaming provider license, which is anticipated to be one of many largest iGaming markets in North America. Ontario will probably be newly regulated markets on April 4th and we’re very excited concerning the alternative, particularly given our presence within the Canadian, particularly within the Toronto market.
21:41 So speaking about development within the enterprise and the licensing and new market alternatives. I need to flip your consideration to slip 22 with a roadmap of increasing market alternative. Bragg’s addressable market continues to develop quickly as on-line gaming corporations develop aggressively and land-based mostly gaming corporations look emigrate on-line. If you consider the place Bragg began in ‘21 targeted on a small area of about $3 billion, by Q1 of 2022 we’re licensed and operational now in about $13.5 billion of TAM. As we proceed to use for and be granted licenses in new jurisdiction, together with the United States, Italy Canada and different new markets, we’re anticipating to develop our whole addressable market by the top of this 12 months to about $21.5 billion. It presents a major development alternative by way of income and new prospects in all these newly regulated markets as we current our content material and that iGaming platform, and naturally, supporting providers to newly regulated entity.
22:43 It is anticipated that our whole addressable market will develop to about $43 billion with North America rising at the next tempo than Europe and can signify very thrilling market alternative for us as we proceed to develop our operations in Europe, North America and remainder of the world.
23:00 With that, and the expansion in our income and our anticipated whole addressable market, I’ll flip it once more to Ronen Kannor to speak concerning the financials and the steerage for Q4 and the complete 12 months.
23:12 Thank you, Yaniv. Thank you very a lot. I’ll start my feedback on slide 24. The fourth quarter income was up by 14.4% 12 months-over-12 months to EUR15.8 million and up by 22% from the earlier quarter, primarily attributed to a stronger than anticipated begin by means of launches of latest prospects in varied markets, with our PAM and managed providers which was offsetting the affect of the brand new German regulatory adjustments launched in July 1, 2021. The gross revenue elevated by 33% to EUR8 million with margin rising as effectively by 7 foundation factors to 51%, that is primarily attributed to the next proportion of income derived from our platform and managed providers, alongside with our Wild Streak video games income, which has no value of products related in comparison with video games and content material, which I’ve mentioned, by the gross line. More concerning the gross revenue will probably be defined within the subsequent slide.
24:05 Adjusted EBITDA for the quarter was up by 23% to EUR1.5 million, up by EUR0.2 million from earlier 12 months, representing margin of 9.8% which is an enchancment of 0.7 foundation factors in comparison with the earlier 12 months. Operating loss lowered by EUR3.4 million to EUR1.9 million, primarily because of discount of the additional continued consideration, discount of promoting, basic and administrative bills and with the development of our whole gross revenue for the interval of about EUR2 million. From the enterprise highlights perspective, throughout quarter 4 we obtained license to provide within the United Kingdom, we launched 10 new buyer, we based a brand new proprietary content material studio Atomic Slots Lab and we additionally proceed to retain 100% of our prospects since 2018. And whereas our prospects retention stays stable, our dependence on our high 10 prospects was up by solely 2% to 68% of our whole income, the development we count on to stay.
25:05 Slide 25, gross revenue enlargement. As you may see from the income and gross revenue margin slide, the gross revenue margins, i.e. the expansion trajectory since Q2 2020 and our scaling up according to the income development and motion within the product combine as offered within the chart within the backside of this slide. As we indicated prior to now, platform and proprietary content material merchandise are carrying exterior occasion prices, which is giving us the flexibility to scale up gross revenue margin. PAM and managed providers improved quarter 4 gross revenue margin because of robust efficiency of the brand new Dutch prospects. And lastly, Bragg is concentrating on gross revenue margin to extend by 2024 as much as 60% of the whole income.
25:49 Coming to slip 26, income and adjusted EBITDA. On this slide I’ll element how we reconcile our working loss to a optimistic adjusted EBITDA in 2021. Adjusted EBITDA was EUR7.2 million at 12.4% margin towards an working lack of EUR6.5 million. The hole will be outlined with the next non-money and exception objects versus the share based mostly funds, it was the brand new administrators administration and workers in Q1 and Q3, transaction and acquisition prices, bills associated to acquisition of Wild Streak Games and Spin Games and the deployment of our cooperation M&A method. And distinctive prices, which embody authorized deployment prices, skilled charges on the NASDAQ itemizing and different non-recurring regulatory and authorized issues.
26:37 Moving on to slip 27. As of the top of December, thirty first 2021 Bragg had a stable steadiness sheet and proceed to ship robust money circulation efficiency. Cash steadiness of December ‘21 was EUR60 million in comparison with EUR26 million on the finish of December final 12 months with no debt facility. Net working capital was EUR11.6 million in comparison with EUR18.2 million initially of the 12 months. We proceed to challenge optimistic free money circulation from operations. As a reminder, our enterprise technique requires little CapEx associated to know-how necessities.
27:09 On a money circulation perspective, within the 12 months ended December ‘21 we [indiscernible] EUR11.5 million for the acquisition of Oryx, we paid EUR8.2 million for the acquisition of Wild Streak Games and we proceed to capitalize software program improvement prices as a part of the funding in our know-how for the brand new North American and European market enlargement.
27:29 2022 steerage. Given the constructing momentum throughout our total enterprise which has establishing a basis for underlying sustainable income and lengthy-time period development, we raised our steerage for 2022 pushed by efficiency in our latest market, our rising numbers of shoppers worldwide and our increasing roster in our in-home video games provided by Wild Streak and our Oryx IGF. We now count on 2022 full 12 months income steerage from EUR68 million to EUR72 million in comparison with EUR59 million to EUR61 million beforehand. And we additionally count on full-12 months adjusted EBITDA of EUR9.5 million to EUR10.5 million in comparison with EUR6 million to EUR7 million beforehand.
28:11 With that, I’ll flip again to Yaniv for the outlook and conclusion. And then we’ll flip up the decision again to the operator the place Yaniv and I can take your query. Back to you Yaniv.
28:22 Thank you, Ronen. 2021 has been a transformative 12 months for the Bragg enterprise which laid a powerful basis for the long run. We’re actually very excited concerning the nice work we have finished and we’re much more excited concerning the future. First, I need to thank each Bragg worker as all of us labored actually laborious to ship higher than anticipated ends in ’21, which laid the inspiration and the groundwork for robust efficiency in ’22. Our robust Q4 efficiency led to an replace of our numbers for 2022, each by way of the income and the adjusted EBITDA steerage. We have a sturdy and scalable participant account administration supported by rising proprietary content material portfolio which can, in fact, as we mentioned will improve our margins into the long run. As we get extra licenses, as we get extra certifications, we’re increasing our whole addressable market, principally pushed by offline to on-line transition and on line casino gaming. We are rising our gross revenue margins and our adjusted EBITDA margin with restricted CapEx wants and we current stable monetary flexibility with a debt-free steadiness sheet.
29:26 The fourth quarter efficiency of ‘21 and all of the laborious work that has gone into 2021 highlights the chance and the thrill for the expansion in 2022. And with that, I’d prefer to thank the entire workforce. Again, I’d prefer to thank Ronen and we will flip to your questions.
29:43 [Operator Instructions] And your first query comes from the road of Matthew Lee from Canaccord Genuity. Your line is open.
29:58 Hey, good morning guys. Let’s begin with the Canadian alternative, on condition that it is in all probability on the highest of everybody’s minds proper now. Can you simply possibly body how we needs to be fascinated by Ontario by way of upside versus your steerage? And is it truthful to imagine that the B2C gamers who already use Oryx and Spin will probably use you in Ontario?
30:17 Hi, Matt. Good morning. I feel, sure, I’ll begin with the top first. Excluding a few of our operators, each from the Oryx aspect and the Spin aspect, the European aspect, the North American aspect will turn into our prospects in Ontario. Of course, behind the scenes, we have had varied conversations as many of those operators are anticipated to or at the least anticipating to get their licenses in Ontario. So we’re excited concerning the alternative that a few of these prospects that we serve within the European market, and naturally the American market will come to Ontario.
30:49 In phrases of the chance, it is a vital alternative. I imply we have had the case examine within the Dutch market [indiscernible] new regulated markets, we have finished exceptionally effectively within the Dutch market as a result of we have been one of many first platforms and the primary B2B provider to be licensed and we’re anticipating to have good outcome within the Ontario market with respect to providing our product and providers. As to steerage itself in our financials, I’ll flip to Ronen to form of talk about of what now we have within the numbers which can be offered for 2022.
31:26 Thanks, Yaniv. Hi, Matt. Good morning. So we’ll not essentially outline each single jurisdiction what is definitely anticipated income goes to be, however I can guarantee that from a conservative perspective we included some income within the Canadian market, as a result of we knew that we are going to get a license, we all know we will — how we will roll out within the 12 months. But undoubtedly, it is materially low that’s what the potential forward of us. And I imagine that going ahead, particularly from 4th of April we will beat these numbers and even present extra, I’d say, steerage concerning the subsequent Q1 and Q2 with our plan, however undoubtedly there’s a large roll up plan, we all know who we strategy, how do strategy, tips on how to proceed with our — with current prospects and the potential new prospects. But total, our estimations are very low.
32:19 Great. And then possibly we will speak with the Dutch market and Ontario market. Are you [indiscernible] these are form of related market by way of measurement, possibly inhabitants, etcetera.
32:29 Actually, I feel the reply is, sure. I imply if you consider the Dutch market and what analysts are estimating the Dutch market to be, they’re speaking about EUR1 billion in TAM. And so based mostly on among the analyst estimates on Ontario, at the least for the primary 12 months, it is a very related measurement by way of whole addressable market. And so I feel that there are similarities, particularly in the best way that it has been rolling out. I imply Dutch market versus the Ontario market you are speaking about comparatively, a reasonably good GDP by way of the chance for the market. And so we imagine, once more, going again to the purpose about being one of many first provide with license, there may be lots of upside within the Ontario market. But as any new market that rolls out, it is form of laborious to have the combo of what is going to occur earlier than you signal the primary contract, earlier than you go dwell along with your first buyer and earlier than you see the adoption of your content material and your platform. So as Ronen mentioned, and I echo the sentiment, there may be lots of upside that’s not baked into our numbers. And as we roll out the content material on April 4 and as we certify our platform and on board new prospects to the platform we’ll see how that rolls out after which we’ll replace our steerage accordingly.
33:40 Perfect. And then simply possibly on money circulation, clearly all of the buyers want to spend money on Bragg for money, however definitely except when you not burning money like a few of your friends, you’ll be money circulation optimistic in 2022.
33:54 Yes, positive. Yes, when you take a look at our steerage consensus numbers, we will generate about EUR10 million of adjusted EBITDA. We’re going to have a optimistic free money circulation from a operation perspective. As you understand, Matthew, we’re reinvesting the whole revenue we’re making from our operation into recruits extra builders, get into the North American market, within the US, the Canada in a fairly accelerated tempo. We fulfill our platforms as Yaniv talked about, we’re creating positive aspects simply let — Just to offer us some understanding, we will roll out 35 video games subsequent 12 months, in 2022, all developed in-home. Not to say different video games they’ll [indiscernible] Wild Streak video games, which wasn’t going to undergo different prospects as effectively. So we actually in 2021 will ramp this operation, in 2022 we will re-make investments closely on that individual aspect.
34:47 So from free money perspective and dealing capital, I feel from submit-acquisition of Spin, we will have a slim working capital, however once more, we’re controlling the money we’re reinvesting within the enterprise and we undoubtedly as a Board and the administration we’re on the lookout for different alternatives to enhance our money place purely to speed up development and really to seize on and capitalize on alternatives on the market. As we did just lately with launching and signing a brand new content material supplied.
35:17 That’s excellent. Thanks and congrats on the great quarter. Thank you.
35:22 Your subsequent query comes from the road of Neal Gilmer from Haywood Securities. Your line is open.
35:28 Yeah. Good morning. Congrats on the quarter. Thanks for taking my questions. Maybe I simply needed to see your perspective on the UK market, you bought your license there in November. Just form of what you are seeing from the primary few months that you have been there? And what your outlook is for this 12 months for that market?
35:45 Thanks, Neal. Good morning. Yeah. So the UK has been just about with our expectation, according to the expectations. We obtained our license in November of final 12 months, as you talked about, we have signed varied prospects in ‘21 and now we have [indiscernible] prospects that will probably be signed in ‘22. I feel it is worthy to say that the UK iGaming market and playing market is mature. It’s in all probability essentially the most mature market and really saturated [indiscernible] nationwide a few of our proprietary content material will lead our means into the market and that is precisely the way it’s taking part in out. [Technical difficulty] proprietary content material, unique content material that’s not obtainable elsewhere. And to this point it has been inside our expectation. And we’re hoping to have the ability to announce increasingly more prospects within the UK as our content material turns into extra fascinating by the operators.
36:43 Okay. Thanks. Appreciate that. On your steerage for 2022, how is the Spin — the closing of Spin acquisition factored into that in addition to among the licensing in a few of these states that you have utilized for? Obviously, the Spin transaction closing sounds utterly out of your management and with the regulators. If that will get pushed out in any respect do you could have — is there any concern on the way you would possibly have the ability to develop into that US market?
37:13 Yeah. Hi, Neal. Good morning. Actually we factored it that it’ll happen across the second quarter, the top of the second quarter. So from our perspective, once we anticipated the shut of Spin from our perspective, from our steerage we have no change. And as we mentioned within the presentation, the combination already began, the inter-firm relationship is already on the precise tempo, we’re certifying – the video games are certifying the combination. So in that respect, I’d assume and we predict that steerage at the moment is on the decrease base, not on the upper or the medium measurement.
37:54 Okay. Thanks, Ronen. That’s useful. Thanks and congrats on an excellent quarter, guys.
37:57 Thanks, Neal.
37:58 Thanks, Neal.
38:01 Your subsequent query comes from the road of Adhir Kadve from Eight Capital. Your line is open.
38:08 Good morning, guys. Thanks for taking my questions right here. I needed to the touch just a little bit in your in-home developed content material. I feel you could have made — you made a reference to what number of video games are out there, however I did not catch that. So I simply needed to form of discuss what number of video games are out there proper now? How are these video games are literally performing? And do you possibly doubtlessly — would you present a goal for what number of video games you’d launch right here in 2022?
38:34 [Multiple Speakers]
38:35 Okay. Please go forward.
38:36 Yeah. So as we mentioned, we’re shifting to some extent our efforts in direction of proprietary and unique content material, due to the gross revenue margins and due to the flexibility to promote that content material higher than third occasion, as a result of, in fact, it’s unique to us. And in order operators are on the lookout for content material, and they’re on the lookout for this particular content material, we’re the one ones which can be capable of provide it. In phrases of the numbers, I do know that there have been some numbers that Richard have offered earlier than. In our estimates for the 12 months, we’re about 90 to 100 proprietary video games developed on our RGS, a few of them are third-occasion unique content material from accomplice studio, we have introduced Bluberi, now we have Blur Guru and others. And then we’re about 30 to 35 titles that will probably be developed in-home from the Wild Streak, from the Atomic Slot Lab, from Oryx, O2X and from Spin, which can signify an ideal improve from ’21. And as we begin rolling out this content material we’ll get into the rhythm of getting increasingly more proprietary content material from our proprietary studios, which can, in fact, drive margin and revenues into the long run.
39:52 Helpful. Thank you. I respect that. And then you definately simply talked about your 100% retention charge in terms of your buyer pipeline. So that is clearly excellent to see. But out of your present prospects — sorry, clearly excellent to see, however then what concerning the precise pipeline? How is that wanting by way of new buyer wins? Are you discovering that you just’re seeing an acceleration in that one from that perspective?
40:14 I feel it is tied to the TAM development. I imply, as you may think about and as you may respect, the extra licenses, the extra certifications we get in new jurisdictions it opens the door for us to enroll new prospects. And so, as we get these certifications, as we get these license speaking concerning the Dutch market which was not open to us pre-licensing, we now have a capability to promote in that market, the Ontario market, the US market, the Bahamian market, the Portuguese, Italian. As we roll our — as we roll our technique into all these new market, given the truth that we get the licenses and the certification, we’re capable of provide content material and platform in these jurisdictions.
40:53 I feel it is essential to say that within the European market lots of our prospects are multi-state operators. And so now we have the combination and we serve them in particular market. As we roll out or as we get hold of licenses and certifications in new markets it is secure to imagine that these prospects will develop with us into these new jurisdiction. One of the examples that’s possibly price to talked about is, we introduced just lately that we have gone dwell with 888 in Spain with our content material. And so you may think about 888 is likely one of the first B2C operators to acquire their Ontario license. I’d think about that 888 could be an excellent buyer of ours in Ontario as we signal addendum to serve them within the Ontario market, as a result of they’re already our prospects in Europe. And in order we rollout into new markets it presents a chance for us to serve our prospects that we serve in different markets.
41:46 Great. I respect all the colour. I’ll cross it on.
41:52 Your subsequent query comes from the road of Sid Dilawari from Cormark Securities. Your line is open.
41:58 Yeah. Hi, good morning, guys. First, in your Netherlands market. How are we doing there? Is the market share nonetheless across the 30% mark or has the market share improved materially from the final time we talked about it? And then, are there some other markets that you are looking at which can be just like the Netherlands market that you are looking to get licenses in?
42:23 So I’ll begin with the primary query. I feel the reply continues to be, sure. Look, we do not have the whole solutions, as a result of, in fact, the numbers proceed to develop by way of the whole addressable marketplace for the Dutch market. And because the market rolls out, as increasingly more operators get licenses, analysts are updating their whole addressable market as we [indiscernible] the market up. We do imagine that we’re nonetheless representing about 25% to 30% of the Dutch market. It’s essential to additionally point out that as increasingly more licenses are being rolled out to the B2C operators within the Dutch market, we’re on-boarding extra prospects, we have had such an excellent launch within the Dutch market that we at the moment are to some extent the go to platform and our content material resonates rather well with gamers out there. So in fact, as new operators get their licenses, they need to and they should provide related content material to their rivals who at the moment are our prospects. So they’re going to come to us for the content material, a few of them will come to us for platform, we received the platform and the content material licensed. So for us, the gross margin and the enlargement within the markets are simply persevering with to extend. And so we imagine that the Dutch market will proceed to current an ideal alternative for us.
43:31 In phrases of latest market, it’s very laborious to estimate how a launch of the brand new market would appear to be. Because it actually is determined by — and I feel Neal alluded to it, regulation, licensing and naturally, the rollout of the certification. We do count on that among the new markets that we get licensed in, Ontario and others will current an ideal alternative for us. Because as we get the licenses, as we get the certifications and as we do the combination we turn into to some extent the go to B2B provider for content material, the go to B2B provider of platform. And so it presents a chance for us to develop with the market as increasingly more B2C operator get their licenses.
44:15 Okay, nice. That’s useful. And only one factor, in your ready remarks you guys highlighted — you guys — like your lengthy-time period targets in your gross margins is round 60% and also you guys at the moment stand round 49% and I do know you talked about that gross margins are anticipated to go up as you roll out proprietary content material from your individual studios. Is that form of the one factor that is driving these targets or is there one thing else right here at play that might lead to increased gross margin? Because on the EBITDA line that is sensible, since you guys have working leverage, in order that appears extremely achievable to me, however simply on the gross margin some readability could be appreciated.
44:58 Yeah. Sid, good morning. So, sure, there are 3 components that’s affecting our gross revenue margin. The first one is content material, as you talked about, which is right. Once you could have your individual content material, you have no royalties to 3rd events. So that is apparent. The second half is the managed providers and that iGaming platform. We actually make the most of and scaling up our know-how, so we’re investing in know-how rollout in numerous international locations with totally different prospects. The know-how is there, the difference and that localization is one thing which, in fact, we’re investing in [Technical Difficulty] any form of income.
45:28 If you take a look at our income combine, final 12 months was 89% of content material and about 11% of managed providers and that iGaming platform. This quarter it was 68% to 32%, that is enhancing considerably the margin as a result of this quarter income doesn’t have any value of products or royalty paid to 3rd occasion. And the very last thing the place we’re engaged on high of that’s commercials with third occasion supplier. The extra now we have — we constructing our content material — constructing unique content material into our RGS and scaling it up and distributing them within the US in few months’ time. And in Europe, we try to enhance the margin. So A and B and C collectively improved the margins and from 50% to get to 60% [indiscernible] income extra make the most of your individual in-home know-how and sport creation and handle relationship with suppliers that you just get to 60% by 2024 and even earlier.
46:26 Okay, nice. That’s useful guys. Thank you.
46:28 Thanks, Sid.
46:28 Your subsequent query comes from the road of Barry Sine from Spartan Capital Securities. Your line is open.
46:37 Hey, good morning. Just needed to raised perceive the outcomes you simply reported. And possibly dig into among the key efficiency indicators. So income for the quarter was EUR15.8 million after which on slide 24, you talked concerning the variety of prospects, the quantity of wagering. Could you form of discuss how these function? I’m assuming your income is solely based mostly on the variety of prospects and the variety of jurisdictions, not the quantity that is wagered, however on that notice, on slide 24 we do see a decline within the quantity that is wagered. So when you may discuss these KPIs and the way they roll-as much as get to the reported income?
47:22 Yeah. It’s an excellent query. Thank you. Yeah, it is an excellent query. I’ll clarify to you the narrative of that. So on one hand, as you see from Q2, Q3, Q4 there’s a slight decline in wagering. This will be 100% attributed to our divestment from the German market. And as you understand, the – from the first of July 2021 the brand new gaming relation truly took in place in Germany. And consequently wagering have been stored as much as the second level, the quantity of beds have been lower, the deposit ranges. So we will see the drop even in final quarter, we additionally notified it by final quarter. In addition, when you take a look at the income, as I discussed simply couple of minutes in the past, the income composition can also be scaling in direction of managed providers and that iGaming platform, the complete turnkey answer that we’re providing. So the income, yeah, it goes up however essentially the content material income goes up in the identical line, and that is consequently that among the German impact continues to be affecting us. But I imagine the extra we will develop income on each our content material and our third-occasion content material, we’ll see the numbers buying and selling up again once more.
48:31 So that is [indiscernible] just like the headwind of the German regulation that is nonetheless affecting our prospects and the flexibility to transact, however when you take a look at subsequent 12 months publicity to Germen will probably be considerably decrease, I’d say, that the numbers will begin going up once more and that may clarify the drop.
48:54 So simply to make clear, there isn’t any relationship between the quantity that is wagered. So are you doing doubles on certainly one of your prospects platform, your income would not go up, you could have a hard and fast price license, is that right?
49:06 Yeah. We have a compulsion. So let me give an instance. So when you take one solely content material in comparison with one other content material, the wagering is a really robust KPIs to replicate how a lot you transact for patrons based mostly on the content material to content material, however when you have adjustments in your income combine that the managed service and that iGaming platform is rising considerably. So your income is rising considerably, however not essentially the content material income, particularly when now we have far more publicity to the German market. And now once we — and a few prospects begin divesting for the market, you will notice some drop in wagering however we count on and we will see the development that it is truly goes up once more as a result of it occurred in Q3 and continued into Q4.
49:50 Barry, if I may add a few extra factors. As we mentioned, our breakdown of income combine is now going from third-occasion content material to extra proprietary content material and to extra platform income. And so subsequently, you see the wagering numbers decreased however the proportion of the income that we preserve is increased as a result of the proprietary content material derived our profitability, clearly extra income — extra profitability on the identical income and the identical factor with the platform. And in order we numerous from purely third occasion combination content material to unique content material than the numbers that stay with us with the enterprise as a proportion of the income get increased. Does that is sensible?
50:37 Yeah. That’s very useful. Thank you. Can I squeeze in yet another query, please.
50:42 In slide 28 you could have your income construct and clearly there’s a damaging crimson bar for the German regulatory have an effect on. And I’m simply need to have a look out going ahead, possibly we will begin understanding what drove the German regulators, have been folks going bankrupt with on-line wagering, they needed to put a management on it? And if we take a look at different jurisdictions is there something related on the docket in different markets, New Jersey, for instance or the UK or Netherlands which will have an effect on income going ahead?
51:21 Yes. So look, let me begin with the large image after which Ronen can speak concerning the numbers per se, however the large image in Germany is that, the German nation have tried to manage on-line gaming, I feel for the previous 15 years, possibly 20 years. Federally there was no regulation after which Germany is split into 16 states. I feel there was one state SH lower than [indiscernible] held or supplied some form of regulated gaming regime. In 2020, in July of 2020 the regulate — I imply the 16 states and the federal authorities in Germany agreed to manage gaming on the federal stage. And then you may see the impact of that regulation coming into full pressure and impact in July of 2021. And so, it isn’t about folks going bankrupt, it isn’t about — or possibly it’s, we aren’t actually positive of season within the German market, nevertheless it actually has to do with the truth that German as a rustic needed to manage on-line playing they usually determined to do it on the federal stage.
52:33 It isn’t any totally different than different locations just like the Dutch market which had unregulated gaming till the Dutch authorities determined to manage it on the federal stage. And so, as they regulated on-line gaming, the framework that they put in place was – effectively, it needed to do with lots of participant safety instruments in place. 5 second spin, EUR1 spin restrict, different participant safety instruments to guarantee that the gaming market will probably be helpful to operator [Technical Difficulty] gamers. And in order that occur and got here into full pressure and impact in July of 2021, the problem is, that the German regulator has probably not been established and licenses haven’t been granted but. And so you could have this dichotomy within the German market between the Gray, which I suppose now flip black due to the regulator that’s nonetheless affecting Germany after which the White operators. We as a regulated firm, as a NASDAQ listed firm, because the Toronto Stock Exchange firm with licenses all all over the world, we will’t help the black operators anymore so we needed to shut down all of the operators that aren’t complying with the regulation. And so, we have stored all of the white operators that are making use of for licenses and are working inside the scheme of the brand new regulated iGaming market, with sport betting market as effectively. And so, wanting into the long run that’s our recurring German income, the nonrecurring German income is the stuff that we needed to flip off as a result of in some unspecified time in the future the German authorities goes to begin issuing licenses and implement towards the operators which can be working legally. Does that form of offer you shade on it?
54:14 Yeah, on what occurred traditionally. Looking forward, are there any related rules on the docket being thought-about in any of your main jurisdictions? What’s the probability we see in different crimson bar on slide 28 within the deck a 12 months from now.
54:29 And so, look regulation is one thing that we take into consideration on a regular basis. In our view and based mostly on analysts’ estimates and the best way that we see the market and the best way that we see the world that we function in, it is unlikely. Regulation goes with us, not towards that. Germany was a one-off due to the character of the market, however when you look all all over the world, whether or not it is the Dutch market, the Ontario market, varied US states, it is all going in direction of regulation somewhat than deregulation. And so we count on that crimson German bar to turn into inexperienced bars in lots of new jurisdictions that we enter into.
55:07Very useful. Thank you for taking my questions.
55:09 No drawback, Thank you.
55:12 [Operator Instructions] Your subsequent query comes from the road of Lisa Thompson from Zacks Investment Research. Your line is open.
55:24 Hi, good morning.
55:26 Hi, Lisa. Good morning.
55:28 So you simply completed up on Germany, so far as your steerage goes what are you fascinated by in Germany? Is it form of fourth quarter – 4 quarters or you could have — do you could have one thing in there for licenses being granted?
55:47 So, Lisa, truly what we did to be tremendous conservative, as a result of to be trustworthy with you, even the German do not know precisely when we’re going to difficulty the licenses. So what we took, we took the run charge of Q4, which was very low after we made the adjustments internally as we guided in final quarter and we run some form of very flattish kind of development. We have majority of the purchasers in Germany already. We know the way the [indiscernible] ready for license. So from steerage perspective, I do not assume it may very well be worse than that. But undoubtedly now we have estimated some form of potential development with the market because the extra is educated, as extra license will probably be issued, as extra black operators will probably be stopped, so there’s a very flattish development. So we imagine that is the precise method to strategy that as a result of we do not have readability when licenses will probably be issued.
56:43 Okay. I had yet another –
56:45 [Multiple Speakers] that I want to add, only a large image on the German market. Look, the German market, if we talked about the identical dialog we’re having proper now in 2021 we might have mentioned that it was a headwind for the enterprise. We weathered the storm and now Germany can solely [indiscernible]. We’ve taken essentially the most conservative strategy for the German income and as soon as the licenses are beginning to get granted and the enforcement is beginning to happen towards the black operators, when Germany scales up it is all gravy for us, as a result of we’re taking a really conservative strategy and we expect that it is truly going to drive our revenues up as soon as the German regulators are arrange and beginning enforcement.
57:24 Great. Okay. So that is good to learn about your steerage. One final query, are you able to describe just a little bit extra particularly what you are — what occurs on April 4th in Canada for you? Do you could have an expectation of X variety of prospects signed up and do you flip a swap, how does that look?
57:45 So, new markets are at all times fascinating markets since you form of by no means know what occurs and in our inside estimates we in fact have many conversations with [Technical Difficulty] could be operators in Ontario. Some of them are present European prospects which have utilized for licenses and I gave 888 instance, which has already been granted. Some of them are the Spin prospects that may turn into Bragg prospects, DraftKings, FanDuel, BetMGM, RSI, all of those which have utilized for licenses.
58:17 The one factor I’d say is that, it actually is determined by the regulator by way of granting of the licenses. If all of those names that I’ve talked about and others are granted licenses between now and March tenth and April 4the then we count on to roll out our content material on day one. It’s as much as all of them. If a few of them are within the subsequent batch or a adopted batch of licenses, then they should wait. I’ll say that from me a certification standpoint, we have been working with GLI and SIQ that are the certifying lab to get our content material prepared for the launch in Ontario. And so from that perspective, we can have video games which can be licensed, and naturally, Bragg is licensed, as soon as we get — as soon as our prospects get their B2C licenses, we’re capable of signal them on to our platform after which introduced the deal for Ontario. But once more, going again to the 888 instance, we simply launched 888 in Spain, we work with them in different jurisdictions in Europe, they introduced that they only obtained their license. So it is extra probably than not that somebody like 888 will probably be a buyer of ours in Ontario, as a result of we’re one of many solely, one of many first B2B suppliers to be licensed and licensed within the Ontario market. So it presents an ideal alternative for us.
59:34 All proper, nice. Thank you for that. That’s all my query.
59:38 Thanks, Lisa. Bye-bye.
59:40 And there aren’t any additional questions right now. Mr. Yaniv Spielberg, I flip the decision again over to you for some closing feedback.
59:48 I need to thank everybody for becoming a member of the decision at the moment and I actually need to thank the workforce for the laborious work, placing the numbers and doing actually nice on the execution. We’re very enthusiastic about the way forward for the corporate, very enthusiastic about the way forward for Bragg. Loads of thrilling issues forward, we’ll converse quickly on our subsequent earnings name. Thanks everybody for handing over.
60:08 This concludes at the moment’s convention name. Thank you in your participation, you might now disconnect.