Bragg Gaming Group Inc.

Good morning. My name is Rob and I will be your conference operator today. At this time, I'd like to welcome everyone to the Bragg Gaming Group first quarter 2022 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Yannib Spielberg, Chief Strategy Officer, you may begin your conference.

Good morning, everyone, and thank you for joining Brad's first quarter of 2022 results presentation. You'll hear today that our first quarter was our best quarter to date. We couldn't have done it without the hard work of every single member of our team, Slovenia, Malta, Las Vegas, Reno, and other places. So before we start, I want to take a moment and thank everyone for their hard work and continued hard work. With that said, I'm going to ask everyone to turn to the second page and look at the Safe Harbour Statement. Please familiarize yourself with the Safe Harbour Statement on the second page. Some of the comments that Ronan and I will make today will include forward-looking statements as defined in the Safe Harbour Statement. With that, I'll begin the presentation, and then I'll pass it to Ronan Kanur, who hosted with me this morning, to discuss the financials. Today, we'll discuss our quarterly highlights. We'll also discuss the strategic focus and focus on the content production that we ramped up. We'll talk about M&A, licensing, and new markets. Ronan will walk you guys through the financials and guidance, and then we'll conclude with an outlook and conclusion, at which time we'll open the line for questions. Thank you very much everyone for joining. I want to start with the quarterly highlights. The first quarter of 2022 was a strong quarter. Strong growth driven by ongoing content and platform expansion and new market strategy. You'll see that the first quarter strong financial performance, the strongest we've had to date. First quarter 2022 revenue came at 19.4 million euros. That's 36.4% growth on our first quarter of 21. The adjusted EBITDA for the first quarter came in at 3 million euros which is 26.2 percent growth on our first quarter of 21 and of course our gross profit margin increased by 490 basis points to 51.8 percent There's also been first quarter business momentum. Very strong revenue in Q1 was driven by underlying recurring revenue and recent new market expansion. Successful launch of new proprietary studio, Atomic Slot Lab, two titles that were released in Europe. We will talk about that more in a few slides. And then, of course, the continued successful rollout of new market strategy. We're live in the Czech Republic and Bahamas, and we continue our growth in the UK, Switzerland, and Spain. Recent developments include going live in Ontario. Ontario market opened up for operators on April 4th, and Bragg is a fully licensed gaming-related supplier in this new regulated market. We also entered the regulated Portuguese iGaming market for the first time with the BetClick launch, and we continue to grow our presence in the Dutch market, announcing our third and fourth-time customer, the brand 711, at MetNation. I want to shift gears and talk about expanding our strategic focus on content. It started, as I'm sure you guys are aware, with the acquisition of Wild Street in June of 2021. And we continue to focus on content as it becomes a very important factor in our success story. And I want to talk to you about the benefits of the proprietary and exclusive content extension on slide seven. You'll see that we continue to invest in our in-house gaming content and to integrate new exclusive content providers. We break down our content into two categories. We have our proprietary content, which you can see on the slide, slide seven at the top, and then the exclusive content providers at the bottom. The expansion of proprietary content is expected to drive gross profits and EBITDA margins. For proprietary content from our in-house studios, we capture approximately 100% of the revenues. For content from partner studios, we capture about 25% to 35% of the revenue, and we now have four in-house content studios, which includes Wild Streak, Spin when it closes, Atomic Slot Labs, and, of course, the Oryx Studio. We also have exclusive content that comes from our exclusive partners. Regular and diverse exclusive content from partner studios offers portfolio diversification and geographical differences. Games that are built on our remote gaming server are not available anywhere else in the market. We have diverse and localized portfolio where we can tailor to the European market and the North American market, and then upon expansion to other markets. And of course, we're leveraging proven track records and bringing land-based brands online, balanced with a selection of new, high-quality online first studios. And so I want to focus on the proprietary studio update on slide eight. And you'll see on the slide that we have really three studios that we can discuss on the slide, but one of the studios, the acquisition of Wild Streak, is broken down into online and land-based. Wild Streak, as you guys remember, is an acquisition that we did in June of 2021. We're on track to release five games via our partnership with Pragmatic Play this year. So far, the successful partnership which was established with Pragmatic Play last year resulted in a total of seven games that were released and are currently live. These games that are released by Wild Streak show strong player retention and continued growth in the numbers. And of course, there's also other success stories of the Wild Streak online content, which have been released in other markets, like the Dragon Power, which has a record quarter in New Jersey in the first quarter of 2022, and was also recently launched in Michigan and West Virginia. The strength of the Wild Streak brand also resonates really well in the land base. wild street land-based has agreements with igt with sega sammy one game has already been released with igt in 2022 with four additional games currently in development the last three games that were released by the wild street gaming land-based version all made it to the top 25 Ehlers-Santini new core game reports with increasing sales. And the success of the IGT deals resulted in IGT actually extending the deal with Wild Street for additional four titles, which will start developing and deliver in the month and the year to come. There's also been four titles that launched this year with Sega Sammy, including the well-known online brands, Congo Cash and Fairy Dust. And these will go into the land base with SEGASAMI in the second quarter and third quarter of 2022. In addition to that, as we discussed in our last earning call, we've also created a new studio, a new in-house studio called Atomic Slot Lab. The launch of the new studio with high quality content focusing on the European markets. We released our first game Egyptian magic in the first quarter, which was a top five game ever released on our platform, on our RGS, our remote gaming server. We also released fairy doc, which launched in the first quarter towards the end of the first quarter of 2022 with increasing success. Total of 11 titles to launch this year in Europe through the atomic slot lab and 10 titles to be launched in the U S with customized math line count and other game variable for each market. The beauty in our ability to tailor games for the European and North American market is that we're able to leverage well-known brands, exceptional math, and exceptional graphics to tailor to the different markets, the European market and the North American market, with growing success. And then, of course, finally, our Orth Studio, which has been in operation for quite some time, has been revamped with new leadership, growing team and talent, and we revitalized the identity and quality of the game design and production, given what we've learned from the Wild Street Gaming and the Atomic Slot Ramp. Six new games are planned to launch in this calendar year, with our North American debut also expected this year with custom U.S.-specific masks. With that said, I want to focus on slide nine on the game release roadmap, both the proprietary and the exclusive content. You will note that in prior years, we had game releases in Europe and the rest of the world, mostly from partner studios, which were exclusive but not proprietary. If you look at 2022, you'll see that we're going to release 22 games out of 49 games that are proprietary games in Europe and the rest of the world. and we're going to release 22 games out of 39 games, proprietary games, in North America. This is important because quality is more important than quantity for us. The key point here that we want to drive is that we move from 20% proprietary content to about 45% proprietary content, and so we keep more of the revenue. Releasing 88 games in a year puts us up with top game publishers in the industry. To name one, Evolution Gaming, which includes Evolution, Net10, Red Tiger, and Big Time Gaming, also announced by coincidence that they'll release 88 games in 2022. 49 games that are released by us in Europe equate to almost one new game per week. And operators generally would struggle to take more than one game per week from one supplier. So it really ties in nicely for one game per week in the European market, both proprietary and exclusive content. And as we roll out our North American strategy, a similar strategy for the North American market with proprietary and exclusive content. With that said, I want to move on slide 10 to M&A, licensing a new market. Updating you on the SPIN transaction. We've talked about it a lot. We're hoping to close. I can assure everyone that we've submitted all the last documentations that were required for the Pennsylvania Gaming Control Board and have been sitting on their desk for review and consideration. We're hoping to be included in the May 18 agenda for the Pennsylvania Gaming Control Board. Once we get the approval from the Pennsylvania Gaming Control Board on the licensing of the individual and the entities, we'll be able to close the SPIN transaction. Despite the length of time that it's taking to close a SPIN transaction, I assure you, like I assured you in last quarter, we've been working as one unit with respect to the prospective deals in the North American market. We've been working with the labs. We've been working with agencies to get everything sorted. So once we get the clearance from the regulators, including the Pennsylvania regulator, we can hit the ground running and then have the ORITS technology, the Wild Street game, the ORITS game distributed through SPIN in the U.S., and, of course, in Ontario. On slide 12, you'll see that we continue to roll out our content and technology in newly regulated markets in Europe, North America, and globally. New licenses and new market entries include the Ontario-Canada market, which I discussed. We obtained our supplier gaming license in March, and the market rolled out as legal on April 4th. In Bahamas, we obtained our supplier license in the first quarter, and we launched with Island Lock in March. In the Czech Republic, we had the first market entry in February, taking content live with the sign-out group. We also had content agreements signed with Microgame, which is Italy's largest distributor of online casino games, in preparation for market entry later this year. We got our PAM, our Player Account Management, certified for the Czech market in preparation for our Player Account Management launch with Merkur later this year as well. We announced in November of 21. And of course, we continue to roll out content in the United Kingdom, launching with SkillNet in January. So far, we've shown great progress in North America. We really are expecting to obtain our Pennsylvania license in the second quarter of 2022. This, of course, paves the way for the completion of the SPIN games acquisition in the second quarter and subsequent U.S. content rollout in the third quarter of 2022. As I mentioned, we're working with SPIN and the regulators to make sure that once we get the license and once we close the transaction, we have a smooth rollout of licensing and certification from the laboratories so we can hit the ground running. We've also applied this quarter for supplier license in British Columbia, and we're hoping to leverage the SPIN agreement with the BCLC and provide our content to the BCLC in BC in Canada. As you guys are aware, we continue to work on licenses and certifications in various markets. On slide 13, you'll see that Bragg's addressable market continues to expand rapidly as online gaming companies grow aggressively and land-based companies look to migrate online. BRAG expects to enter the North American market with our own proprietary content and exclusive content in the third quarter of 2022. We've started the rollout in Canada, in Ontario, with 888. We're hoping to get our final approvals from the U.S. regulators in this quarter and roll out our content, proprietary and exclusive, in the third quarter. Even in the first quarter of 2022, BRAG's total addressable market equates to about $13.5 billion, including the United Kingdom, Germany, Netherlands, Greece, and canada as we continue to get our licenses and certifications we're expecting to grow the total addressable market by the end of the fourth quarter to 21 and a half billion dollars which will include our existing market but also going live in italy united states rolling out canada including ontario and bc and other new markets if you look at the future We're estimating that by the end of 2026, including the growth in the North American market and the European market, Brad's total addressable market will be at about $43 billion, and that presents an immense opportunity for revenue diversification, revenue growth, and increasing customer base to grow our revenues well into the future. I'd like to turn the presentation to Ronan to discuss the financial and the guidance for the first quarter of 2022 and the rest of the year.

Thank you, Yaniv, and good morning, everyone. I'll begin my comments on slide 15. The first quarter revenue was up by 36.4% year over year to 19.4 million euros and up by 22.9% from the previous quarter, representing the record quarter we ever had. This performance derived mainly from the organic growth from its existing customer base, the onboarding of new strategic customers in various jurisdictions, mainly the Netherlands, in the PAM and managed service segments. In addition, we had a strong revenue performance from Wild Street Gaming that business required in June 2021. From a KPI perspective, the total wagering generated by games and content also by Oryx and Wild Street in the period was up by 0.8% from previous year to $3.8 billion, and with 23.2% growth from the previous quarter. And you can see from the wagering chart on the right-hand side, the new German market restrictions on gameplay had an effect during Q3 2021. But ever since, we have been seeing a positive trend and momentum. Also, we noted last quarter, we have continued to retain 100% of our customers since 2018. And while our customer retention remains solid, our dependence on top 10 customers has slightly changed. Revenue for our top 10 customers was up by 12% to 75% of the total revenue, compared to 62% in Q1 2021, a trend we expect to improve over the next few quarters. The gross profit increased by 50.7% to €10 million, with margins increasing as well by 4.9 percentage points to 51.8%. This is primarily attributed to higher proportion of revenue derived from our platform and managed services, alongside with wide-trade proprietary gains revenue, which has no cost of sale. And this compares to license gains and content, which have third-party costs associated. Adjusted EBITDA for the quarter was up by 26% to €3 million, with adjusted EBITDA margin reaching 15.3%, decreasing just by 1.2% from the same period in the previous year, but with an improvement of 5.5 percentage points from the previous quarter. The decrease in margin is mainly the result of scale and improvement in the product mix of spam and managed services offset by the increased salaries and subcontractors cost as part of the corporation strategy of investment in its expansion of its software development, product, and senior management functions. Now turning to slide 16, as I mentioned earlier, Our entry into new markets, in particular the Netherlands, has been exceptionally strong, coupled with new client wins and a ramping up with operators launched earlier in the year give us significant momentum to this financial year. During the quarter, the new 2021-2022 business revenue was up by 15.8% to quarter-on-quarter during the new market launches. Existing client revenue, including Germany, has also seen a marked step up in growth from Q1 2021 by 43%, but 6% drop from the previous quarter, but this is due to seasonality. One-streak revenue was up by 35% from the previous quarter as a result of strong performance of in-house-built games. And the underlying recurring growth revenue, including licensed Germany, increased by 22% quarter over quarter. As you can see from the right-hand side, represented the Q1-22 underlying business revenue mix that is moving into Q2 and for the whole year after offsetting the headwinds from the German market since the new regulatory changes took place in July 2021. So overall, the new business pipeline, new market entry, and more focused sales undefeated the 2022 financial year revenue guidance. Slide 17, the gross profit expansion. As you can see from the revenue and gross profit margin slide, The gross profit margins are in the growth momentum since Q2 2020. We're scaling up in line with the revenue growth and movement in the product mix as presented in the bottom of the slide. The product mix changed since third quarter of last year and now trending towards spam, managed services, and proprietary content, while improving gross profit margins and profitability. As we indicated in the past, platform and proprietary content products are carrying no third-party costs, which gives us ability to scale up gross profit margins. The time and managed services improved the Q1 2022 cost-profit margins as a result of the strong performance of the new Dutch customers. In slide 18, it's important to demonstrate our continued growth complemented by substantial margin expansion. We highlighted the importance of proprietary content, the play account management, and the managed services. And this slide illustrates why it is so important for our growth and profitability. The gross profit margin in 2020 was 43%, and the adjusted EBITDA margin was just 11.9%. As we were selling mostly third-party gaming content, while payment managed services accounting of less than 11% of the total revenue. As we transition to higher proportion of platform, managed services, and proprietary content, a change that started last year, you can see the effect in this quarter result with gross profit increased by 8.3 percentage points and adjusted EBITDA by 3.4 percentage points, reaching 51% of gross profit margin and about 50% of adjusted EBITDA margins. As we look into the future, our target to achieve high gross profit of approximately 60% with adjusted EBITDA of 25% is a corporation operating leverage expected to increase given limited growth in employee costs and other overheads. In slide 19, revenue-adjusted EBITDA, on this slide, I'll detail how we reconcile our operating loss to positive-adjusted EBITDA in this quarter. Adjusted EBITDA amounted to €3 million and a 15.3% margin against an operating loss of €0.2 million. The gap can be explained by the following non-cash exception items. Depreciation amortization and increased intangible amortization as part of the Wall Street acquisition in June 2021. The share best payment awards granted to senior management in Q1 2022 compared to DSU, composed of DSUs, RSUs, and share options, and transaction acquisition costs, costs associated with the corporation M&A strategy. Moving to slide 20, at the end of March 2022, BRAC has a solid balance sheet and continues to deliver strong cash flow performance. Cash balance of March 2022 was 18.4 million euros compared to 16 million euros at December 31st, 2021, with no debt facilities in place. Networking capital was 12.6 million euros compared to 11.6 million at the beginning of the year. We continue to project quality free cash flow from operation. And as a reminder, our business strategy requires little capex related to technology and debt requirements. From a cash flow perspective, in the three months ended March 2022, we generated 3.8 million euros from operating activity while investing 1.2 million in software development costs as part of the investment in our technology. The 2022 guidance, we reiterate a full year 2022 revenue guidance of 68 to 72 million euros and adjusted EBITDA of 9.5 to 10.5 million euros. With that, I will turn the call back to Yaniv, following that back to the operator, so Yaniv and I can take your question. Thank you.

Thank you, Ronan. As everyone heard on this call this morning from Ronan and I, the first quarter has proven to be our best quarter on record to date. We continue our strong revenue growth, which is driven by underlying recurring business and new markets. We successfully launched new proprietary content studios and expanding our exclusive game roadmaps. We continue to grow our total adjustable markets, which we project to reach $21.5 billion by the end of the year. We're increasing our gross profit margin, our adjusted EBITDA margin, which are all driven by changing in our product mix. And, of course, we show solid financial flexibility with a debt-free balance sheet. And so the strong Q1 2022 performance sets the foundation for a continued successful execution of our growth strategy. With that, I want to thank everyone for joining us today, and I want to thank the entire BRAG team for a very successful quarter. And we can turn into the question section now.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of Neil Gilmer from Haywood Securities. Your line is open.

Yeah, good morning. Congrats on a strong quarter, guys. Maybe I want to start off with, you know, you've maintained your guidance, and obviously it was a great Q1. Can you give us a little bit of colour on the mentality of sort of maintaining that? Obviously, it's a conservative approach. I get that it's early in the year. But, you know, is there some seasonality that we should be expecting that a little bit softer, you know, Q2 and Q3 or is the pending spin games acquisition? Obviously, this has taken longer to close than expected to sort of factoring in until you sort of get that closed and have more visibility to to run through that revenue line.

Yeah, so thanks Neil and good morning. I think that you kind of answered the question that you posed. The answer is we're taking a conservative approach, but the reality is there is some seasonality that is built into our forecast. It's been a very strong quarter, and we can say that the momentum is continuing into the rest of the year. But it's really early on in the year, and it's difficult to predict what the rest of the year would look like. On the revenue side, it's simple. I mean, we're doing better than we're expecting, and we are very confident and comfortable that we're going to – you know, over-deliver this year again. On the EBITDA side, we know that there's a lot of expenses that are going to be built into our U.S. rollout expansion. So we've decided at this stage to keep the guidance as is for now, and then we'll monitor the situation. Once we finish the second quarter, if it continues to be as strong as we expect, then we will update the guidance. Ronan, have I missed anything?

I couldn't agree more, Yannick.

Good.

Okay, great. Thanks for that. Maybe just for my second question, just to talk a little bit more about the strategy with respect to proprietary content versus partnerships. You had on one of your slides there sort of what your target profile is. Can you give a little bit more color on sort of how you think about why you have that mix versus going more proprietary that obviously comes along with the higher margins. Does that just sort of diversify or just what you're thinking, you know, sort of more longer term as you sort of establish that proprietary content?

And so, look, if you recall on the slide, on slide seven, we talked about the benefits of proprietary and exclusive content. In an ideal world, of course, we want all the content to be proprietary to us, but there's limitations to what we can and can't do. And if you think about the global expansion of the business, we need to have a tailored approach to different markets that we operate in. Wall Street is doing exceptionally well in the markets that it is. Atomic Thought Lab is doing exceptionally well in the markets that it is. But there's other markets that are German-speaking, therefore GammaMap does really well. And then there's rollouts in the U.S. where land-based companies like Blueberry will resonate really well with the players. And so to be versatile enough and to have a good approach to a growing market, you want to have a lot of content that comes from mostly proprietary and exclusive, but you have to have some sort of a growth strategy where you kind of capture the rest of the world as well.

Okay, great. Thanks very much. I'll pass the line. Congrats again on a great quarter.

Thanks, Neil. Thank you. Your next question comes from the line of Matthew Lee from Canaccord Annuity. Your line is open.

Hey, morning, guys. Congrats on the quarter as well. So let's really talk about the growth drivers here. It seems like Germany is probably flat. North America really hasn't taken off the ground yet. So what's kind of pulling the wagon here?

Ron, do you want to take that? Yeah, thanks. Morning, Matthew. How are you doing? So we have, again, an exceptional quarter. Continuing with the fourth quarter, we've seen that the Dutch market is performing well, more than we expected. As you reminded, we have a couple of operators.

Among them, we have two platform customers performing exceptionally well. As you rightly said, Germany is actually relatively flat according to our expectations. Lights haven't been approved yet. Only one was approved a few days ago. We're waiting to see how the market is evolving. We still have a lot of line-up customers still operating on the German market, so I think it's going to be when the news will come in the next few weeks, hopefully. We will be able to see probably more traction there. And as you rightly said, the US market is still not operational from our perspective. We're waiting for the spin transaction to close and then we'll be full speed over there. So just to recap, it's the Dutch customers which are performing well. Also, we have other jurisdictions that we're starting. UK is performing well according to our expectations. We have other markets that we're enhancing and we're rolling our continent. So it's all a mixture, but with the highlight that the Dutch market is performing better than we expected.

And Matt, I want to add one last thing. It's a pretty positive that the German government had issued a license So far, which I think is on track with what we were hoping to see, some traction with licensing in Q2 and Q3 and for the rest of the year. And so we are hoping that the relatively flat line that we forecasted for the German market will start picking up again once the licenses are issued and enforcement carried.

Right. That's great, Collier. And then maybe on the North American front, can you just give us an update on the progress you're seeing, particularly in the Ontario market that just opened?

So the Ontario market has been open for months now. We have one agreement that we discussed in the public market, the 888 agreement. We have a lot of other agreements in the background that we're working on and finalizing. And so the agreements with the operators is one thing. And the second side of this equation is licensing and certifying our partners. proprietary and exclusive content for the Ontario market and certifying our platform for the Ontario market. We're in the final stages of doing so. And we internally believe that next month in June, we will roll out a lot of big operators that everyone would know and some of our proprietary content that has been doing really well in the rest of the world.

All right. That's great, guys. That's it for me.

Thanks, man.

Thanks, man.

Your next question comes from a line of idea from eight capital. Your line is open.

Perfect. Thanks guys. And congrats on the quarter here. I wanted to touch on your eye gaming, the platform strategy. I know you obviously pointed out that you're seeing a lot of interest in the platform strategy in the Netherlands, but maybe what about some of your other jurisdictions that you've entered into? Do you think that the platform strategy could become maybe more important to the overall strategy as we move forward?

So that's a great question. I think that it's important to know that the iGaming platform strategy is important for the business overall because when you own the iGaming platform, when you do the full turnkey solution, you're getting a percentage of rev share for all the services that come around it as well. You're talking about the content, you're talking about the managed services, you're talking about the player engagement, you're talking about the player account management. And so it presents an immense opportunity to, on the one hand, increase your revenue, but also increase your profitability as most of it is tech. You mentioned correctly that in the Dutch market, it worked really well. And I think it's a function of how the Dutch market transitioned from gray, black to white. We see a similar effect in other European markets. We have a platform customer in the Czech Republic. that is going to go live. And of course, we have a lot of platform customers in Germany waiting to go live once the regulation takes place. For the North American market, it's slightly different because I think capital markets, for the most part, dictate for big operators to own their own platform. And therefore, you see the big guys, DraftKings, FanDuel, BetMGM, owning or having exclusive ownership of the platform. It does give us an opportunity with land-based operators going online for the first time. And we're in various discussions with some of these. And it also gives us an opportunity for some of the operators that are transitioning from a gray slash black market to a white market where their platform is not certified for the white market, and they'll be looking for a platform that can carry them through the white market, or at least the licensed market. And so it gives us an opportunity to actually own a bigger value of the chain.

Great. Thank you. Appreciate that. For my second question, I wanted to ask just about the Italian market entry. You had mentioned, I think, on one of the slides that you intend on going live in the Italian market later on this year. Given that that's the second largest gaming market in Europe, What are your expectations for that market? Would you have like a similar strategy to maybe the UK market, given the similar levels of maturity in that market? But I'm just thinking that could be a pretty big part of your strategy as well going forward. Maybe your thoughts on that.

Yeah, so you're right. I mean, the Italian market is a mature market. From a licensing and certification standpoint, it's slightly different than other markets that we operate in because most of the regulatory burden is on the operators. And therefore, it takes a lot longer for the operators to certify the B2B providers. We've signed a deal with Mikrogaming to deliver our content to them. It's really on them to get all the paperwork and certification ready for launch. We're expecting the launch to come, as we said, in the third quarter. But the approach in the Italian market is similar to the UK market, as you mentioned, is to sell content. And therefore, going back to Neil's question, localized content becomes really important because We don't typically produce content or we don't produce proprietary content for every market that we're in, and therefore partner-exclusive studios become important in these markets where we can get, you know, tailored content for these markets that will resonate well with the players in that market.

Perfect. Appreciate all the color. Congrats on the quarter, guys. I'll pass it on. Thanks, Adir.

Thanks, Adir.

Your next question comes from the line of Sid Billarwary from Comarch Security. Your line is open.

Hey, guys. Thanks for taking my question. Maybe if you can talk about some of the specifics regarding the regulatory hurdles you're facing on closing the SPID acquisition. I know you guys are working towards it, and hopefully it should be closed by Q3 based on your guidance during the call, but Maybe if you can give us some specific as to why it's taking so long, because I think initially when you announced this acquisition, it was supposed to be closed in Q4.

So actually, I'm really happy that you posed the question because I want to set the record straight. And I think that when we did the transaction back in the day, there was some indication from past management that the transaction will close in Q4. But for those of you who are well versed in U.S. regulatory framework, especially as it relates to iGaming and sport betting, you will know that in the U.S., The licensing regime is very, very complex, and it's on a state-by-state level, so every state where we're applying for has its own regulator, whether it's the DGE in New Jersey or the Michigan Gaming Control Board or the Pennsylvania Gaming Control Board or Connecticut. It is well known that Pennsylvania is strict, is very strict, and licensing in Pennsylvania takes anywhere between 12 to 18 months. In Pennsylvania, unlike other jurisdictions, say New Jersey or Michigan, there's no such thing as a transactional waiver. And so in Pennsylvania, you actually have to get fully licensed. And when I say fully licensed, it's all personnel, senior management, so CEO, CFO, COO, myself, and others. And then every entity in the organization from the TOPCO, BRAG Gaming Group, all the way to the R&D Development Company in Malta. With that said, you can imagine that it's taken a long time to get all the paperwork sorted. Someone sent me a screenshot from the Pennsylvania Gaming Control Board yesterday. We've submitted our application to the Pennsylvania Gaming Control Board in August of last year, and we've gone through the process of interviews, discoveries, whatever else they need to do. The process hasn't taken longer than what typically takes for Pennsylvania. I think it's about the expectations that were set to the market. And so, Sid, thank you for doing it. We're of the view that we're almost done. We've done all the interviews. We've submitted all the documents that have been sitting on the Pennsylvania Gaming Control website. personnel for approval and to be sent to the board. We're hoping to hear back from them and to be put on the agenda for the May 18th meeting. And if we are on the May 18th meeting and we get the license, then we'll be fully ready to close the SPIN transaction. So I appreciate the question. I think it's good to set the record straight on that.

Okay. Okay. Great. Thanks, Adam. Thanks for the call. That's really helpful. And then, you know, just in terms of your, you know, TAM slide here, I guess back half of the year is more weighted towards, like, the growth will largely be driven by North America, Italy, as well as these new market launches that you talked about during the 3rd of March. But just talking about the first half here, can you maybe talk about if that's going to be driven largely by the U.K. and maybe... if you have some initiatives going on there to uh sort of have some new launches in the uk market and maybe just talking about netherlands or how's the netherlands performing i know the last few quarters has been really strong um so if you can get some color on that that'd be great yeah so i think that the the answer is well the the dutch market has been performing really really well for two quarters and then it's pretty much gone live in q4 of 21 and it continues to perform really well in in q1 of 22.

As the Dutch market expands, and when I say expands, as the regulators issue more and more B2C licenses, we are actually onboarding more and more customers. And so proportionally, we feel that we're still a very big chunk of the market, and I think about 20% of the gaming market in terms of the GGR. It has been a very good launch, and we've taken what we learned from that market and we're applying it to other markets. So we've launched in the Czech Republic, and it's been going quite well. I mean, the UK market is different, as we discussed earlier from someone else's question. It's a mature market, so the opportunity for PAM and iGany platform are more rare. And so we're doing a content first approach in that market. And it's very similar to the Italian market. And so I think that the growth that you've seen so far comes from the new markets that we've entered in 2021, the Dutch market, the Czech market, some UK markets. And the growth that will continue in 2022 and on to 2023, you'll see growth in the North American market, Ontario market, B.C. market, and, of course, the U.S. once we close the spin transaction and get the licenses and the certifications to go live.

Okay, that's a great thing. And just one last one from you. How is the search going for our CEO here? Any updates or progress you share on that front?

So, based on the latest information that I have from our chairman, the search is almost done. I think that they zoomed in on, you know, the top candidates, and it's just a matter of agreeing or negotiating on terms. Based on what Paul Godfrey had said to me, it will be done this month.

Okay. Okay, great. Thanks, Alan. Thanks for the comment. That's it. I'll pass it on. Thanks. Thank you.

Your next question comes from the line of Lisa Thompson from Zach's Investment Research. Your line is open.

Good morning. Hi, Lisa. Hi there. So I have a few questions about, first off, SPIN, right? From the date of May 18th to how long is it going to take for you to start booking revenues from SPIN?

Ronan, in terms of, Lisa, do you refer to the closing of the transaction or in terms of the accounting?

Well, you said that you were trying to get on the agenda for May 18th, right? If that happens, how long does it take from that date to start showing spin revenues?

I understand. So Ronan will correct me if I'm wrong, but there is revenue in spin already. And so assuming that we're on the agenda for the May 18th and we close this month, we'll start generating revenue as broad from SPIN on day one because that revenue will become broad revenue.

Yeah. Okay. And then what happens after that as far as rolling it out?

So the plan for us, we've been working closely with SPIN since we signed the deal. We've gotten our platform certified, or we're working on getting the platform certified by the regulators and the lab, whether it's the DGE or GLI. And then, of course, getting our content on their RGS and their content on our RGS so we can upsell and cross-sell to their existing customers, which are the biggest U.S. operators, you know, the DraftKings, the FanDuel, the BetMGM, the RSI's of the world. And so once we close the transaction and we're one of the same, you will see cross-selling and upselling of our technology and our content to the SPIN customers.

Okay. Sounds good. Ronan, so you say that Q2 is typically down 5% sequentially. Does the SPIN closing or any other factors change that this year? No.

No, Lisa. We assume that when SPIN will close, we assume the 31st of May was the latest that we could assume of. It doesn't affect the SPIN one specifically, the seasonality we applied for the main business. But yeah, we normally see Q2, Q3 slightly lower than the quarters of the 1st and the 4th. And SPIN, there's no change in our assumptions for SPIN revenue, consolidated effectively for the 1st of June.

Okay, great. And I was didn't really get to read the whole MD&A yet. But I was shocked to see that Netherlands was almost half of revenues. Is there any differences in gross margin between the geographies? Or is everyone pretty much the same?

No, no. So, first of all, it's a good question. So, we are making better margins in territories or in states or in countries where we're rolling our PAM and managed services. This makes a lot of sense because when we're distributing our content and also we're leveraging our technology and our services, we can increase our... part of our wallet from a customer and actually increase our margin. As you know, PAM and RAN services have no cost of sale. Also, our proprietary content doesn't have any cost of sale. So that makes a lot of sense. On other countries, as I mentioned, if we see UK, and we're going to be in Italy in the next few months, and other markets we're selling only aggregating content or third-party or RGS content, definitely there is a difference in your margin perspective. So if we look at the 2022 forecast, what we actually budget internally, we have new rollout of PAM customers in Netherlands and other markets in Europe. And in Germany, we have as well. So I know Germany hasn't been licensed yet, but the more platform we have out there, especially in Europe, we're already familiar with certified platform. We're using one particular license and localizing everything we're operating. We can increase the leverage significantly. Having said that, coming with exclusive content, as we're building with our Atomic Slot and our Wall Street studios, it's also a game changer because it's not only we're getting better margins, the quality of the game is proven to be top of the scale, as we're saying. So it's a combination of the two. It's not one against the other. It's both. Of course, when we have a play account management customer, there is some kind of logic to push our content as well. We have a relationship with those customers. We're running the operation for them. So it makes a lot of sense. So it all adds on as one after another, one plus one plus one plus one. Eventually, there are more than one, five, or six. That's the concept.

Okay. Sounds complicated. And you stated what your growth margin goals were. What do you think you can get to by the fourth quarter of this year?

So... So we indicated in 2024 we're going to be 60% gross profit margin and about 25% of adjusted EBITDA. If you look at this quarter, we finished around 52% and 50% of adjusted EBITDA. I don't think that – I think that by the end of the year, we're aiming towards the 55-ish from perception of gross profit. Again, when we're rolling more of our gains, we have more customers like the U.S. customers to roll our gains. we believe we can push that. Currently, it's quite low, 3%, 4% of our revenue. Also, when we have rollout of those play accounts, management customers, which it's the same question I answered before, we're going to see improvement in margins. It's going to be more towards the third quarter and fourth quarter, and we might reach the 55-ish. And then, when we're going to have, in one of the slides, again, it presented about the game rollout, when we have 12 games proprietary in Europe and in the U.S., so 24 together. Next year, we're going to do even a double So what's going to happen, most proprietary content will push even further up. So we're going to get to the 57, 58. That's how we're actually building the building blocks of our gross profit margin. With the gross profit margin, with increase of revenue projection, your adjusted EBITDA will automatically move from the 50% to the 25%. Because we're leveraging. We have enough. Everything is built in-house. We have the content. We have the play account manager. We have the managed services. And we have the entire management already and the entire organization built in. So the operation cost will remain relatively flat, growing slightly higher, but then the scalability of the business will be very well presented.

All right, great. Thank you so much for that. That's all my questions. Thank you, Lisa.

And there are no further questions at this time. Mr. Yanib Spielberg, I turn the call back over to you for some closing remarks.

Thank you, everyone. I'd like to thank everyone that joined the call, and we'll see you again in our second quarter.

This concludes today's conference call. Thank you for your participation. You may now disconnect.