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spk06: Ladies and gentlemen, thank you for standing by. My name is Sherrell, and I will be your conference operator today. At this time, I would like to welcome everyone to the BRAG Gaming Group 2Q23 earnings 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 would like to ask a question during this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the call over to Yaniv Spielberg, Chief Strategy Officer. Please go ahead.
spk09: Thank you, operator. Good morning, everyone, and thank you for joining our second quarter 2023 earnings conference call. I'm Yaniv Spielberg, Chief Strategy Officer for Broad Gaming Group. I'll be hosting today's call alongside my colleagues, CEO Yaniv Sherman, will comment on our second quarter performance, and Renan Kanur, our CFO, will review and discuss our second quarter financial results. If you have not already done so, you can follow our earnings call presentation from our website at investors.brag.group. Again, that's investors with an S, .brag.group, in the section called Latest Presentation. On this call, we'll review Brag's financial and operating results for the second quarter of 2023, Following our prepared remarks, we'll open the conference call to a question and answer period. I'll start the call with some brief questionnaire remarks regarding certain statements that may be made on this call. Certain statements made on this conference call and our responses to various questions may constitute forward-looking information or future-oriented financial information within the meaning of applicable securities law. Statements about expected growth, prospective results, strategic outlooks, and financial and operational expectations, opportunities, and projections rely on a number of assumptions concerning future events, including market and economic conditions, business prospects or opportunities, future plans and strategies, technological developments and anticipated events, trends and regulatory changes that may affect the corporation and its subsidiaries and their respective customer industries. While we believe these assumptions to be reasonable, they're subject to a number of risks, uncertainties, and other factors, many of which are outside of company's control and which could cause the actual results, performance, or achievement of the company to be materially different. There can be no assurances that these assumptions or estimates are accurate or that any of these expectations will prove accurate. For a complete discussion of these factors, please refer to our recently filed press release and other publicly available disclosure. I'd like to turn the call now to Yaniv Sherman. Yaniv?
spk11: Good morning. I'm Yaniv Sherman, Bragg CEO. Welcome to our 2023 second quarter presentation. I'm going to touch a few notable highlights from our first half of the year, and then I'll let Ronen take you through our financial KPI in more detail. Turning to slide four, another busy quarter behind us in which we continue to execute our strategic vision for Bragg. We've been expanding Bragg's top-tier partner network across Europe with landmark deals signed and new markets launched. Our Dutch dominance was complemented by a successful rollout in Switzerland. In parallel, we are progressing our content production with Bragg Studios taking its game development capabilities up a notch and producing hit titles in growing cadence. We're delivering more differentiated content that started resonating across our different partners and markets and receiving recognition for it, such as our recent rollout of Devil's Lock. We also marked the launch of new games across our North American states, namely Pennsylvania, Michigan, Connecticut, and New Jersey. I'll share more details around each one of these highlights shortly. I'd like to turn this now to a woman who will review our financial performance.
spk07: Thank you Yaniv and good morning everyone. I'll begin my comments on slide six. As Yaniv indicated earlier, the second quarter of 2023 was another successful step in our digital journey. We continue to execute against our mission and strategic plan, and we can see that in our financial and operational results. In the second quarter, total revenue were up by 18.9% year over year to 24.7 million euros, continuing our growth momentum since the third quarter of 2021. The growth was mainly derived organically through our existing customer base, launched in 2021 and 2022. In particular, the Kpam and 10K solution customers in the Netherlands, content offering, and a solid revenue performance from Wall Street gaming studio customers. From an operational KPI perspective, total wagering generated by games and content offered by the group during the quarter was up by 31.2% from the same period in the previous year to 5.5 billion euros. As you can see from the wagering chart on the right-hand side, BRAC saw an ongoing positive trajectory from the third quarter of 2021, which demonstrates the ability to transform and diversify operations. Gross profit for the quarter increased by 18.9% to 13.8 million euros, with gross profit margin remain at 55.9% level. The gross profit is primarily the result of increased revenue performance in all content products, while recording slightly lower PAM and managed services revenues. Adjusted EBITDA for the quarter was up 51.3% to 4.7 million euros, with adjusted EBITDA margin reaching 19.2%, an improvement of 410 base points from the same period in the previous year. The change in margin is mainly the result of scaling revenue while maintaining controlled investment in salaries and subcontractors costs as part of the company's strategy to expand software development, product, and senior management functions. Operating income for the quarter amounted to 1.3 million euros, an improvement of about half a million euros from the previous year, and net income also increased by 0.3 million euros to 0.4 million. We are pleased with our current trading, and we are updating our 2023 revenue guidance range to 95 to 97 million, and adjusted EBITDA range to 15.5 to 16.5 million euros. As you can see on slide seven, the gross profit margin continuing a growing trajectory since the third quarter of 2021 due to the shift in BRAC product mix. We continue to executing as our missions and strategic plan, and we are scaling up our business in line with both our revenue growth and continued movement in product mix, as indicated on the right-hand side of the slide. Product mix has changed noticeably since third quarter of 2021. While the revenue is scaling, it is also trending towards proprietary content, PAM, and turnkey solutions, by leading to improvement in gross profit margins and overall profitability. Gross profit increased by 18.9% to 13.8 million, with margin stable from previous year to 55.9%, while increasing by 240 base points from the previous quarter. The second quarter revenue growth was driven mainly by the Dutch Palm and Turnkey customers, together with the outperformance of our content offering, which is Bragg Studios, powered by Bragg, and Bragg Hub aggregated content. In the second quarter, content revenue segment increased to 18.9 million euros and represented 76.6% of total revenue compared to 69.3% in the previous year, highlighting BRAC's positive execution of content strategy. Proprietary content deployment is positively progressing both in the US and EU markets by increasing both distribution and games performance. And as Yaniv indicated, we have recently marked another key milestone, with the launch of a newest tech stack in Pennsylvania with our fourth U.S. state to date, with launching another strategic partner in Michigan and Connecticut. As we indicated in our previous quarters, we are targeting gross profit margin improvement to exceed 60% by the full year of 2025, mainly by increasing the proportion of revenue, which comes from proprietary content, PAM, and 10-key solutions. Moving to slide eight, adjusted EBITDA amounted to 4.7 million euros against an operating income of 1.3 million. The gap was driven by the falling non-cash and exceptional items. Depreciation amortization, the increase of intangible amortization as part of WASDRIK and SPIN acquisition in June 2021 and June 2022, respectively, and the increase in capital as of the development costs over the period. Share best payment, a reduction in the charge for awards granted to teams, including senior management, during the period composed of DSUs, RSUs, and share options. Exception cost, which is mainly associated with the discounted contracted relationship of several employees. And gain of remeasurement of deferred consideration, its cost mainly associated with acquisition of SPIN in June 2022 on the total outstanding deferred liability. Moving to slide nine. As you see on the slide, we ended the second quarter with cash balance of 10.7 million euros compared to 11.3 million euros at the beginning of the year, with outstanding liability of $7 million of convertible security. We expect to continue exercising the right to pay down the existing convertible security subject to ongoing management assessment. During the second quarter and post-quarter end, the company made cash repayment of $2 million leaving an outstanding balance of $6 million as of today's date. Our net working capital at the end of June 2023 is 8.3 million euros, excluding deferred consideration, compared to 6.6 million euros at the beginning of the year. From a cash flow perspective, for the six months ended June 30, 2023, a total of 5.2 million euros generated from operating activities with underlying performance reaching 7.4 million euros offset by negative movement working capital and income taxes of 2.2 million. A total of 3.9 million euros invested in intangible assets, mainly related to the capitalization of software development costs in the period. And in a total of 1.3 million euros used to finance activities, which is predominantly related to repayment of loans in relation to the convertible security in the total of 0.9 million euros. Looking forward, management are projecting a positive free cash flow from operations while there is no capitalist of technology debt required in the business. In addition, management is confident there are no current financing or debt requirements needs of the business. Improving networking capital position and free cash are primary objectives, and we will explain that in the next slide. I would like to take this opportunity to reiterate BRAC's clear plan to further improve financial performance by increasing gross profit and adjusted EBITDA margins to enhance networking capital. There are three fundamentals. Revenue, diversifying revenue mix, focusing on distribution of in-house studio content, and maintaining a profitable relationship with our exclusive partners. U.S. acquisitions and exclusive partner studios support accelerated U.S. market penetration and strength our long-term relationship with our Tier 1 customers in various markets and positioning Bragg as a must-have iGaming content and tech solution for our partners. From a margin perspective, improving gross profit margin by optimizing product mix, leveraging our PAM, aggregated and exclusive content. Optimizing investment in tech and people, ensuring efficient revenue growth. Capitalizing on synergies to lower cost base and utilizing global operational functions. And committing to our long-term strategy of exceeding 60% gross profit and 25% of adjusted EBITDA margins by 2025. And for net working capital, strong performance leading to increase free cash flow, optimize capex and operation expenditure, exploring options to credit facility or line of credit to enhance working capital position, and continue to utilize free cash from operation to repay convertible security to avoid further dilution. With that, I would like to turn back to Yaniv to continue with our business operational update.
spk11: Thanks, Lenin. In slide 12, you can see our recent progress, further expanding Bragg's partner network with new tier one contracts and relationships. These deals give us access in multiple markets and brand portfolios in one go, considerably extending our addressable market and distribution. Our ability to swiftly integrate and certify our tech and products has proven to be a competitive edge time and time again, taking Bragg to the next level. The landmark contracts and launches with Fluthers, PokerStars, and Ajarabet. The global deal with 888 William Hill for their full brand portfolio are just two examples of how our near and long-term strategy is being pursued with local and global partners, a stepping stone in our growth and ability to continue to scale the business going forward. Moving to slide 13, through our distribution, you can now see the cumulative effect of proprietary title releases. which we expect to accelerate in the second half of the year and into the next. This already has a demonstrable effect on margin, as our proprietary content portion of gross profit is consistently increasing. Bragg Studios are continuing to make great progress in taking a larger share of wallets across different customers. Our Bragg-developed Fuse engagement platform, coupled with some of our best-performing titles like For the Loot and Big Roar, has been powering much of this activity. A wide range of competitions and promotions has resulted in increased engagement and game stickiness with players, and we're only getting started with this exciting product portfolio. Moving on to slide 14, I've presented our content-led strategy in the past, and we are starting to see the results of our persistent investment into it. Establishing a high-end game production factory is a monumental task, basically setting up a new business within the existing one. The core competency developed in Bragg Studios to adapt land-based titles and bring them online is beginning to bear fruit. On the back, proprietary titles coupled with exclusive relationships with the likes of King Show Games, Blueberry, Incredible Technologies, and more. The production and rollout of Devil's Lock, a hit game developed in partnership with Blueberry, is a great example. The game was very well received by players on both sides of the Atlantic. and mark BRAG's foray into the Alias rankings in the top 10 new title for June in the US. This is an important milestone as it provides BRAG studios with credentials and data-backed track record that are pivotal in a competitive landscape. Our content roadmap includes several more land-based titles currently in development as we look to leverage on this early success. Turning to slide 15, In past presentations, I've outlined the importance of gaining access to new territories, monetizing our superior tech and products with competitive time to market. The Dutch market is a great example as we became the leading online platform through our successful partnerships, driven by our PAM and turnkey proposition. As you can see from this representation of our growing footprint, we've recently marked another successful rollout in the Swiss market, this time behind our proprietary and exclusive content, signing deals and integrating with almost 100% of the market's operators in a relatively short timeframe. This naturally complements our ongoing rollout in North America, and we're looking to run this playbook in other major markets, such as Italy, the UK, and Latin America, just to name a few. It's also important to note that we're using our entire product portfolio, not just GAINS, to gain access to growth markets, aiming to further diversify our revenue sources. This will continue to be a major focus for us to expand BRAG's global distribution and penetration. In my last slide, I wanted to leave you with some key points for the first half of 2023, as we're already deep into the second half of the year and into 2024. A record first half of BRAG on both revenue and adjusted EBITDA, including achieving positive net income. We're utilizing free cash flow to proactively address our convertible security and maximize shareholder value going forward. Management is focused on leveraging our 2023 momentum to continue executing against our strategy, namely US deployment and proprietary revenues into 2024. Commercial relationship negotiations are in flight with the aim of extending and expanding existing key partnerships. And we're pleased with current trading updating our 2023 guidance for revenues and adjusted EBITDA. I wanted to thank you all for attending this presentation. Just before we take your questions, I would like to acknowledge the latest natural disaster which occurred in Slovenia last week. Home to hundreds of braggers, they're now trying to put their lives back on track, and we support them and their families during these efforts. We'll be happy to take any questions you may have at this point.
spk03: Thank you.
spk06: 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. We will pause for just a moment to compile the Q&A rosters. Your first question comes from the line of Gianluca Tucci from Haywood Securities. Your line is now open.
spk10: Hi, good morning guys and congrats on a strong quarter. I was just wondering firstly, can you extrapolate the growth for us? Is it mainly coming from new geographies or is it new customer logos in existing markets?
spk11: It's a combination. We've seen actually good traction with existing customers, but we're also seeing New customers, we mentioned the Swiss market is one market that we've been able to get to market very quickly from contract to deployment phases. We've actually parallel processed some of these processes and efforts. So we've been able to enjoy the effect. That's just one example. And generally speaking, we've been very focused on shortening our development, commercial development and deployment cycles. So this is a combination of logos or customers from the 2021 cohort, but also newer customers on the back of 22 and even a few from early 23, mostly around content that are starting to show the effect towards the back of the first half. But it is a combination of new and legacy customers.
spk10: That's great. Thanks, Genevieve. And on that point, in terms of product development, it seems like you're on a good cadence here. of title development. How's the roadmap for the second half in terms of new content look like?
spk11: Oh, we're very excited about the second half of the year and into 24. We've been very focused over the past, I'd say nine or 10 months in streamlining, further streamlining the content production. We've signed some very interesting partnerships. We have great assets. um so we're we're on track of hitting our even exceeding our game development deployment roadmap for this year uh and the first half of next year is also looking very exciting both for the us focused content and the global content and actually a few of the titles have been deployed in several markets but we're sort of also focusing some of the content development on specific markets and partnerships now that the data is starting to sort of accumulate and we're able to craft the games based on specific operator or market preferences. So you'll be seeing more versions of successful games. That's exactly what we were aiming for in terms of our content deployment strategy. But we have resourced up and invested greatly over the last year, so we're starting to see the results there. We'll probably stabilize the number of titles produced and then distribute them on a more ongoing basis into 24.
spk10: Awesome. Thanks, Genevieve. And just lastly from our end, in your press release, it talks about optimizing key customer partnerships. What does that exactly mean, if you can help us extrapolate that?
spk11: Well, it's a few things. Naturally, with some of the markets that we ventured into, like the Dutch market, like, well, it's not the Swiss, which is relatively new, but mostly the Dutch market and other European and operator relationships, these contracts or relationships are maturing. They're moving past the launch, the initial market share grab going into two, three, even four years in. and we're now restructuring or renegotiating some of them with the aim of extending and expanding these key relationships. We naturally have a few. Some of them are in flight, so I can't comment directly, but some of them are good examples like Flutter, our contracts with PokerStars and Jarbet, and our new contract with 888, William Hill, are good examples of existing relationships that were essentially extended and expanded, so we can now access more brands in more markets and also offer more products like FUSE and additional titles and content partners into one contract touchpoint. And that's our aim. We want to make sure that every contract that we sign maximizes the effect. It's part of the operational efficiency that On-Hem discussed, sign once and deploy many. But that's just one example. So we're sort of in the mid-flight of a few key partnership negotiations, and we'll hope to be updating further on some of them.
spk10: Okay, that's great color. Thank you, guys. And again, congrats on a great quarter. Thanks. Thanks, Anuka.
spk06: Your next question comes from the line of Matthew Lee with Connacore Genuity. Your line is open.
spk12: Hey, morning, guys. So I want to ask you about the confidence around some of your partnerships in Europe, particularly just given some of the M&A that's occurred in those markets. How are you feeling about the long-term opportunity around those?
spk11: I think that we've naturally been focusing on some of these conversations and relationships in the near past. We've been very focused on the dialogues. I can say that they've been going very well. I think that the overall target for everyone is to make sure that you sustain momentum. I think we've proven ourselves as a good partner and a platform and a team that you can rely on and ride with and really create an impact in markets. Central European markets are a good example of that. And I think that the focus right now is how do we preserve that momentum and help our partners compete and grow further in the near-ending, more long-term. And I think that's the part of what my previous answer around key partnerships is. Some of these contracts are getting into the second, third, or fourth year, and that's exactly our focus is prolonging them. I think by now we have... We have good relationships, and I think all of these conversations are held with a very good degree of good faith and the desire to preserve momentum.
spk12: Okay, right. That's the color. And then in terms of margins, you know, 19% on EBITDA was really much stronger than we expected. Now, I know some of that's due to mixed shift, but, you know, how sustainable is that high teen margin for 2023? And then maybe, you know, without getting into guidance, do you expect that to continue to gain strength in 2024?
spk11: Well, if you're referring to the 19% EBITDA margin, then our goal is definitely to maintain that level. And as Lenin outlined, our strategic goal is to exceed the 25% and 60% gross profit threshold that we set. Initially, we set it to 24. We want to actually exceed that to be more profitable into 25 and beyond. So that's definitely something in a very near-term focus, and we'll be looking to preserve that, naturally balance our growth needs. And if we need to invest specifically around opportunities, we can do that. But we also want to demonstrate our ability to streamline and enjoy some of the synergies that we now have as a global organization. So that's definitely something we're looking to further expand on.
spk12: All right, fair enough. And then lastly, Kamath, you know, just in terms of the U.S. market, can you just perhaps provide some updates into your progress there or, you know, even more preliminarily, if you've had any success with your games in that market?
spk11: Well, first of all, we're progressing well. One of the key points around are the traits of the American market. The U.S. market is that once you're in, the entry barrier is quite high, and we're definitely in. We're progressing. We're pushing very hard. This is naturally also dependent on our partners, so we have to work with them, and some of them have, in some cases, unforeseen circumstances, and we work with them to expedite some of the distribution. But so far, we've been working towards plans. We actually launched in Pennsylvania slightly ahead of schedule, and now we're looking to expand in each one of the states, each one of the four gaming states that we're live in. and to further expand both in terms of operators and share of wallet. In terms of the games, as I've outlined in my presentation, we've had some good start to rollout and then an even better one with some of the recent titles. So we've seen good success around some of our titles in the U.S., some of our exclusive relationships like Devil's Lock was mentioned, but it's not just that. Some of our proprietary games launched in Michigan. and in New Jersey have seen a good early success that we're now trying to preserve in terms of momentum. But the games are definitely being adopted by players. I think the game development philosophy led by our head of content, Doug Fallon, out of Las Vegas is definitely showing that the direction that we want to go in and land-based games going online has been a great way to capitalize on it. So we're very excited about it, and we're happy with the performance so far.
spk03: All right, thank you. Thanks, Mary.
spk06: Your next question comes from the line of Jordan Bender with Bragg. Your line is open.
spk05: Thanks for taking my question. I guess heading into the NFL season, traditionally more sports betting, but it is a big cross-sell opportunity for some of the the online operators in the united states so what are you seeing in terms of like distribution from the operators as well as yourself and i guess should we expect kind of an uptick in player adoption of your titles versus kind of years past well that's a great question thanks jordan um
spk11: Every year, we think it will be a normal, steady year, and then we start looking to the future, and then we see the development. I think the recent developments in the market, we've had some very exciting news over the past couple of weeks from some of our existing partners and some that we hope will be future partners soon. But I think what manifests itself at this point is, They're all very excited about the upcoming NFL season, but I think what everyone is talking about right now is gaming, predominantly online casino. And I think that was put to the forefront. I think the more successful partners are the ones that have been able to cross-sell, just as you alluded to. I would expect on the back of the new partnerships formed in the market that we'll see an uptick in marketing, but we'll also see, I expect, a more increased effort on product, and player cross-sell into casino. And I think that it's a great time to offer U.S.-focused casino content. I think we'll see much more competition in the market. I'm putting aside any future gaming states, even with the existing states. I think this season, last season was more of a steady state. I think more companies were looking to stabilize their marketing expenditure, I think, with increased competition. We'll see two things, more marketing dollars and more cross-sell because people understand that profitability is tightly coupled with the gaming and sports synergy. That's why we're definitely putting more focus on deploying and improving and streamlining our deployment capabilities in North America. We want to be able to have a steady cadence of U.S.-focused titles going into the NFL season early next year. That's just one of our prime goals. So we can be a good partner and help them and support them in their long-term profitability goals.
spk05: Great. And then on my follow-up, you talked about the margin target of 25% for EBITDA. Should we think about that as kind of a linear track towards that or will there be kind of investment needed or will there be any choppiness that'll get us to that margin target?
spk11: I think right now what we're seeing is that, again, looking into a year, over a year of operation and our sort of revitalized strategy and mission and values, a lot of it is around efficiencies. So we are constantly focusing on streamlining the business and doing more with existing resources. Having said that, what can affect that are only opportunities. If we see opportunity, mostly around content production, either accelerating or creating new partnerships or new types of games, we may elect to focus or put a focused investment into those areas. It may have a near-time effect. In most cases, it's hiring more people in a shorter amount of time. Having said that, the business has ramped up quite significantly over the past, I would say, three years even the last two years and we're now looking at a more stable organization and again this is now optimizing we're still hiring people we're still looking to grow but in a more controlled fashion so we utilize what we have so i would think about this linearly unless there's some specific opportunity that will have a good reason to uh go the other way for a certain amount of time but at this point we're definitely focused on sustaining that trajectory
spk03: Thanks, Neve. Next quarter. Thank you.
spk01: Your next question comes from the line of Edward Engel with Roth Capital Partners.
spk06: Your line is now open.
spk04: Hi. Thanks for taking my question, and again, congrats on the next quarter. You noted in the press release that you're aiming to continue to pay down the convertible note that you have about $6 billion on today. Kind of based on the cadence that you talked about in the press release, it seems like that will be fully repaid sometime maybe in the second quarter of next year. Is that a fair way to think about it?
spk11: That is the current pace and that's, I think, again, barring any assessment or unforeseen events, that would be the linear progress of that process, yes.
spk04: Helpful, thanks. And then if I look at the revenues from the proprietary content segment, it looks like you had a nice uptick. It looks like it's record revenues for you there in that segment. It also looks like that was mostly from outside the U.S. So I just want to kind of get some more information on where that proprietary content is coming from today. And then at what point do you have the distribution that you think you need in the U.S. to really start to ramp revenue on the proprietary content side in the U.S.? Thanks.
spk11: Well, first of all, the European portion of proprietary revenue has grown significantly, but it's only because it's growing faster. We've enjoyed good progress. Nominally, the new proprietary content grew on both sides. So we're seeing more revenues with proprietary content, both in the U.S. and on our new proprietary content, the Atomic Slot Lab and Wild Streak. And in Europe, that content, both proprietary and exclusive content, is also enjoying rapid growth. So it's sort of two rabbits facing each other in that regard. That's the reason why we're seeing faster or more proportionate growth on the European side. On the U.S. side, satisfactory distribution would be when we have every operator in the market signed up for direct integration. We're not there yet. I think we're already at a situation, as we've explained in the overview that we've just provided, that we have the vast majority or the majority of operators under contract and either integrated into our new tech stack or the existing spin one. So we believe we already have enough distribution to start creating more impact with more titles on the operators. But I think that once we hit that infliction point north of, and it's pretty easy to date top six or seven operators with our new content, if you hit that 90% mark in each one of those states, I think that will be a fantastic achievement that will allow us to really crank up the revenue effect of these games. We're pretty close, but we're not there yet. And we're also looking, besides the actual distribution, we're also looking to deepen those relationships So we can actually deploy more content faster and help the operators monetize those games better. It's not just about deploying the games. It's also creating traction with the players, promotions, all sorts of marketing activities, in some cases, some exclusive efforts and some features that you're building into games that are focused on specific markets, just to name a few things. So it's a bit more complicated than just distribution, but we definitely have enough challenges ahead of us in that regard. We have a lot of runway in the U.S., and I hope that that inflection point sort of towards the back of the year and into the next.
spk03: Great. Thank you for the call.
spk06: Your next question comes from the line of Jack Vander Arde of Maxim Group. Your line is now open.
spk13: Okay, great. Good morning, guys. Solid results. Thanks for taking my questions. So, Yanni, you guys had another strong top-line quarter, slightly raised the 2023 guide. You launched 30 new games in the first half. Plants launched another 40 in the second half. It seems like your implied second-half outlook is rather conservative for all this momentum. Are there any notable headwinds that you're being cautious of in particular that you'd speak to?
spk11: Well, I think that we've sort of touched on it with some key partnerships discussions that we've been having recently. We've had a long discussion around that. We thought we'd be prudent to take those into considerations while we're assessing the second half of the year. Having said that, we have decided to update our guidance on both revenue and adjusted EBITDA, considering or including an assessment of the potential effect there. So we need to balance those two things out. We see good momentum in the first few weeks of the second half. So we're confident in our guidance at this point. But again, we have to take these discussions, some of these discussions into consideration. So we have a line of sight into the outcome of those discussions. And actually, we're aiming to expand and expand those But, again, we wanted to – I would love to have shared more details at this point, but because they're in flight, we'll need to wait a little bit longer. And once we have more information, I'll be able to share it. But that was our balancing between the two, the current momentum and potential new deals that we'll be securing, hopefully, in the near term.
spk13: Okay, great. That's helpful. And then just one more for me. Maybe in terms of ranking your key markets, considering you've only kind of recently entered the U.S. and that will continue to ramp significantly. Dutch market's been your top market. I know in the past, Germany used to be your top performer historically, and that's kind of been on pause. Just maybe as you go forward and things, your recent, I guess, market penetrations and expansions continue to ramp. Just as you look in 2024, 2025, can you just help us understand what you see or envision as your top markets?
spk11: Well, first of all, Bragg has deployed its latest tech stack and content, as you've mentioned, recently, 22 in the U.S., but the spin and wild streets that were acquired and now part of the Bragg family have been operating in the market almost since its inception. So I think we've had a good track record that we've adopted and sort of assimilated into a DNA that we're trying to leverage on. And yes, we have a lot of runway in that market. Looking ahead on the back of our existing top markets, I believe that we have so much runway still besides the U.S. in the U.K., which is still the single biggest. If you break down the U.S. interstate, the U.K. is still the single biggest online regulated market in the world. We're just getting started there. We've seen some great progress with our proprietary content in that market, but we have so much to do there. Italy, the second biggest market, is also a prime target for us, and we want to start seeing progress with content and other products in that market. So I would say that, and then considering our position in the Dutch market and latest license in Sweden, I would definitely look for us to be in 2024, 2025, and beyond that, to have those Western European, Central and Western European high on our market, at least, and further diversify. So it's the UK, it's Italy, it's Sweden. The beauty around these markets is that some of the deals that we've signed, that I've mentioned, like PokerStars and 888, already cover all these markets in one swoop, so we'll be looking to utilize and leverage those new contracts to do exactly that, to be able to develop ones and deploy many. Canada, I think, is another runway. Ontario, again, we've only seen some early success there, but that market's shaping up to be a major North American market, and the other provinces are also higher on our list. And our recent deployment in Mexico and Latin America, I think Brazil has recently regulated sports gaming, sports betting. So main markets there, the top two or three markets in Latin America. So we'll be looking to include each one of these markets, especially around content and content delivery and turnkey services in our longer term, mid and longer term Declining times, we've already had some good initial success in each one of these markets. We've stuck a flag in, and now we need to start expanding our presence in them so we can further diversify. But these would be our top focuses for the next two or three years.
spk13: Okay, excellent. I appreciate the color, and again, solid results. Thanks.
spk03: Thank you.
spk06: Our next question and final question comes from David McPadgen of Cormark Securities. Okay, great.
spk02: Yeah, it was just maybe another question on the gross margin. I'm just wondering what it would be contingent upon to get to the 60%. Is it a matter of just keeping the cost? But I would think that would be more for the EBITDA margin, but... Sorry, did I cut you off?
spk11: Yeah. Yeah, Dave, can you just repeat the question because you're a bit cut off?
spk02: Sorry. What would the, what would it take or what is it contingent upon to achieve the gross margin of 60% that you're looking at to achieve in fiscal 25?
spk03: Ronan, do you want to take that?
spk07: Sure. David, good morning. How are you doing? So, as we indicated in the past, the success to getting 60% and above all depends on how we can grow our revenue, but more importantly, to grow our proprietary content. As you can see in the last couple of quarters, the top part of the bar in slide seven, we're growing not only the nominal value of the revenue, but we're also growing the proprietary content itself. I believe once, as Yaniv indicated, as we're going to be more, how to say, accelerate our revenue in the U.S., and our titles will be accepted well, they already accepted well, but it will be much more distributed through all our network, including the tier one customers and the European and the US side, this 9.7 could be easily 10 to 15%. That will be the differentiator to hit the 60%. Not to mention that we still keep the PAM because PAM and managed services are keeping your margin very high, aggregated content, improvement of the commercials and scalability with customers. So those revenue buckets will also come with better cost of sale or better gross profits. And that will automatically and mathematically, we're just 4% off from the 60%. And I think it's just a matter of a couple of quarters that we're going to be there. We said it two years ago, we're going to be 60% by 2024 and above that by 2025. And I think that's the only items we are focusing on because that's going to bring us higher. And of course, that will also increase our adjusted EBITDA margins Because as Yannick mentioned before, we're investing, but we're not heavily investing, only unless we have particular opportunities. So we're keeping our costs quite controlled. And hence, we managed to achieve 19% of adjusted EBITDA this quarter, 70% last quarter, and we're progressing on that side as well.
spk02: Okay. And then just a question on the Georgian market. Is that a new market for you guys? I'm just wondering how optimistic you are about that market.
spk11: It is a new market for us in terms of our content and our products. The Georgian market has proven to be quite a sizable. It's not a tier one European or Asian market, but it's definitely a market punching above its weight class over the last few years. It's a little addressable market there. And I think it was twofold. One is we're partnering with a market leader, a job that is a clear market leader and it's always good to hit the ground when you're riding the biggest horse. And it was another milestone in our relationship with the Flutter group. Again, to my point around single-point relationships that sort of, they're not duplicated because in some cases you need to do a little bit more overhead and deployment, but generally speaking, accessing the family, some of the Tier 1 operators are now a family of brands and markets, and this is a good example between the JARBET and PokerStars to building that relationship and start deploying our content more frequently across more of these brands. So our JARBET has definitely been a great, it's been in the works for quite some time, and we were very excited to be launching in that market and also about every short timeframe.
spk03: Okay. All right. Thanks, guys.
spk06: I will now turn the call back over to Chief Strategy Officer Yanis Bilbo for closing remarks.
spk08: I would like to thank all of you guys for joining our call today, and we look forward to hosting you on our next call for our Q3 of 2023. Have a great day, everybody.
spk06: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
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