Bragg Gaming Group Inc.

Good morning, everyone. My name is Sarah, and thank you for joining the third quarter of 2024 Earnings Conference Call for Bragg Gaming Group. I'll shortly hand the call over to Bragg Gaming Group CEO, Natash Mazzi, who will comment on Bragg's third quarter performance and Bragg's interim CFO, Robbie Bressler, who will review and discuss the company's third quarter financial results. I would like to remind you, if you are not already doing so, that you can follow this earnings call presentation live from Bragg's investor website at investors.bragg.group. That's investors plural with an S. Then go to the events and presentation section. On this call, there will be a review of Bragg's financial and operating results for the third quarter of 2024. Following these prepared remarks, the conference call will be opened to a question and answer period. I would like to remind you that certain statements made on this conference call and the responses to various questions may constitute forward-looking information or future-oriented financial information within the meaning of applicable securities laws. If you have not already done so, please familiarize yourself with Bragg's full explanation of these risk factors, available on the second slide of the Bragg Gaming Group third quarter 2024 earnings presentation. titled Forward Looking Statements, which is published on the website at investors.bragg.group. This information is also available in Bragg's recently filed third quarter earnings press release and other publicly available disclosures. I'd like to turn the call now to Mateusz Mazzi, Chief Executive Officer of Bragg.

Good morning, everyone. My name is Mateusz Mazzi. I'm the chairman and CEO of Bragg. For this call today, I'll start with an update on the strategic review process that has been running. Then we'll go through the third quarter operational highlights, including our key launches and latest news. Then I'll pass the line to Robbie, who will present our latest financial results. When Robbie has taken you through the numbers, I'll give you an update on the positive change I have been implementing since returning as both chair of the board and CEO a little over a year ago. And after that, Robbie and I would be happy to answer any questions you may have. I'll start with today's announcement that the board has concluded the strategic review process that we announced earlier this year. In March 2024, the company announced the formation of a special committee comprised solely of independent members of the board. to conduct a review of strategic alternatives for maximizing shareholder value. This committee, together with its advisors, Opel Capital and Blake Castles and Graydon, evaluated a wide range of strategic alternatives for maximizing shareholder value, including a potential sale or merger of the company. The committee held discussions with over 70 potential counterparties. They executed non-disclosure agreements and shared confidential information with over 25 counterparties. And they received multiple non-binding proposals. After careful consideration, the special committee and the board unanimously determined that none of the proposals received reflect the company's intrinsic value or current and projected financial performance. As a result, the board has elected to conclude its review and has disbanded the special committee. Although the process has now concluded, the board will continue to be open to and consider all opportunities for enhancing shareholder value. We remain extremely confident about the company's business plan, operating strategy and financial prospects. Turning now to slide five, in the third quarter, I am pleased to announce that we delivered meaningful growth across all of our key performance indicators, delivering 16% top line growth year over year, with gross profits up 18% and adjusted EBITDA up 7%. We continue to grow our position as a supplier of online casino games in the United States, something which has been a key focus for BRAG over 2024, and something I'm pleased to report that we're capitalizing on. Notably in the U.S., we have been growing revenues from games, which come from our proprietary content studios, Wild Street Gaming, Atomic Slot Lab, and Indigo Magic at a particularly accelerated rate. These are high-margin products, of which Bragg is the IP owner, the developer, the technology owner, and the distributor. Outside of the U.S., as well as our exclusive content business, We continue to grow our PAM, that's player account management technology, and turnkey solution business. During the third quarter, we launched our sixth PAM customer in the Netherlands with the iconic Hard Rock Casino brand in a turnkey deal, which includes our product delivery, content aggregation, and managed services. It's been great to support Hard Rock in their Dutch expansion, and we're looking forward to a long and fruitful relationship. Also in the Dutch market, we successfully launched the Canby Sportsbook with our valued partner 711.nl, adding a new product vertical and further cementing our great relationship with the Dutch licensed operator. During the third quarter, we were also busy working on developing and implementing solutions to the new regulatory requirements in the Netherlands, which include the introduction of monthly deposit limits, which came into effect on October 1st. To date, the impact of these new restrictions has broadly been in line with our expectations. The Netherlands continues to be an important market for us, and we continue to work with our operator partners in the jurisdiction to further optimize and refine our products in response to this new regulatory environment. Throughout the third quarter, we continue to grow our content distribution reach in the US market, building existing relationships with our operator partners and expanding into new states. Third quarter examples include the expansion of our existing agreement with Caesars Entertainment to include provision of exclusive content into Pennsylvania, as well as into Ontario and Canada. Our new content launch with Fangio in Pennsylvania as well as expanding our relationship with Bet365 to include New Jersey. Now I'm going to turn the line over to Robby to discuss our financial results. Robby?

Thank you, Matt, and good morning to everybody. I will now cover our financial results for the third quarter of 2024. Total revenue for the third quarter was 26.2 million euro, another record high up 15.9% compared to Q3 2023. Additionally, Q3 2024 gross profits grew by 18% to €14 million, with gross profit margin rising by 99 basis points to 53.5%. Adjusted EBITDA for the quarter also grew by 7% to €4.1 million, our third consecutive sequential quarter of growth. Our adjusted EBITDA margin was 15.6%, slightly lower than the 16.9%, We reported in the same period last year as expected. A strong quarter and record growth for the group was no more exemplified than in our U.S. numbers, where growth in content distribution helped drive a 40% increase in proprietary content revenue globally compared to the third quarter of last year. We reiterate our full-year revenue and adjusted EBITDA guidance at $102. to 109 million euro and 15.2 to 18.5 million euro respectively, noting that we are currently tracking to the lower end of the guidance ranges provided. Moving on to our product mix, as noted on slide eight in the third quarter of 2024, revenue from PAM and turnkey operations was 5.7 million euro, representing 21.8% of total revenue compared to 4.6 million representing 20.6% of total revenue in the third quarter of last year. Total content revenue was €20.5 million in the third quarter of 2024, representing 78.2% of total revenue, while in the third quarter of 2023, total content revenue was 17.9%, representing 79.4% of total revenue. Turning to the balance sheet, as of September 30th, 2024, we held 11.6 million Euro in cash and cash equivalents. During the quarter, we fully settled the remaining balance of the LEND convertible debt in cash. Our only remaining debt facility is a 7 million USD secured promissory note due in April of 2025. Networking capital excluding deferred consideration and promissory note at the end of September 30th, 2024 amounted to 11.3 million Euro compared to €5.1 million at the beginning of the year. Before handing the call back to Matt, I would like to make a few comments on our 2025 outlook. FRAG is actively advancing a robust pipeline of opportunities that is anticipated to drive strong momentum as it enters 2025. The outlook for 2025 remains positive, with expectations of sustained double-digit top-line growth

expanding bottom line margins and increased operational leverage further strengthening bragg's position in the market i will now hand over the call back to matt to continue with commentary on strategy and operations thank you robbie now in the next slides i want to give you a snapshot of our progress since i became ceo of bragg approximately 14 months ago and how our products and technology stand out from the competition throughout my tenure as ceo I've wanted to grow Bragg's existing business in a meaningful way. And in practical terms, this was about adding to our strong foundations with a number of changes designed to fortify and focus on our operations. Changes which will unlock the value of our investments in technology, people, and relationships in order to deliver profitability and solidify our position as a one-stop solution capitalizing on the expansion of the iGaming markets and partnering with household names in regulated and regulating jurisdictions. In line with this philosophy, we've taken action in a number of areas. Firstly, we've strengthened our executive leadership team to include experienced industry experts at all levels, and it is this strengthened team that has already begun to deliver the kind of results that will grow BRAG for the long term. And as I mentioned earlier, we're already beginning to see the results of these changes in the United States, a key focus area for BRAG this year and going forward. We've built a robust pipeline of opportunities, not only for our proprietary and third-party exclusive online content, but also for our PAM, HUB, FUSE technology, and turnkey solutions. From a commercial perspective, we've realigned our commercial strategy to regionally focused approach with dedicated teams for North America, LATAM, and Europe. Keeping with the commercial team, we have positioned ourselves to take advantage of the forthcoming launch of the regulated market in Brazil from January 1st, 2025, preparing our full technology suite, including our PAM, HUB, and FUSE for the requirements of that jurisdiction developing localized content, as well as opening our first office in Sao Paulo. We're making it easier for our customers to work with us in the jurisdiction by becoming a local supplier, and our preparation for this market underscores the significance that we see in the Brazilian opportunity going forward. Lastly, we've continued to deploy new product features over the last 14 months, features such as jackpots and recommendation engine, which set us apart from the competition in a meaningful way by delivering a competitive advantage which allows us to drive profitability for those customers. And I will talk more about it on the next slide. To sum up, we offer unmatched value to our commitment to market specific localized content, onboarding exclusive studios for market like the US, Canada, Brazil and the Netherlands. Our comprehensive product suite and enhanced player journey management tools, including Bragg Views, empower these clients to elevate operations with diversified content, aggregation, and tailored player experience. Our realigned commercial strategy positions us as a global leader in iGaming solutions dedicated to supporting operators' expansion in regulated and pre-regulated markets through tailored regional approaches. with a regional focus on key markets across the US and Canada, Latin America, Europe, and pre-regulated regions, we're set to onboard new turnkey PAM and hub clients in emerging and regulating markets such as Brazil, Peru, Canada, Finland, France, and Germany. By focusing on European, Latam, and Canadian clients seeking seamless PAM migration, as well as lottery operators expanding into iGaming and sports betting, we help drive cross-channel engagement and maximize cross-selling opportunity. With strategic partnerships, we provide best-in-class solutions to support a seamless and engaging player journey in today's competitive iGaming landscape. Now, I want to talk more about how our iGaming content and technology solutions are differentiated, making us a Tier 1 regulated market supplier. We are operational in over 30 regulated iGaming jurisdictions globally. We support our customers in all of the markets they operate in with localized content portfolios and locally compliant technology solutions. As you can see from the diagram on this slide, our solutions are modular. Our PAM, data layer, FUSE player engagement, hub product delivery platform, content and managed services can be taken together or can operate independently in order to create custom content and technology solutions which upgrade the product offering for online casino, sportsbook, and lottery operators and optimize the player journey. Unlike other solutions on the market, our data warehouse is also built as an independent element, making it a uniquely flexible and powerful tool which can be leveraged across any product or channel. whether for proprietary products or third-party. This flexible solution unlocks a 360-degree player overview, which consolidates player and game data across different product protocols. Our data warehouse also comes with advanced built-in reporting dashboards, as well as custom regulatory reports, solving multiple common reporting challenges which operators typically face, enabling them to focus on optimizing the player journey and maximizing profitability. Our proprietary remote gaming server technology and our in-house game development expertise drives the success of our in-house studios, as well as the success of our partner studios, allowing operators to introduce attractive global, localized, and custom content portfolio. Our multi-award-winning Fuse Player engagement platform works across all content delivered by Bragg, whether that's in-house, partner, or aggregated casino content, and it works across sportsbook and lottery products too, allowing for cross-sell between verticals, reducing acquisition costs, and significantly increasing conversion and retention rates and end-user lifetime value. Our multiple third-party product integrations include leading sports books and other iGaming product partners, giving our operators customers a wide choice of products and verticals with which they create compelling, highly localized offering. Lastly, our vertically integrated product suite means we control the full spectrum of the supplier's ecosystem from IP ownership of content and technology to the development, deployment, and promotion of the products. Not only does this give us unique data and insights, but it gives us direct control and allows us to move fast, whether that is to optimize a product, develop a new feature, or to implement a new regulatory requirement to ensure our operator partners are always one step ahead. Looking in detail at the U.S., we employ an operator-centric approach, continually connecting and reconnecting with our customers to understand how we can deliver content for their respective strategies. As I've already mentioned, we have seen continued growth in distribution of our online casino content in North America since the beginning of the third quarter, expanding our relationships with partners in six jurisdictions with new content launches. We launched with Caesars in Pennsylvania and Ontario in the third quarter, as well as launching with FanDuel in New Jersey during the same period. I am pleased to announce that post-quarter end, we launched in Delaware, our fifth US state, with our partner Rush Street Interactive. This gives us 100% of the Delaware market as they are the only casino operator in the state. We are on track to launch our sixth US online casino state West Virginia. In the second quarter of next year, our expanding distribution network in North America is helping to drive strong growth in exclusive and proprietary content revenue, and we note that global revenues from on proprietary content were up 40% year over year. In the third quarter of 2024, compared to the same period last year. And so to conclude, Prague's third quarter revenue rose by 16% compared to the same period of last year to 26.2 million euro, representing a record quarter for the company. Our gross profits grew by 18% year over year to 14 million euro, corresponding to a margin of 53.5%. while our adjusted EBITDA also increased 7% to 4.1 million euro with a margin of 16%. With our third quarter results published and halfway through the fourth quarter trading, we are reiterating that we are tracking to the lower end of our full year 2024 guidance of between 102 and 109 million euro in revenue and 15.2 and 18.5 million euros in adjusted EBITDA. In addition, we shared that the special committee has concluded the strategic review process and has determined that the ongoing execution of the company's strategic plan is the best way to maximize value for shareholders at this time. Lastly, the structural changes we have made to the business are beginning to deliver meaningful, measurable results, giving us a robust sales pipeline to look forward to in 2025. Thank you for listening. I'd like to take this opportunity to pay tribute to the entire BRAC team for their continued unwavering hard work and commitment during this quarter. And now I will turn the line back to the operator and Robbie, and I will be happy to take any questions.

Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from the line of Jordan Bender with Citizens JMP. Your line is open.

Good morning, everyone. Thanks for taking my question. I want to start on the guidance. Implied 4Q revenue somewhere high double digits. But first, should we expect that kind of exit rate as we head into 2025? And second, what markets do you foresee driving some of that elevated growth?

Now if I can take that. Jordan, thanks for the question. In terms of Q4 outlook and then into 2025, you know, I think what you said is correct. double-digit growth is definitely a possibility and what we think is achievable. Sorry, can you repeat your second part of your question?

Yeah, just some of the 4Q high double-digit growth exit rate, looking at that. But as we think about some of the higher growth markets, where should we be thinking for next year? Sure.

So definitely the US, we see the opportunity to continue our meaningful growth. And as that compounds on what was a relatively small base, I would say at the start of this year, it's starting really to compound into some meaningful numbers and growth. We also have a fairly aggressive plan to be ready on January 1 for the launch of regulated Brazil. We do have legacy business there, but we see significant opportunities to really increase the amount of revenue we're generating in that jurisdiction.

Great. And then maybe bigger picture, you know, unpacking the enhancing shareholder value comments. I think it's fair to assume that investing in your business would be on the top of that list. Can you just maybe help us understand what else that comment might mean? Are we thinking share purchases, M&A, et cetera? Thank you.

Good question. I don't think share purchases would be at this time the best use of our excess capital, but something we would always consider. There really isn't a need to make significant investments in our products. So we've done a very good job to get our products to where we believe commercially they could be very appealing to operators. Now it's really investing in the commercialization. So we've done a lot of that in the sense of bringing on the right talent in regions to be able to best sell our product. And we also think that there's good opportunities in our pipeline. quite impressed with the pipeline that has developed over the last, I'd say, six to 12 months and feel that there is going to be some good opportunities that were well-placed to win coming soon. Great. Thank you very much.

Your next question comes from Gianluca Tucci with Haywood Securities. Your line is open.

Hi. Good morning, Matt and Robbie. it does look like you had your best quarter ever in the U.S. on a quarterly perspective. Is that just the facet of having better market coverage, or have you changed your go-to-market approach there? And then as a follow-up, how big do you think the U.S. can be for BRAG next year?

Thanks for the question. So I think it's a combination of several factors. I think our coverage just continues to increase, so we're We're going to hit 90 plus percent coverage of the market by the end of this year. I also think that the efforts, as Matt mentioned, when he came back into this business to really take on the CEO role, looked at the bench that Bragg has, the talent and what's needed to penetrate the markets that we want to be in. And he's brought the right people to do that. And we're seeing the fruits of those of that of those moves play out. So I think we're being we have the most talent we probably ever have in terms of being able to push our our product in the US and I'd say other jurisdiction. Also, the pipeline internally of us being able to develop content keeps getting better and keeps increasing in terms of cadence. And we actually see Next year, we believe our cadence of getting new titles out is going to increase fairly dramatically from the prior year, which is just going to further enhance our ability to become real established partners with our operators and push our proprietary content.

Okay, that's good color. Thanks, Robbie. So as a follow-up to that, is the team getting more efficient in... the speed or the cadence of game development, content development, or are you adding more bodies on the content side of things, or a combination of both?

Yeah, it's a bit of a combination of both, but by no means do we, for us to, let's say, double our content output, by no means do we need to double the internal infrastructure to do that. So we definitely can scale just being... more efficient, getting better, getting more experience and leveraging titles that we've used in other jurisdictions that could be potentially repurposed and things like that. So we're quite happy where we've gotten our internal proprietary content going in the infrastructure we've built to do that. And again, our cadence, I believe, will increase in the coming year and with the right team in place to push that content onto the operators I really think the U.S. could be, will be a meaningful part of our revenue concentration going forward. And I think that was part of your question as well as, you know, what can we expect? You know, I think the U.S. could become up there in double-digit percentage of our total revenue in the coming year, for sure.

That's great, Robbie. Thanks for that. And then just secondly, here on gross margins and EBITDA margins, it does sound like the company is expecting a lift next year. Is that going to be smooth or is it going to be like second half weighted, that margin growth? I'm just wondering if the company could provide some context as to the cadence of margin growth. Sure.

Just a little early to make specific comments on that. I do think we will have margin growth over time, and it's really related to our product mix. And as I mentioned earlier, the emphasis on our proprietary content and actually the opportunities for our PAM business that are in our pipeline really be factors that drive that margin increase. In terms of timing, Really want to get into that in in in early January when we we have a clear sense of our 2025 guidance, but I'm quite. Happy to see the the opportunities for growth that are coming in 2025. OK, thank you guys.

Yeah, let me just add.

You know to your question.

So 2025 we will obviously We expect to see significant growth in content output. That's one factor that is going to affect the growth of revenue. We have diversified our development hubs, and some development hubs will be more regionally focused. The other factor is that our portfolio has grown to accommodate a range of product styles and game mechanics. We're still going to be primarily slot focused. But in addition to the 2024, we will add support for other styles of games. We have now reached a point in games portfolio to go live with new operators in a variety of markets with a richer portfolio based on games that can start to add incremental revenue with new operators and new game will add revenue to the existing operators. So that's, also expected to be a factor that is going to affect the revenue. Then we have obviously more requests and demand for bespoke and customized games from existing operators and operators that are coming into the market. So we will see the optimization of older games with new features, specifically with a bolt-on jackpot features. And we have managed to grow operational efficiencies in a number of different processes. in design and development. So we have a richer baseline for clones, derivatives, and complementing a growth in team size for larger output of total games. So lots of room for growth as we look at some regional markets in the US and Canada as well. We're just starting in Delaware, West Virginia, and we have more coming online with Pennsylvania and Ontario and opportunities in British Columbia. That's a few more things to add to what Robbie said about the opportunities in 2025.

Sounds like a busy pipeline. Thanks for the color match and talk to you guys soon. Thank you.

Once again, ladies and gentlemen, if you have a question, it is star one. Your next question comes from Jack Codera with Maxim Group. Your line is open.

Hi, this is Jack Codera calling in for Jack Vander Ark. Thanks for taking my question. Given that you're kind of ready for this day one regulated Brazil, do you have any view on what portion of that market you'll be able to capture and any view on an estimate of how meaningful that market will be relative to your existing markets? Thank you.

It's probably difficult or too early to say what are the numbers going to be post-regulation. We obviously have existing relationships with our leading operators in that market, and we expect to significantly increase our revenue in the market post-regulation. We believe that the market is going to be extremely important for BRAG in the future, we feel that we are very well positioned to be one of the leading not the leading product delivery platform in the market and we're building a portfolio of content that is going to allow us to deliver local unique custom content to these operators and we expect to take a meaningful market share in that respect as well we also have plans to um launch our PAM in the market in the next 12 to 24 months. So we expect to be active in content and technology and services in the market, and we feel it's going to be a very important market for us.

Okay, that's helpful. And then just one more general question. Does BRAC have a perspective on, you know, whether it be B2B or B2C, on how crypto is affecting the market. Do you see any strategic moves that the market's adopting that might have a sort of headwind or tailwind effect to your business? Any comments there would be?

I can take that, Matt. Sure. What we haven't seen to a great deal in the crypto market, in the regulated world of gaming, is the... regulators being accepting of crypto as a means of depositing. So and withdrawing and essentially playing. So I think it's going to be time. And I think that'll happen over time. And there probably will be a catalyst to do that as the dot com crypto casinos of the world seem to be taking, you know, sizable market share and regulated jurisdiction. And I think a way to attract players away from those offerings is to be able to utilize crypto as a means of withdrawing and depositing in the regulated jurisdiction. So I think that would be a net positive for us for that to occur is it'll just increase the amount of TAM and the amount of GGR that's occurring in regulated jurisdiction. So I see it all as net positive and I feel like the direction, I mean, It's hard to really predict what's going to happen in significant jurisdictions like the United States, especially being so state-led in terms of how regulations roll out. But just the momentum of crypto will hopefully be something that state regulators consider. And again, that just increases the amount of TAM in each jurisdiction. And that's just a net positive for us.

Okay, that's helpful. Thanks again for taking my questions. Congrats on a strong quarter.

Thank you. This concludes the question and answer session and we'll conclude today's conference call. We thank you for joining. You may now disconnect your lines.