Good day, and thank you for standing by. Welcome to the Bragg Gaming Group Q1 2021 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Yaniv Spielberg, Chief Strategic Officer of Bragg Gaming Group. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining our first quarter 2021 earnings conference call. I'm Yaniv Spielberg, Chief Strategy Officer for Bragg Gaming Group. I'll be hosting the call today, along with Bragg's newly announced Chief Executive Officer, Richard Carter, who will share some opening remarks and an update on our business; and Chief Financial Officer, Ronen Kannor, will provide a review of our financials. In this call, we'll review Bragg's financial and operating results for the first quarter of 2021. Following our prepared remarks, we'll open the conference call to a question-and-answer period. I'll start the call with some brief cautionary 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 for 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, its subsidiaries and their respective customers and industries. While we believe these assumptions to be reasonable, they are subject to a number of risks, uncertainties and other factors, many of which are outside the 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 releases and our publicly available disclosure documents that we filed this morning as well. I'll now pass the call to Richard Carter, CEO of Bragg. Richard?

Thank you, Yaniv, and good morning, everybody. To open, I'd like to say how excited I am to be speaking to you today. I joined Bragg last October as Chairman of the Board, because I recognize the potential of the company's technology and product offering. Now as group CEO, I'm very much looking forward to building a market-leading virtually integrated iGaming business, which enables our clients to be successful and facilitate an outstanding user experience for our end users. On today's call, we'll cover the following topics: our first quarter results and recent accomplishments, our product and technology investments, as well as the group's corporate development. And before turning the call over to Ronen Kannor, I will talk about the Spin acquisition we announced yesterday and the outlook for 2021. I'm pleased to announce that we continue to build on the strong momentum of 2020 with an excellent first quarter, outperforming our targets and accelerating our progress on the company's strategic plans. Revenues continue to grow in the first quarter, increasing by 62% to EUR 14.2 million. Wagering revenue also saw a significant increase, rising by 52% to EUR 3.5 billion compared to EUR 2.3 billion during the first quarter of 2020. We've also seen a 54% increase in unique players using a Bragg Games in content, rising to EUR 2.4 million from EUR 1.6 million during the same quarter in 2020. We continue to transform the business into a global player in the B2B gaming sector and adhere to the 3 pillars of growth that we set out in early 2020, enhancing our technology and product offering, diversifying our revenue and expanding into new geographies, and collaborating with key players in leading jurisdictions through strategic partnerships and content deals. Now in terms of enhancing our technology and product, we…

Thank you, Richard. Good morning, everyone. As a first note, I would like to say that all the numbers are presented in euros. Revenue. Revenue increased by 62% to EUR 14.2 million in the first quarter of 2021 compared to EUR 8.8 million for the first quarter of 2020, maintaining a quarterly growth momentum since Q1 2019. Revenue growth was mainly derived from games and content services, which accounted for 86% of the total revenue as demand for the corporation unique games and content and technology proposition continues to grow. Quarter-over-quarter revenue increased by 3% from EUR 13.8 million in the fourth quarter of 2020 to EUR 14.2 million in the first quarter of 2021. Total wages was up 52% from the same period in 2020 and totaling EUR 3.5 million to EUR 3.5 billion. The number of unique players also increased by 54% to 2.4 million. These strong growth numbers demonstrated strong demand stemming from our unique content portfolio and continual technological advantages. The gross profit increased by 68% to EUR 6.6 million, compared to EUR 4 million last year, with an increase of margin from 45% to 47%, which is mainly attributed to the shift in proportion of revenues from games and content to iGaming and turnkey services, the latter of which have lower associated cost of sales. The group stability continues to improve as well. The adjusted EBITDA ended EUR 2.3 million in Q1 2021, which is up 234% compared to EUR 700,000 in Q1 2020, with an increase in margins from 8% to 16%, primarily as a result of higher scale and cost control. Net loss for the period was EUR 1.1 million, a decrease of EUR 4.6 million from the previous quarter, mainly due to the full settlement of the Oryx sign out on January '18 this year, resulting in yield expenditure for remeasurement of the deferred and contingent consideration in the current quarter. The weighted average number of shares of March 31 was 18.1 million shares compared to 8 million shares of March last year on a post consolidation basis. Loss per share was EUR 0.06 versus EUR 0.71 last year. Cash and cash equivalents of March 31, 2021, amounted of EUR 30.1 million versus December 31 was EUR 26.1 million. On a corporate level, we recently announced our intent to cross list on the NASDAQ Exchange, and we are finalizing the step to make this happen. We currently expect to complete this process in late May or early June. Finally, in terms of guidance, we continue to target our full year 2021 revenue of EUR 47 million and adjusted EBITDA of EUR 4 million pre-M&A. And while we have started this year strongly, and I'm pleased to say momentum for Q1 continued into Q2, we remain mindful of the upcoming regulatory changes in Germany from 1st of July and onward. With that, I'll turn now the call over to the operator for any Q&A session.

[Operator Instructions] Our first question comes from Neal Gilmer with Haywood Securities.

Congratulations on the quarter. And maybe, I guess, my first question might follow-on the last comments there on the guidance. Obviously, if you take a look at the run rate from Q1, you're factoring in, obviously, a little bit of decline in the second half of the year. Can you just provide maybe a little bit more color on some of the assumptions that sort of go into that on both the sort of the revenue and EBITDA level?

Sure. I'll take that. So effectively, we're assuming that, obviously, regulation happens in Germany from the beginning of July. If you read some of the recent news flow, there are some question marks over if it will necessarily go ahead, and will there be some legal challenges, which could potentially delay it. But our working assumption is that on the first of July, that the market will be fully regulated. And therefore, obviously, there'll be full compliance with the regime. And so we've assumed that, we've obviously assumed that obviously creates an impact for our clients. Some clients will leave the market. And we try to be conservative. We've assumed a sort of medium enforcement. If it is full enforcement, and I think that will help our company, because, obviously, the local Tier 1 operators will then be able to grow the market. And hopefully, there'll be greater channelization. So there's a lot of moving parts. We try to be as conservative as possible, but we're assuming quite a significant decline, obviously, in our German business from July month.

Okay. I appreciate it. I guess my second question might be just on your U.S. strategy following yesterday's announcement with Spin sort of as you work together to integrate and obviously close that transaction and access some of those markets. What's your overall philosophy for further penetration within the U.S.? Is that closing this and working to get deeper into the U.S.? Or are you still evaluating other opportunities, either whether it be M&A or working through your own licenses in certain states?

Yes. I mean, just to give a bit of background. I mean, we're obviously running an organic strategy of entering the U.S. It's just -- Spin, obviously, tremendously accelerates that. So we're already in the process of applications and all that sudden stuff. So in terms of looking forward, Spin gives us that foundation. They have all of the customer relationships, just the case that we'll be using them as our building blocks and springboards into the U.S. and then obviously, there is discussions at the moment in certain states about further iGaming regulation. We'll probably get 1 or 2 new markets over the next sort of 12 to 16 months. And we'll be going into that market as a combined entity. So yes, we'll be using the combined entity effectively going into them.

Our next question comes from Suthan Sukumar with Eight Capital.

This is [indiscernible] on for Suthan. Just wanted to maybe kind of ask another question on Spin. Maybe can you maybe talk about the cross-sell opportunity from the content from the European portfolio? How much of that is a relevant fit for the U.S. consumer? And are there any maybe technical efforts that you guys are going to require in order to bring these to market?

Yes, it's a very good question. I think I can give you the view that Ken has, and he's obviously got the local knowledge. But I think one of the things which really excites Ken about this combination is that he's very bullish on the European content we've got. A lot of it was created sort of a -- it comes from a sort of land-based sort of audience. And therefore, the thought process that, that will resonate very well. With U.S. customers. So I think it's a significant opportunity over the next sort of 12 to 24 months to bring our European content into the U.S. market. And again, I think a lot of content won't necessarily work from Europe into the U.S., but we have a lot of sort of confident that resonates from the land base. We think it will and that's Ken's view. In terms of the -- from a technical perspective, there's not -- we don't think there's a huge amount to do. There are some slight sort of rules in New Jersey in terms of some payouts and things like that and on the math side, but sort of the initial analysis suggests that it should be actually relatively seamless and quite incremental. Obviously, you need to go through the certification, but most of these games have been certified anyway by GLI. You'd have to go through that sort of New Jersey process. I mean that obviously takes a little bit of time, has a little cost, but overall, now very limited amounts of change needs to be undertaken.

Okay. That's great. Maybe just aside from the actual content, are there any other aspects of the Bragg tech stack that you can see leveraging across the acquired spend base, outside of content, really?

Yes, I think there is. I think I mentioned that we have a player engagement platform. And I think that's going to become increasingly important in the U.S. market and the ability to be able to personalize promotions and rewards, tailored to individuals, I think is going to be a really expanding part of the marketplace, having jackpots and things like that, we're working over the coming quarters in deepening and broadening our jackpot offering as well. So I think that player engagement platform will be another key area of the product offering that we'll bring from Oryx into Spin and into the North American market.

Okay. That's great. And just 1 quick question on the U.K. market. I know you said that the licensing is kind of on track. Is there any potential timing there?

I'd be very disappointed if we're not live in Q4. Obviously, with COVID and things like that, the SLAs of -- on the license application, maybe -- are maybe extended a little bit. But as I say, I'd be disappointed if we're not live in Q4 of this year.

Your next question comes from Matthew Lee with Canaccord.

Just in terms of of backlog, can you maybe disclose how many customers have signed on right now but aren't launched yet?

Ronan, do you have any color on that?

Yes. We have a list of quite a few customers that been signed or in the process of being signed. We're waiting from outside, from the counter-party side. We're talking about dozens of customers, at least in the next Q2, Q4 -- Q2, Q3 that we are looking to sign. I don't have the specific number specific, because it's quite a big list, but we have quite handful if anything.

We can come back to you on that. I mean, I remember last week on 1 of the calls, I mean the pipeline was sort of like 85. Of that pipeline, we'll come back to you with the exact number that's moved into the other buckets of where they are in terms of the contract negotiations inside so on. So we will come back to you on the exact number.

All right. That's perfect. And maybe just a follow-on with regards to guidance. If Q2 looks relatively similar to Q1, does that fundamentally mean that your expectation for EBITDA in kind of Q3 and Q4 is zero to maybe a little bit negative?

There's a lot of moving parts. We're obviously investing significantly in our in-house content. We -- as we've already guided at the beginning of the year, we're expanding the team. We're also entering the U.S. market. So there's quite a few moving parts in terms of the business, but there is a potential of that, yes. Ronan, do you want to add anything?

No, I think it's fair.

All right. And then just lastly, on the M&A front, I mean, what do you think is the next target for Bragg? I assume that Spin is kind of the first kind of move for you guys in the North American market. But are you still interested in adding a sports book? I know that was something we talked about earlier on.

We're interested in adding product verticals and businesses that we think can create significant shareholder value, not just for the sake of it. So if we can find the right product verticals that we think fit with our culture and add value for shareholders, then we'll do it. We're not going to particularly go around focusing on lots of different areas and just doing it for the sake of it. But clearly, I think we all know what's happened in terms of inflation in the online sports book market over the last sort of 12 months. So we'll have to see how that settles down.

Your next question comes from David McFadgen with Cormark Securities.

A couple of questions. So just looking at your guidance statement, you put a pre-M&A qualifier on there. And I was just wondering how we should interpret that?

It's just to say, obviously, that we in terms -- I don't know when Spin is exactly going to close. Obviously, it could close a lot sooner. And obviously, if we did any other M&A, so it's just a pre-M&A, just to keep you clean and relevant to our last guidance.

Okay. Okay. And then just on the gross profit change, I didn't fully understand what was driving the gross profit there, maybe you could just elaborate on that?

Yes. Ronan, do you want to take this, please?

Yes. David, so we're discussing about that in every single announcement. We're saying that we have the composition of -- our revenue is a composition of 2 segments, gaming content and gaming platform. As we said 82% of this revenue this particular quarter was on gaming content. Last quarter, if you remember, Q4 was 89%. Previously, it was 88%. When we have some most signage of -- more revenue comes from gaming content alternative services, in a particular quarter, the weighted amount of those particular revenue from gaming content is higher, we have less cost of goods associated to that. If you remember, cost of gains with constant currency with cost of goods, which is the cost of using those particular games in royalty payment, loyalty based. So we have more weight on games and iGaming platform and turnkey solutions from time -- for quarter-to-quarter, what we have is literally changing gross profit margin. And we anticipate that those particular platform will continue with us going forward, of course it's on contract. And we believe that we'll start scaling down to be more gross profit-oriented and more profitable. So I assume it's going to be about 46% or the 48% -- 46% to 47%. That's we're trading. So it's all about the composition of revenue.

Okay. All right. And then can you give us an update on in the Netherlands because I know you've signed a contract with a big operator in the Netherlands going live. I'm not sure exactly when, but can you give us an update on that market?

Well, I was hope -- I've been looking at focusing on Netherlands for 5 years. I mean it's been going right for quite a while. But I think, finally, it's hopefully, I think, going live in October this year. So that's -- we're moving forward with that. And the expectation is that we'll be live in early October.

Okay. Okay, great. And then just an update on your NASDAQ listing, anything new there?

No, I think Ronan touched on it. We're continuing to proceed, and we currently expect to complete that process in late May, early June, as what we communicated recently.

[Operator Instructions] Your next question comes from Lisa Thompson with Zacks Investment.

So just to clarify a little bit. For Q2, do you expect the revenues to be up sequentially and margins also?

We're not talking -- we've not talked about what we expect in terms of Q2, just given the yearly guidance.

Okay. And expense wise...

We've made it clear that we started the quarter well.

All right. And will we expect expenses to be around the EUR 7.1 million level going forward quarterly or does it come down or up?

It will move around. Roman, do you want to...

Yes, which -- Lisa, what kind of expenses, are you talking about the operation expenses?

Yes.

I think the main actions remain the same as we guided on the 26th of January, we are going to see more investment coming on, on the cost side on the investment in the U.S. It's for compliance. It for a key executive, it's of technology. So you'll see slightly increase of scaling up, Q2 will be slightly higher than Q1, and so on. So yes, it's slightly higher than that. But you have to normalize the share-based payments and exceptional costs. You just need to take them out to come with a real like-for-like comparison.

Right. Okay. And if you were to look at like a pro forma with Spin for the first quarter, what would gross margins look like?

Unfortunately, given our move on to the NASDAQ Exchange and the documents we are compiling, our advisers and lawyers of bankers have told us that we're not allowed to comment on that until that document has come out. So we are hopeful as, I think, a couple of weeks before we can get into the detail of the numbers.

Can we assume it's a higher number?

A higher number than...

Your current?

Well, you can see -- we can't really talk about it. I mean the company is pivoting away and building its own content. So we'll give -- hopefully, we'll be able to give guidance once this moves to announcement that has occurred. Have -- you have anything to add, Ronan? Is there anything else you can add?

No, no.

A clear, clear message from the lawyers of the bankers. Yes, correct. Apologies.

All right. And then my last question is, when you say U.K. market is going to go live, what specifically does that mean? Do you have customers that are ready to put the switch or how does that work?

Yes. So let me just give you a bit of background. So in terms of -- so obviously, we operate in almost every European market. So we have the relationships with all of the major players in Europe. So we've got those contractual relationships. We may have to add some redundance, but we can do that pretty quickly. We've got the integrations. Again, so it's pretty seamless. So in terms of is not quite flipping a switch, but that's how you should think about it. So I think we'll be pretty -- we'll be able to -- obviously, some of the content needs to be slightly changed for some of the rules in the U.K., but again, that's not a tremendous amount of work. So we should be able to bring quite a significant library of our exclusive content, turning on with a lot of the operators in the U.K. and pretty quickly, target a -- 1 of the biggest casino market in the world. There will be a period of, let's say, 3 or 4, 5 months just as we roll out across into all the different customers. But within couple of quarters, then we should be up to speed, and it should be a material market for us, which we haven't assumed in our numbers. So once we get closer to getting the license and you've got a bit more certainty on it, and we'll be able to give a bit of guidance around the U.K., but clearly, it's a big market.

There are no further questions at this time.

Thank you, everyone, for joining the call today and for your interest in the Bragg story. We appreciate your time and look forward to providing updates on progress over the next few months. Thank you, everyone.

Thank you for participating in today's conference. You may now disconnect.