Ladies and gentlemen, thank you for standing by. My name is Sherrill [ph], and I will be your conference operator today. At this time, I would like to welcome everyone to the Bragg Gaming Group Q3 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Yaniv Spielberg, Chief Strategy Officer. Please go ahead.

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 Bragg Gaming Group. I’ll be hosting today’s call alongside my colleagues, CEO, Yaniv Sherman, who will comment on our second quarter performance; and Ronen Kannor, 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.bragg.group. Again that’s investors with an s dot bragg dot group in the section called Latest Presentation. On this call, we’ll review Bragg’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 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 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 customers 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 of 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 release and other publicly available disclosure. I’d like to turn the call now to Yaniv Sherman. Yaniv?

Good morning. I’m Yaniv Sherman, Bragg’s 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 to take you through our financial KPI in more detail. Turning to Slide 4, another busy quarter behind us in which we continue to execute our strategic vision for Bragg. We have 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 and growing cadence. We’re delivering more differentiated content that started resonating across our different partners and markets and receiving recognition for 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 Ronen, who will review our financial performance.

Thank you, Yaniv. And good morning, everyone. I’ll begin my comments on Slide 6. 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 continuing our growth momentum since the third quarter of 2021. The growth was mainly derived organically through our existing customer base, launching 2021 and 2022, in particular, the PAM and turn-key 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. As you can see from the wagering chart on the right-hand side, Bragg saw an ongoing positive trajectory from the third quarter of 2021, which demonstrates our ability to transform and diversify our operations. Gross profit for the quarter increased by 18.9% to €13.8 million, 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, with adjusted EBITDA margin reaching 19.2%, an improvement of 410 basis points from the same period in the previous year. The change in margin is mainly the result of scale in 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…

Thanks, Ronen. In Slide 12, you can see our recent progress, further expanding Bragg’s parking network with new Tier 1 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 have proven to be a competitive edge time and time again, taking Bragg to the next level. The landmark contracts and launches with Flutter, Pokerstars and Adjarabet. 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 wallet across different customers. Our brand developed Fuze engagement platform, coupled with some of our best performing titles like 4 the Loot and Big Roar have been powering much of this activity. A wide range of competitions and promotions has resulted in increased engagement and gain stickiness with players, and we’re only getting started with this exciting product portfolio. Moving on to Slide 14, I have 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…

[Operator Instructions] Your first question comes from the line of Gianluca Tucci from Haywood Securities. Your line is now open.

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?

Hi, Gianluca. Well, it’s a combination. We’ve seen essentially good traction with existing customers, but we are 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 process 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 2022 and even a few from early 2023, 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.

That’s great. Thanks, Yaniv. And on that point in terms of product development, it seems like you are only a good cadence here of title development. How is the road map for the second half in terms of new content look like?

We’re very excited about the second half of the year into 2024. We’ve been very focused over the past, I’d say, nine or ten months in streamlining further streamlining the content production. We’ve signed some very interesting partnerships. We have great assets. So, we’re on track of hitting our – even exceeding our game development deployment roadmap for this year, in the first half of next year is also looking very exciting, both for the U.S.-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 will 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 gravely 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 2024.

Awesome. Thanks Yaniv. And then 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?

Well, it’s a few things. Naturally, with some of the markets that we ventured into, like the Dutch market, like wellness not to switch, which is relatively new, but mostly the Dutch market and other European and operator relationships. These contracts and relationships are sort of 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 in PokerStars and Adjarabet and our new contract with 888 William Hill, a good example 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 partners – content partners into one contract touch point, and that’s our aim. We want to make sure that every contract that we signed maximizes the effect. It’s part of the operational efficiency that Ronen 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.

Okay, that’s great color. Thank you guys. And again congrats on a great quarter.

Thanks. Thanks, Gianluca.

Your next question comes from the line of Matthew Lee with Canaccord Genuity. Your line is open.

Hey good 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 occurred in those markets. How are you seeing the long-term opportunity around those?

I think that we’re – 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, that some of these contracts are getting into the second, third or fourth year, and that's exactly our focus which are prolonging them. I think by now 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.

Okay. Right, that's good color. And then in terms of margins, 19% on EBITDA was really much stronger than we expected. Now I know some of that's due to mix shift, but how sustainable is that high-teen margin for 2023? And then maybe without getting into guidance, do you expect that to continue to gain strength in 2024?

Well, if you're referring to the 19% EBITDA margin, then our goal is definitely to maintain that level. And as Ronen 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 2025 and beyond. So that's – that definitely something 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.

All right. Fair enough. And then lastly from us, just in terms of the U.S. market, can you just perhaps provide some updates into your progress there? Or even more preliminarily and you've had any success with your games in that market?

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 or 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 of foreseen circumstances, and we work with them to expedite some of the distribution. But so far, we've been working towards plan. 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 were live, 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 roll out, and then it may 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 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 teams 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.

Alright. Thank you.

Thanks Matt.

Your next question comes from the line of Jordan Bender with [indiscernible]. Your line is open.

Thanks for taking my question. I guess heading into the NFL season that traditionally more sports betting, but it is a big cross-sell opportunity for some of 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 to have an uptick in player adoption of your titles versus kind of years past?

Well, that's a great question. Thanks Jordan. Every year we think that will be a normal steady year and then we started looking into 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 or predominantly online casino. And I think that was put to the forefront I think the more successful partners for the ones that have been able to cross-sell, just as you've alluded to. I would expect on the back of the new partnership form in the market that we'll see an uptick in marketing, but we'll also see, I expect 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 state, 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 one of our prime goals so we can be a good partner and help them to support them in their profitability – long-term profitability goals.

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 will get us to that margin target?

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 opportunities mostly around content production, either accelerating or creating new or new partnerships or new types of games, we may elect to focus or put a focused investment to those areas 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 early unless there is some specific opportunity that we'll have a good reason to go the other way for a certain amount of time. But at this point, we're definitely focused on sustaining that trajectory.

Thanks, Yaniv. Nice quarter.

Thank you.

Your next question comes from the line of Edward Engel with ROTH Capital Partners. Your line is now open.

Hi. Thanks for taking my question, again congrats on a nice 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 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?

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.

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 its record revenues for you there in that segment. It also looks like that was mostly from outside the U.S. So 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 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.

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 content – the proprietary – new content grew on both sides. So we're seeing more revenues of 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 regards. 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 this situation, as we've explained in the overview of 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 inflection point north of and it's pretty easy if you take top six or seven operators with our new content, so 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 little bit more complicated than just distribution, but we definitely have enough challenges ahead of us in [indiscernible]. We have a lot of runway in the U.S., and I hope that inflection point towards the back of the year and into the next.

Great. Thank you for the color.

Thanks Ed.

Your next question comes from the line of Jack Vander Aarde of Maxim Group. Your line is now open.

Okay. Great results. Good morning guys. Hail results. Thanks for taking my questions. Yaniv, 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 just – 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?

Well, I think 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 consideration 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 had to take these discussions – some of these discussions into consideration. So we have a line of sight into the outcome of those discussions. And naturally, we're aiming to extend and expand those. But again, we wanted to – I would like to have shared more details at this point, but because they're in flight, will need to wait a little bit longer. And once we have more information, I'll be able to share it. But that was us balancing between the two, the current momentum and potential new deals that we'll be securing hopefully in the near-term.

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 has 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 continuing to ramp. Just as you look in 2024, 2025, can you just help us understand what you see or envision as your top markets?

Well, first of all, Bragg has deployed its latest tech stack and content, as you've mentioned recently in 2022 in the U.S., but the standard Wild Streak that were acquired and now part of the Bragg family have been operating in the market almost in its inception. So I think we've had a good track record that we do in sort of assimilated into a DNA that we're trying to leverage on – 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 UK which is still the single biggest, if you break down the U.S. in the States, the UK 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 securing or license in Sweden, I would definitely see us or look for us to be 2024, 2025 and beyond that, to have those Western European, Central and Western European high on our market base and further diversify, so it's the UK Italy it's Sweden. The duty around these markets is that some of the deals that we've signed that I mentioned like PokerStars and 888, already cover all these markets in [indiscernible]. So we'll be looking to utilize and leverage from those new contracts to do exactly that to be able to develop once and deploy many. Canada, I think is another runway in Ontario. We've – again, we've only seen some fairly success there, but that market is 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 2 or 3 markets in Latin America. So we'll be looking to include each one of these markets, especially around content and content delivery and turn-key services in our longer term – mid- and longer term [indiscernible] plans. 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 of them so we can further diversify. But these would be our top focuses for the next two or three years.

Okay. Excellent. I appreciate the color, and again solid results. Thanks.

Thank you.

Our next question and final question comes from David McFadgen of Cormark Securities. Your line is now open.

Okay. Great. I was just maybe another question on the gross margin. I was just wondering what it would be contingent on [indiscernible] subscription is that a matter of just keeping the cost, but I would think that would be more for the EBITDA margin, but, sorry did I cut-off.

Yes. David, could you just repeat the question? You're a bit cut-off?

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 2025?

Ronen, do you want to take that?

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 a) 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 on Slide 7, we're growing not only the nominal value of the revenue, but we're also growing the proprietary content itself. I believe, one, as Yaniv indicated, is going to be more, how to you say, accelerate our revenue in the U.S. and our titles will be accepted well. They already accepted well, but we'll be much more distributed through all our network, including the Tier 1 customers and the European and the U.S. 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 to 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 profit, and that will automatically and mathematically, we just fall 4% 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're focusing on because that's going to bring us higher. And of course, that will also increase our adjusted EBITDA margins because as Yaniv 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, 17% last quarter, and we're progressing on that side as well.

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.

It has a new market for us in terms of our content and our products. The Georgian market has proven to be quite sizable, if not Tier 1 European or Asian market. But it's definitely a market punching above its weight class over the last few years, the total addressable market there. And I think it was two-fold. One, is we're partnering with a market leader, Adjarabet is a clear market leader, and it's always good to hit the ground when you're writing 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 and some of the Tier 1 operators are now family of brands and markets, and this is a good example between the Adjarabet and PokerStars to building that relationship and start deploying our content more frequently across more of these brands. So Adjarabet is definitely doing 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 a relatively short-time frame.

Okay. Alright. Thanks guys.

Thank you.

I will now turn the call back over to Chief Strategy Officer, Yaniv Spielberg for closing remarks.

We'd like to thank all of you guys for joining our call today, and we look forward to hosting you on our next call for Q3 of 2023. Have a great day, everybody.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.