Welcome everyone to the Bragg Gaming Group Third Quarter 2023 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Yaniv Spielberg, Chief Strategy Officer for Bragg Gaming Group. Yaniv, please go ahead.

Thank you, operator. Good morning, everyone and thank you for joining our third quarter 2023 earnings conference call. I am Yaniv Spielberg, Chief Strategy Officer for Bragg Gaming Group. I’ll be hosting today’s call alongside my colleague, CEO, Matevz Mazij, who will comment on our third quarter performance; and Ronen Kannor, our CFO, will review and discuss our third quarter financial results. If you have not already done so, you can follow our earnings call presentation from our website at investors.bragg.group, that’s investors with an s, dot bragg, dot group, in the section called latest presentation. On this call, we will review Bragg’s financial and operating results for the third quarter of 2023. And 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 laws. 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 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 assurance 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. With that behind us, I’d like to turn the call to our CEO, Matevz. Matevz?

Good morning, everyone. I’m Matevz Mazij, I’m Chairman and CEO of Bragg and I’m going to run through our operational highlights from the quarter, then I’ll hand over to our CFO, Ronen Kannor, who will take you through the financials. Afterwards, I’ll take a few of the points in a little more detail, wrapping up with our outlook and summary and then Ronen and I will be happy to take your questions. Turning now to Slide 4. I want to run through some of the key points of third quarter, the quarter in which I was appointed CEO. I have a long history at Bragg. I originally founded ORYX Gaming back in 2012, running the company until I sold ORYX to Bragg in 2018. As a part of that process, I also became Bragg’s largest shareholder. I continued as CEO of ORYX until in 2021, I stepped back from operations and joined Bragg’s Board of Directors. As a director, I have strongly supported our U.S. acquisitions, Wild Streak Gaming and Spin Games and was involved in developing our U.S. expansion strategy. I was subsequently appointed Chair of the Board earlier this year and then CEO at the end of August of this year. By appointing me as CEO, the Board was seeking to align and streamline the interest of Bragg shareholders with company operations and to unlock shareholder value, which is something I aim to do. So I’m delighted to be back in reporting on another quarter in which we continue to make good progress on our goals. After Ronen has presented the financials, I’m going to talk a little about our extended agreement with BetCity which will see us continue supplying our PAM content and content aggregation to BetCity into 2025. And I’m also going to reiterate and expand…

Thank you, Matevz, and good morning, everyone. I’ll begin my comments on Slide 6. As Matevz indicated earlier, the third quarter of 2023 was another positive step in our digital journey. We continue to execute against our mission and strategic plan, and we can sell it in our financial and operational results. In the third quarter, total revenue were up by 8% year-over-year to €22.6 million, continuing our growth momentum since the fourth quarter of 2021. The growth was mainly derived organically to our existing customer base, launch in financial year ‘21 and ‘22, in particular, the PAM and turnkey solution customers in the Netherlands, together with content offering and a solid revenue performance from the Wild Streak gaming to our customers. Third quarter, however, showed a slight sequential drop of 8.5% as a result of bad failure revised extended commercial terms. From an operational KPI perspective, cultural wagering generated by gains and content offered by the group during the quarter was up by 24.6% from the same period in the previous year to €5.7 billion versus €4.6 billion in the same period last year. As you can see from the wagering chart on the right hand side, Bragg’s ongoing positive momentum from the fourth quarter of 2021, which demonstrates our ability to transform and diversify our operations. Gross profit for the quarter increased by 13.5% to €11.9 million, with gross profit margin slightly increased to 52.5% from 50% in the same period last year. The gross profit is primarily the result of increased revenue performance in all content products, while recording slightly lower paired managed services revenue, which also as a result of bad city renegotiated extended commercial terms. Adjusted EBITDA for the quarter was up by 70.5% to €3.8 million, with adjusted EBITDA margin reaching 16.9%, an improvement…

Thank you, Ronen. As a recently appointed CEO and with this is my first time leading our earnings call, I want to remind everyone of the great business that we’ve built and on the exciting future we have ahead of us. Bragg is an award-winning supplier in a growing multibillion-dollar iGaming market. We have over 450 employees in 7 offices across North America, Europe and in India. We are licensed or certified to offer iGaming products in over 25 regulated jurisdictions globally, including the largest markets in the U.S. and Europe such as New Jersey, Pennsylvania, Michigan, the UK and Italy. Our customers’ number over 200 and include names such as BetMGM, DraftKings, Fanduel in the U.S. and in Penn SuperBet and Flutter in Europe. In view of recent M&A activity in the iGaming space, I believe that at Bragg, we have built something very unique in the market. There are very few companies in the space that are able to offer what we can, which includes our full product suite of content, content aggregation, sportsbook delivery, PAM, promotional tools and managed services. With this product suite, we’re uniquely positioned to be able to deliver full turnkey iGaming solution in regulated markets and in a landscape where more and more markets are on the cusp of regulation. With that in mind, I want to take a few minutes to refine and reflect on Bragg strategy, which I haven’t fundamentally changed since coming in as CEO, but which we have refined and expanded, and we now plan to accelerate. Firstly, our proprietary and exclusive games roadmap has been a renewed focus for us since we integrated in ‘21. Bragg studios or in-house studios, which now include Wild Streak gaming, Spin Games and ORYX Gaming, as well as two new studios we…

Thank you. [Operator Instructions] It looks like our first call is – caller is Gianluca Tucci with Haywood Securities. Gianluca, please go ahead.

Hi, good morning, guys. And congrats on another good quarter. I’m just wondering if we can start off on the news from earlier this week, I think you did a good job of providing color, Matz. But the extension, like does it take you through ‘25 or at the start of ‘25? And I’m curious if you can speak to how the company expects the revenue like mix to shift from this one customer over the duration of this extension agreement.

So the exact details of the commercial terms remain obviously subject to the parties of eyes only as their sensitive commercial terms. We – by negotiating this deal, we focused on keeping the PAM and aggregation deal, and it’s in place until September 2025. And we reduced managed services resources already has in-house. The – moving forward, we are going to work very aggressively on decreasing the exposure to one of our top clients, and we are going to work very aggressively in the direction of growing our content – proprietary content portfolio of clients, the Tier 1s that we have signed recently and the increasing number of aggregation and PAM clients where we believe that we have a very good opportunity to leverage that position and grow our proprietary and Powered by Bragg content revenue with them.

Great color. Thanks, Matz. And so on your commercial efforts, with all the recent Tier 1s that have been signed over the last quarter or so, I’m just wondering how you’re thinking about 2024 at this point from a growth perspective, combined with your cadence of Games comment accelerating, it appears that 2024 could be even growthier than ‘23 at this point? Just curious for your comment on that.

Sure. So we now have agreements with most of the Tier 1 operators, but they don’t represent top customers for Bragg. Our plan in 2024 and ‘25, as well as to grow our wallet share with all of these existing content-only operators as well as existing PAM and aggregation operators as they present a great revenue growth opportunity for our proprietary Powered by Bragg content. We are also looking to establish ourselves in markets that we’re in, but we are underrepresented. And finally, newly regulated markets in LatAm and Europe are a great opportunity for our PAM aggregation engagement and content products with these Tier 1 operators that we already signed with and new operators that are coming out of these newly regulated landscapes.

Okay. That’s great. And my last question here. As it pertains to the American markets in the U.S. particularly, are you doing anything differently? Or is it pretty much the same kind of execution plans from a growth perspective in the U.S.

Well, as discussed in the presentation, in 2023, we will eventually roll out 69 titles, both in the U.S. and Europe. And preliminary data suggests that the content performs well. Bragg is now live in the four largest U.S. gaming market being Pennsylvania, New Jersey, Michigan and Connecticut with its proprietary content. And we continue to roll out with more operator brands in these states, further expanding its reach. To answer your question, we launched our content portfolio in Pennsylvania with Rush Street Interactive and have also launched content with Fani in Michigan and Connecticut and Winbet in New Jersey, and we expect this trend to continue into 2024 and 2025. I would like to also say that we’re very excited about the U.S., and I want to remind everyone that our business is extremely successful in Europe and that we’re one of the largest content aggregators and leading PAM providers in Europe, and we expect to leverage our expertise coming into the U.S. and become a leading content provider in iGaming partners to global operators and U.S.-only operators, obviously, such as Bet365 and others.

Okay. Thank you for the color and congrats again on the quarter. a good work.

Thank you.

Thank you, Gianluca. And our next question comes from the line of Jordan Bender with JMP Securities. Jordan, please go ahead.

Great. Thanks for taking my questions. You actually just mentioned Rush Street in your prior comments. They are the new operator starting here soon in the State of Delaware to run the online platforms. I was wondering what does that kind of mean? And can you kind of frame the revenue or potential revenue opportunity for the company over the course of ‘24 and ‘25. Thank you.

So it’s probably too early to discuss the revenue opportunities for ‘25. We believe that Rush Street is obviously a great operator that they have an extremely good team, an extremely good product. And I believe that they’re going to use all of that to significantly grow the GGR in the state of Delaware, and we plan to be very high on their list of content providers for that state. Exactly what the revenues are going to be, it’s probably too early to discuss.

Understood. And then in terms of your player and wager growth, nice growth in the quarter, but from a wager per player perspective, you’re seeing a little bit of a deceleration year-to-date and especially here in the third quarter. Is that just a function of mix? Or is there something in the underlying consumer just spending less? Thank you.

Yes. So this is mainly connected to the seasonality. Third quarter is usually slower than first and second quarter.

I guess from a growth perspective, first half down roughly 5% in the third quarter, it’s down about 24%. Is that – is there anything kind of in that?

I wouldn’t say there’s anything in that any underlying reason that we would be able to identify.

Understood. Thank you very much.

And our next question comes from the line of Adhir Kadve with Eight Capital. Adhir, please go ahead.

Thans, guys. Thanks for taking my question. Matz, congrats on the role. Looking forward to working with you. I just wanted to talk about some of the European markets, specifically the UK and Italian markets. You’ve been in these markets for some time, some meaningful wins. How are you thinking about those two markets, just given how large they are and how meaningful they could be for your revenues moving forward.

Yes. So we were – we started with these markets anywhere between 24 and 12 months ago. And we were using this time to integrate with clients. These are obviously very heavily regulated markets. We believe that they are a great opportunity for our content only proposition, and we believe that we were largely underrepresented in those markets. And we feel that these markets represent a great growth opportunity for our content in ‘24 and ‘25.

Okay. Excellent. And then just the content in different European markets, you’ve obviously had success. How easily transferable are those markets from, say, the Netherlands into the UK and then into Germany? And just like how does that all work? And do you find that there’s minimal heavy lifting or investment that needs to go into launching this content in different markets?

We are integrated with most of the clients that are operating across these markets. So the heavy lifting has been done in the past. And what we need to do now is we need to use our data and build local custom content that is going to fit the requirements of these markets and effectively place the content, position the content and promote the content with these operators and use our engagement tools that will allow us to create certain unique and specific categories within the content portfolio to be able to compete with existing content providers in these markets. I’m very positive about the progress that we have made over the last 12 months. And I believe that we have a great future ahead of us with the two proprietary studios and road maps that have been put in place with these two proprietary studios and Powered by Bragg Studios that are developing content for these local markets in Europe.

Excellent. Thanks guys.

Thank you.

Thanks, Adhir.

[Operator Instructions] And our next question comes from the line of Daniel Rosenberg. Daniel, please go ahead.

Hi, Matevz, Ronen. My first question comes around cost controls and automation. So we’re seeing some of the benefits take place here in the quarter, but just wondering how much more leverage do you have in terms of implementing other automations into your operations that could keep yielding strong results.

Ronen, why don’t to take this?

Sure. Dan, good morning. Good morning, everyone. So we implemented at the beginning of last year, we implemented at the beginning of this year. So we implemented quite a lot of cost control. Some of the areas that only focus on growth and what we actually need to grow and to diversify in different markets to different products and of course, the new content we’re producing. There’s – of course, there’s a lot of room for optimization. It’s from every single department. But I would have to say for our business perspective today, the majority of the work is automated. The majority of the process is automated. We are becoming more efficient in the way we’re operating, the way we actually build in games, we’re investing in our technology. We actually have, at this stage, I would say we’re very well positioned to further growth with the same team and the same operation we have today. So yes, there’s a lot of growth. There’s a lot of opportunities for optimization. But I think we’re already there. I think what we’re seeing right now, what we will be seeing right now is more commercial and more revenue coming from the same team from the same functionality and infrastructure we have right now.

Thanks for that context. My second question is around the BetCity contract. I was just wondering it’s nice to see the risk contained here. Is the final outcome in line with what you were expecting as you started negotiations? And are there any other opportunities to work with BetCity that came out of those negotiations?

Yes. So our original agreement had a 5-year term with a 12-month termination notice. So we’re happy that we managed to secure the extension of the deal and it’s obviously in line with our expectation. BetCity and Entain as a group are a key partner of ours, and we’re proud of what we have achieved together. We’ve been having a very constructive dialogue over the recent past, and we hope to be able to power the BetCity brand and Entain Group as a global powerhouse going forward. We are, right now, very focused on making sure that BetCity continues to effectively utilize our products and continues to grow. And I think it’s positive that that we have secured the longevity of the deal, and we have now a clear path where we have continued support of Entain strategic initiatives in the market. Entain as a, like I said, a global operator presents a large opportunity for us as a content provider for us as an aggregation solution provider and for us as an engagement solution provider. So we will work together with Entain BetCity to implement these solutions into their B2C network across all different jurisdictions in 2024 and obviously, 2025 and hopefully achieve similar success as with BetCity.

Okay. Thanks for that. Lastly, just a quick one for Ron. On the working capital, free cash flow, you guys are expecting to do – continue to improve and grow. Just wondering if there’s any color you could give in terms of how working capital ebbs and flows in the coming quarters if you require capital to scale just from a working capital perspective?

Yes. So as you’ve seen in the last 9 months of operation, the working capital relatively remained the same, 6.3 million, about 6.6, dropped to 6.3 of course, with high adjusted EBITDA compared to previous year. So we believe that in the next couple of – I would say, the next 9 months, we’ll be able to generate relatively the same type of profit. We are definitely funding our investment in our software development cost, which I think is going to be relatively the same. I don’t think there’s a big expectation to be much higher than that. We can serve the debt. That’s what we’re doing. And I think, excluding the changes in working capital in the last 9-month period, we definitely conserve that and the working capital would probably will improve with everything we’re doing right now. So I’m quite confident that it will be slightly higher than what we think right now compared to compared to what we did so far. And we will improve that the €3 million, €4 million in the next couple of months on time. That’s on the basis that we’re going to secure the debt and we’re paying on a regular basis to avoid any dilution to the shareholders.

Thanks for taking my questions. I will pass it on.

And our final question today comes from the line of Sid Dilawari with Cormark Securities. Sid, please go ahead.

Hey, good morning, guys. Thanks for taking my questions. Firstly, just on the Ontario market, maybe if we can speak about the general landscape in Q3. You’re now live with Bet365, Rush Interactive and maybe a couple of others. It seems like there was a minimal sequential growth on the number of live operators. And just given that dynamic, do you see your future growth in Ontario from penetrating further with current operators or from new operators coming back to the market.

So we are seeing future growth coming from existing operators. Like I said, we are going to grow our wallet share with these existing content-only operators. And I believe they present a revenue growth opportunity as well as new operators coming into the market. Ontario has been a market that is growing slower than expected, but I believe that we are going to be able to increase our presence in the market through existing and new operators like I said.

Okay. Thanks. And then just going back to the PAM extension agreement with Entain and BetCity. Nice to see obviously. Your PAM market share in the Netherlands also remains resilient. Any commentary you can provide on the competitive landscape there? And if you have opportunities now with more localized content to penetrate further in that market with more operators other than Betcity.

Yes, we are – we have established ourselves as a leading PAM solution provider in this market. We believe that we have more opportunities to grow as the PAM and aggregation solution provider in this market. And we also believe that we’re going to be able to leverage our position as a leading PAM solution provider and aggregation solution provider in the market to grow our wallet share, like I said, in the market. And I think that Netherlands has been a great market for us in the last – over the last 2 years. And we believe that we are going to be able to maintain our position in the market moving forward.

Okay. And then just one last one for me. Just on the M&A landscape here. We’ve seen some industry consolidation over the last few weeks, as you also alluded to in your prepared remarks. Do you see any opportunities in the near-term to be acquisitive at accretive multiples? And if so, would you focus be primarily on gaming studios or somewhere else?

Ronen, do you want to take this question?

Yes, sure. Thanks, and thanks for the question. We can see from recent M&A activity in the market that Obviously, capital markets are undervaluing companies, successful companies, and we’ve seen recent examples in the acquisition of Aristocrat of Aspire and obviously, the recent acquisition that was announced yesterday between Segasami and GaN, companies that are trading at much lesser valuations than what companies are willing to pay for in terms of cash. And that, in our opinion, is the true value of companies, and I think that is not in the capital markets today. That’s on the landscape in general. But in terms of in we have – we have anything that we need in-house in terms of the content studios, in terms of the distribution agreements and especially the technology. We’re looking to continue to grow the business and expand within our customers and to new customers and in new jurisdictions. And if there’s an opportunity on us to be acquisitive, then of course, we’ll look into it. And of course, as a public company, there are a lot of other opportunities to be in the M&A space, and that’s something that we are open to and always are on the lookout for.

I’m sorry. So in terms of potential targets would they primarily be focused towards content producer as in gaming studios or somewhere else?

Mostly content. I mean we have all the tools in-house that we need in terms of the technology, the distribution and the licensing. And so if we were to be acquisitive, it would be about content and differentiated content that is localized to the jurisdictions where we operate in and what the jurisdictions that we want to operate in.

Okay. Thanks for the clarity. I’ll pass line.

Thanks, Sid, and thanks to all our callers with questions today. And with that, I will now turn the call back over to Yaniv Spielberg for closing remarks. Yaniv, the floor is yours.

Guys, Thanks everybody for joining our call. Thank you for being interested in Bragg. We’re closing another very successful quarter, and we look forward to hosting you on our next quarterly call. Have a great day, everyone.

And ladies and gentlemen, that does conclude today’s call. Thank you all for joining, and you may now disconnect.