Ladies and gentlemen, thank you for standing by, and Welcome to the Bragg Gaming Group Q2 2021 Conference Call. At this time, all participants' lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker, Yaniv Spielberg. Thank you. Please go ahead.
Thanks, Phyllis. Good morning, everyone, and thank you for joining our Second Quarter 2021 Earnings Conference Call. I'm Yaniv Spielberg, Chief Strategy Officer for Bragg Gaming Group. I'll be hosting today's call alongside my colleagues. Ronen Kannor, our CFO, will present the results, and our Chief Executive Officer, Richard Carter, will comment on our H2 performance and give an update on the business. For the first time on this call, we will be presenting a Q2 presentation. If you have not already done so, you can download our Q2 earnings call presentation from our website at bragg.games/investors, and on that page, you'll see investors presentation. The presentation is called 2021 second quarter earnings presentation, to follow the points that Richard and Ronen will walk you through. In this call, we'll review Bragg's financial and operating results for the second quarter of 2021.
Following our prepared remarks, we will open the conference call to question and answer period. I will 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 and industries.
While we believe these assumptions to be reasonable, they're subject to a number of risks, uncertainties, and other factors, many of which are outside 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 disclosures. I'd just like to remind the ones who haven't heard and just joined the call. This time, we'll be presenting a Q2 press release. You can download the press release on our website, bragg.games/investor, and under the investors presentation, you'll see 2021 second quarter earning presentation. I'd like to turn the call now to our CFO, Ronen Kannor. Ronen?
I think that we have a little bit of a problem with Ronen's connection, just give us one second. Richard, do you want to take it and start with the rest of the presentation, and Ronen will join in a minute? He said that he was cut off, he's calling back.
Sure. Do you want me to start with my slides then?
Sure.
Go back to... [crosstalk]
Sure. We'll go back to the financials only because Ronen was cut off from the call.
Good morning, everybody. Throughout the second quarter, we made meaningful progress with our strategic growth initiatives, including expanding existing customer relationships, building out a pipeline of premium in-house iGaming content, and providing our content and offerings to new markets. These and other strategies are transforming Bragg into a leading global content-focused B2B iGaming provider. Before reviewing our strategic growth initiatives in more detail, I want to address the new iGaming regulatory regime in Germany. Following the new iGaming regulatory regime in Germany, which became effective on July 1st this year, revenue contributions from this market are expected to decline in the second half of 2021 and into 2022 compared to historical levels.
These changes are fully anticipated in Bragg's growth forecasts and are expected to be offset by strong growth in both new and existing markets, as well as from new clients and from increased profit margins as a result of developing more proprietary content and from our acquisitions. In the first half of 2021, German revenue outperformed and represented 65% of total revenue, which has resulted in a higher base going into the July rule changes. Since those rule changes came into effect, player behavior and invoice revenue has trended in line with our expectations. We have budgeted that monthly German revenue will bottom out in Q4 2021. Looking into 2022, we expect to launch additional new licensed clients in Germany, coupled with launching new in-house developed casino content.
There is also an expectation that the German regulator should start to address the unregulated offshore operators later in 2021, which should limit some of the offshore flow to unlicensed operators. However, to be cautious, we are not assuming any recovery from the Q4 2021 run rate and anticipate German revenue to compromise approximately 10% of 2022 revenue. This slide that shows that German regulatory impacts for 2021 has been fully anticipated in Bragg's growth forecast and is expected to be offset by strong growth in both new and existing markets, as well as from new clients and from the acquisition of Wild Streak. We expect general regulatory impact of 2021 revenue to be EUR 8.2 million, and for this to be offset by EUR 4 million from underlying market growth and EUR 4 million from the launch of new clients.
We also anticipate that Wild Streak will now contribute EUR 2 million of revenue in 2021. This results in an updated 2021 revenue guidance for the group of EUR 49 million, up from EUR 47 million previously. We have also today increased our EBITDA guidance from EUR 4 million to EUR 5.4 million. Our previous EUR 4 million EBITDA guidance has been maintained. We have reflected EUR 1.4 million of EBITDA for Wild Streak. Let's turn and look at the group's 2022 revenue outlook. As already commented, we expect 2022 German regulatory impact to be more material and are estimating an EUR 18 million impact. We expect this to be offset by entry into new markets like the U.K., Italy, Canada, the Netherlands, and the U.S., which I'll talk about a little bit later.
We also expect to see growth from clients launched in 2021 coming into 2022, and from the addition of new clients, and by the ramping up of the delivery of games from our proprietary in-house content studio. We'll also see a full-year contribution from acquisitions. Taken together, this is expected to result in 2022 revenue of between EUR 54 million-EUR 56 million. We anticipate that EBITDA will be at least at the same level for 2021. Now let's look in more detail at strategic growth initiatives we started to advance in Q2, including our in-house content strategy, third-party content, and new market entry plans that will not only rapidly mitigate the near-term German regulatory impact, but will enable the group to transform its future revenue growth opportunity and significantly expand group EBITDA margins over the medium term.
An important building block for accelerating this strategic transition was the acquisition of Wild Streak Gaming, which we completed on the 2nd of June this year. Wild Streak Gaming will significantly help transform Bragg's business going forward as we shift from primarily providing third-party online content to be predominantly focused on providing in-house developed online content that will carry significantly higher gross profit margins. Wild Streak Gaming, a leading U.S. and European-focused proprietary casino content studio, provides Bragg with a library of 40 casino content titles, as well as expertise in game design, slot mathematics, and advanced game features. As of June 30th, Wild Streak Gaming had seven online casino games live in key iGaming markets, including New Jersey, the U.K., and other regulated jurisdictions in Europe, which have helped grow Wild Streak Gaming's adjusted EBITDA by 940% during the first half of the year. Looking forward, we believe that material further growth opportunities exist for the following reasons.
Wild Streak had only seven online games at the end of the second quarter, with four released during the first six months of the year, but now has plans to release a minimum of 16 games per year in 2022, with that ramping up in the following years. In the U.S., Bragg was operational in only one state, New Jersey, and expects to grow into other regulated U.S. states in the second half. Finally, Bragg's offering will benefit from the large distribution network available through ORYX RGS and from the company's player engagement tools. Further underpinning growth, Bragg has also shown significant growth in GGR from Europe since the beginning of 2021, as shown in the next slide. It released four new titles with Pragmatic Play and plans to release one more game in 2021.
These games achieved EUR 37 million in GGR in the first half of 2021 and have proven to be very sticky since being deployed, underpinning the quality of the Wild Streak game mechanics and features. As you can see in the next slide, compared to the average of our Q1 exclusive game releases by the ORYX RGS. Three, four, and five after release when compared to the first month of release. For example, in month three, Wild Streak games showed wagering was around 50% of the levels seen in the first month, compared to 30% for games we launched from other studios. As already stated, we expect Wild Streak to add EUR 2 million to group revenue in 2021, and EUR 1.4 million of EBITDA, which represents a seven-month contribution.
While in 2022, at this stage, we expect Wild Streak to add EUR 5 million of revenue and close to EUR 4 million of EBITDA in 2022. Another important milestone in the quarter was the acquisition of Spin. We continue to make progress with the U.S. and Canadian licensing process related to the Spin acquisition, and we expect to complete the acquisition in the fourth quarter as previously communicated, pending regulatory approval. The technical integration between Spin Games and our ORYX Hub distribution platform is already completed, and the combined offering will deliver the benefits of ORYX's RGS in-house content, advanced player engagement, and data tools, alongside Spin's U.S. market content and operator relationships, providing a differentiated and widely distributed iGaming product offering.
Following the completion of the transaction, we will gain access to key strategic operator relationships in the U.S., where Spin Games has over 30 customers, including iGaming customers such as DraftKings, Golden Nugget, and Penn National Gaming, to name a few. We plan to leverage these relationships to initially cross-sell our existing European casino content, followed by the new proprietary online casino content that we are currently developing to address the U.S. and Canadian markets. Now let's turn to the near-term and medium-term market size opportunity for the group. We believe the greatest opportunity for growth is in the online casino segment of the online gaming sector. Within the key markets of North America and Europe, online casino has a larger TAM relative to sports betting and has historically tended to be materially more profitable for operators.
We expect the current trend for online casino regulation in North America to continue underpinning the group's growth opportunity. Bragg historically, given its European focus, has operated in targeted markets that represented only $2.8 billion U.S., or only 20% of the EUR 14 billion European online casino market. Looking forward into 2022, we expect to increase the group's total addressable market by a factor of sixfold to EUR 18 billion. This will be driven by entering the U.K. market with an estimated market size of EUR 5.5 billion, entering the Italian market with an estimated size of EUR 2 billion, the Dutch market with an estimated market size of EUR 4 billion, and the U.S. market with a TAM currently run rate of over $3 billion. We expect all this to open up for Bragg during the fourth quarter of this year.
As we move into 2022, we are very excited about the opportunities that the Canadian online casino market presents to the group, given we will have relationships with many of the leading North American operators via the acquisition of Spin, coupled with our existing European operator relationships. In addition, via Spin, we expect to be licensed in British Columbia with a Q2 2022 go-live date already slated. We are in the process of building our go-to market strategy for Ontario for a Q1 2022 launch following the recent enactment of a law that creates a regulatory framework for competitive iGaming and mobile sports wagering market. Today, the Canadian online casino market is estimated to be currently worth approximately $600 million USD, which includes offshore operators.
Following the privatization of Ontario and the expected market entry and investment from many of the leading global online gaming and sports betting operators into this province, the total online Canadian casino market is expected to grow materially with an estimated TAM of between $2 billion-$3 billion by 2025. As way of reference, Ontario represents about 40% of Canada's population. If Ontario was a U.S. state, it would be the fifth largest state by population. Based on the current New Jersey online casino spend per adult would have a TAM of approximately $2 billion. Taking a closer look at our roadmap to expanding our market reach. We're already ramping up our presence in new European markets. We received our B2B license to supply in Greece last week.
We have completed the certification of our games for the Netherlands in preparation for when the market opens, currently anticipated for October the 1st this year. We have signed a platform deal with JVH, one of the leading Dutch land-based operators, and expect to announce more deals in the run-up to this market opening up. As mentioned, we expect to be ready to supply games in the top European markets of the U.K. and Italy from late Q4 this year. While in 2022, we expect to ramp up in all other territories, as well as rolling out in the U.S., Canada, and other markets globally. As you can see on the next slide, the other core pillar of our future growth will be driven by our in-house and third-party content strategy.
We have made strong progress during the first half of 2021 in commercializing our in-house studio, and with the addition of Wild Streak, we are now in a strong position to increase our output of games produced from our in-house studios, which capture a greater share of the value chain compared to distribution of third-party games. The completion of the Spin acquisition in Q4 will also significantly add to this. In addition, we will continue to look to add differentiated and appealing third-party exclusive content and are currently in discussions with several Tier 1 studios for the exclusive rights for further slot titles for both the U.S. and Europe. On the next slide, we illustrate graphically the progress we are making and expect to make into 2022.
This year in 2021, we expect to release a total of five games from our in-house ORYX Gaming Studio, which will represent about 11% of all exclusive games we will release this year via the ORYX RGS. In 2022, we have a roadmap of 19 proprietary games to be launched in Europe from our ORYX Gaming Studio, representing 33% of exclusive games which we plan to release by the ORYX RGS in Europe for the year. In 2022, we expect to release a further four proprietary games from the ORYX Gaming Studio in the U.S., while our Las Vegas-based Wild Streak Gaming Studio will release 10 proprietary games in the U.S., giving a total of 14 fully owned online slot game titles expected to go live in the region and representing 37% of all exclusive games expected to be launched by the company in the U.S. in 2022.
Overall, we plan to launch a combined 96 slot titles in 2022, which implies more than 100% year-on-year growth. Out of the 96 titles, 33 or 30% will be in-house generated content versus 11% this year. Now let's look at how these key growth initiatives are expected to change our revenue and margin profile going forward. Today, as you know, the majority of our revenue and gross profit comes from the distribution of exclusive games built by third-party studios on our ORYX RGS. The revenue generated from these games is shared with our third-party studio partners in the form of a royalty fee, which depresses our gross profit margins, while revenue from our in-house platform and our in-house developed games converted close to a 100% gross margin.
As we pivot towards our in-house led content strategy, we expect to take our gross profit margins from around 33% today up to 60% by 2024. Which would in turn will drive our EBITDA margins from 12%, which were in 2020, to between 20%-25% by 2024. Now in conclusion, Bragg possesses many competitive advantages, including proprietary modern technology and development resources that enable us to innovate rapidly and develop content quickly. With our technology platform, growing proprietary premium content portfolio, value-added player engagement tools, and global distribution capabilities, we believe Bragg is well-positioned to capture a growing share of the large global iGaming market. These factors, combined with our low capitalized expenditure requirements and predominantly fixed cost operating model, will enable Bragg to materially grow revenue and adjusted EBITDA margins over the medium term. That concludes my comments.
If Ronen is on the line, I'll pass it over to Ronen.
Yes. Thank you, Richard, and good morning, everyone, and apologies for the technical issue. I will start with slide number three. Revenue continued to grow in the second quarter, increasing by 27.6% up to EUR 50.5 million. The key driver to growth derives from the gaming content segment and was driven organically by German-facing customers alongside promising growth from European and rest of the world customers, which grew 20% sequentially and represented close to 40% of the total Q2 revenue. During the first half of 2021, the group launched approximately 20 customers, which will also lead to further growth and a continuing improvement to the new customer pipeline for the following years. The regular revenue generated by customers has increased, rising by 15.9% to EUR 3.8 billion as compared to EUR 3.3 billion during the second quarter of 2020.
We've also seen a 21% increase in unique players using the Bragg Gaming content, which is up to 2.3 million from the 1.9 million last quarter. Both operational KPIs were in a positive direction. The strong growth numbers demonstrate the strong demand stemming from our unique content portfolio and continual developed technological advancements. The gross profit increased by 37.5% to EUR 7 million, while improving the margin by three points to 45% as opposed to 42% last quarter. This is predominantly attributed to the shift in the proportion of revenue from the games and content into the iGaming interaction services, which represented today 12% of the revenue that had no cost of goods impact. The group profitability continued to improve. The adjusted EBITDA for the quarter was up by 8.5% to EUR 1.9 million, with a margin of 12.3%.
The margin decreased by 2.2 points, mainly because of the group investment in talent in our technology, compliance, and sales teams as part of the group expansion plan. Now I'll comment on the business highlights from the second quarter. We are continually adding new customers and expanding our global footprint. During the quarter, we added 5 B2C operators in various jurisdictions. During the quarter, we also strengthened our foothold in Spain and Mexico by launching new partnership with Casumo and Logrand respectively. We improved our casino gaming offering by launching 11 new exclusive slots, of which two were developed by our own in-house studios. We launched these new proprietary games across our network with encouraging trading signs and with additional games planned for the remainder of the year. Our patron continues to grow, and we have retained 100% of our customers since Bragg's inception in 2018.
Although our customer retention is excellent, our dependence on our top 10 customers has also improved, with a decrease from 64% in Q2 2020 to 57% in Q2 2021, and we anticipate this trend to continue. Now we move to the next slide, page four, and I'm going to talk about how we reconcile operating loss to a positive adjusted EBITDA. The adjusted EBITDA amounted to €1.9 million, with 12.3% margins and representing underlying improvement performance with an operating loss of €1.8 million. The gap can be explained by three main non-cash and exceptional items. The first is share-based payment charge as a result of the work of directors and management in Q1 of this year and last year. The second is the transaction acquisition cost relating to the transaction of Wild Streak Gaming and Spin Games and the deployment of the corporation M&A strategy. Third is exceptional costs.
This includes legal and professional fees on the NASDAQ listing and other non-recurring regulatory and legal matters. I'll now pass to page five in the presentation. Bragg has a solid balance sheet with improved working capital from continuing operation. Cash balance in the end of June 30 was EUR 21 million, as opposed to EUR 16 million in December 2020, with no debt facilities, as this has all been cleared early this year. A net working capital of EUR 11.7 million as opposed to EUR 6.7 million at the beginning of the year. The group has a projected positive free cash flow generation. There are no main CapEx or technology debt requirements for our strategy. From a cash flow perspective, in Q1, the group completed acquisition of ORYX Gaming with a payment of EUR 11.5 million.
In Q2, we completed the acquisition of Wild Streak in the value of EUR 8.2 million, and we raised financing through the exercise of warrants relating to last year fundraise in the value of EUR 111 million. Now Richard and I are available to take some questions. Thank you.
Thank you. Your first question comes from the line of Matthew Lee with Canaccord.
Hi, guys. Congrats on the good quarter. I just wanted to talk a little acquisition strategy here. Can you maybe highlight your priorities in terms of targets and if you feel like you have the adequate capital to capture the full acquisition opportunity right now?
Morning. We've made a couple of acquisitions recently which basically closes the hole that we had. As of right now, we are just integrating those into our portfolio, and we don't really feel the need that we need to make any acquisitions near term. We're quite happy with where we are, and I think we've got enough on our plate to manage in the near term.
Fair enough. If you're thinking about the content library and building the proprietary asset that you own, would that be possible to be supercharged by a couple additional studio acquisitions, or is that not something in the cards?
We can supercharge that, and we're in the plans with putting that in place by adding a couple of games producers, which given our scalability and given the resources we've got in place, if we add one games producer, we could probably add 20 odd titles a year. If we add two or three games producers, we can turbocharge or supercharge our growth off of that, and obviously that's something we're looking to do.
Right.
Of course, if there's the right acquisitions out there, which is at the right price that we think adds value, then we would obviously look at that. I think it has to be an acquisition that adds value to our business and improves our business. I think as we alluded to in this presentation, the performance of the Wild Streak games are the top percentiles of this industry. It's going to be quite difficult to find that type of acquisition. We've been very fortunate. We don't really want to be buying things that is diluted to the underlying performance of what we're trying to aim at, which is at the premium end of the market.
Right. Maybe I could just clarify on the Canadian market. Is it fair to say that Bragg is going to be ready to go in terms of every province as iGaming gets liberalized?
Well, through the Spin Games acquisition, we obviously got British Columbia covered. We're obviously in the process and talking to other provinces. Obviously if they pivot and regulate, then we'll be well-placed. We're talking to the incumbent lotteries. Obviously from an Ontario perspective, I think we're well-positioned. Yes, is the answer to your question. I think we're well-positioned to capture the opportunity in Canada.
All right, great. Thanks, and congrats again.
Thanks.
Your next question comes from the line of Neal Gilmer with Haywood Securities.
Yeah, good morning. Yeah, congrats on the quarter. Appreciate the slides that you walked through, particularly sort of understanding the moving parts there with Germany and your revenue guidance. Guess I wanted to touch on one thing or actually a couple things. Number one is your revenue guidance for 2022. I assume that includes the acquisition of Spin. I know you expect it to close in Q4, I assume that that's sort of factored in for the start.
Yes. Yep.
You made some comments that what was in the press release, sort of the EBITDA should be sort of similar to 2021. I guess I was thinking with the launch of all the games that you were talking about, I think you said 33 going into next year, obviously the contribution of Wild Streak into that. Surprises not a little bit of an opportunity for margin expansion in next year, aside from what you walked through on sort of your plan to get to 2024. Can you just sort of help understand the reconciliation?
Sure. Obviously as we go through next year, the plan is obviously to build out and establish this content strategy. We've assumed quite a bit of cost specifically on the technology side, which will then enable us to significantly ramp up in later years at a much lower cost. From that investment, if we were to take that out, then yes, you'd have definitely a bit more of expansion. Obviously we're also growing next year into a lot of these markets, so the U.K., Italy. There's definitely a bit of cost that we need to put in there to help grow that. As we go through next year, we'll look at that and hopefully come back with some more positive news around that level.
Yeah, I think what you're saying makes sense, but we just given it's very early days and there's quite a few moving parts in terms of growth, and obviously we want to this is not about next year, this is about 2022 and 2024. We really think given the content we have, we have a real opportunity here to capture a sizable part of the market, and we want to make sure that we lay that investment to be able to do that.
Okay, great. That makes sense and helpful. I guess my second question then I'll pass the line, just maybe digging a little bit further on some of your comments with respect to the German market. What you've put here. Is your expected impact or whatever. Is there a chance you're being overly conservative, or you really think that that's sort of where things sort of trend out to? There's that one slide, I think it's slide six where you sort of have where it comes down and sort of flat lines in that Q4.
Yep.
sort of half a million euros a month. Is that sort of the worst-case scenario? Is there a couple of different things that you think that might transpire that could be slightly more positive to the impact of the German business for you guys?
Yeah. We've obviously given there are quite a few unknowns in terms of Germany. We've tried to be very conservative with how we've factored that in for the business. In terms of what I would tell you in terms of what are the sort of moving parts, the key is obviously a huge part of the market is still being played offshore. If over the coming quarters, we start to see the regulator being a bit more aggressive, then that is a really big delta. If more of the market comes onshore, that's obviously going to significantly help with our growth there. That's the big sort of unknown. It's obviously difficult to predict when that will happen, if it will happen. We've taken the view that that's not going to happen. Now, obviously, July's done very well, and we'll have to see.
August looks good. We'll have to see how that trend continues. Yeah, I hope we're being conservative. Given that a lot of the market is still being played offshore, it's difficult to time when the regulator will make any moves. We've seen this in other markets across Europe where a significant amount of the market. If you look at Sweden, people estimate like 30% or 40% is still offshore. The other obviously important bit in Germany is it's still very early days. It's the summer. I don't think operators have started to really spend a lot of money on marketing.
I think as they get a bit more confidence, and if we start to see a bit more move back onshore, then I think you should get some of our operators spending more money on marketing, and that will obviously transpire into greater revenue for us. The other area obviously is that we believe with the content we have and our understanding of the German market, we are going to release content into Germany next year, so that will hopefully also help us from a competitive market position. There are quite a few sort of moving parts there and we try to be as conservative as possible to give ourselves some upside into next year given the sort of unknowns that we have to deal with there.
Fair enough. Thanks. I appreciate your insight on that. I'll pass the line.
All right. Thank you.
Your next question comes from the line of Adhir Kadve, with Eight Capital.
Good morning, guys. Congrats on the quarter. I just wanted to maybe touch on your customer pipeline. You said you're going to be entering several new markets. You've obviously had a good streak of customer acquisitions. Can you maybe talk about what's in the pipeline? I know last quarter you said you had several different customers in the pipeline, and maybe just speak to how they're converting and which markets maybe you see a stronger entry into.
Sure. The pipeline, I think, is significantly strengthening, and it's strengthening based on the fact that we now have market-leading content. We're still going through the presentation and the roadmap. The real drive in terms of customer acquisition is going to occur over the next sort of three to four months. Based on very early feedback, it's been very, very positive. You can see from Q1 and Q2. As we go through the second half of this year, and obviously as we go into more markets, we're naturally just going to add a lot more operators because these are all virgin territory for us. There's obviously a lot of incumbent operators in these markets that we don't have relationships with.
I think when we come back in the next quarter, I think we'll be in a bit of a stronger position, and we'll give a bit more update on actually what we've seen in terms of that pipeline. From what I see right now, it's expanding significantly and I'm very optimistic about what conversion we'll get on that pipeline.
Okay, great. Thank you. I think last quarter you guys mentioned that you launched your first proprietary in-house consumer games with Oryx. You said obviously you had five more in the pipeline. Can you maybe speak on some of the early results from the one game that you launched last quarter and kind of how you're going to use that for the five extra games that you're going to be adding this quarter?
The one thing I'd say is since obviously we made the Wild Streak acquisition, the world has changed upside down. We've got one of the best game designers in the world with access to some of the best mathematicians. Looking at our game right now versus what's coming down the pipe is not really comparable. Now, in terms of the performance of that game, it compared very favorably with the games we launched this year. That's obviously exciting from that perspective. The second game obviously performed better than that. Recently, Doug Fallon, who is the founder of Wild Streak, has been overviewing the sort of upcoming games from the ORYX studio.
You can't really compare, I don't think, because just in the recent game is basically just to give you an idea I think over a three-week period, he reviewed it and I think changed the math model five times and some of the jackpot features. It's a completely different proposition and game from what we had before. From that perspective, I'm pleasantly surprised with the performance given it was our first two games. I think with the oversight of Doug and his team, you'll see a material improvement in the next games coming.
Okay. That's great. Thank you very much, guys.
Thank you.
Your next question comes from the line of David McFadgen with Cormark Securities.
Oh, great. Yeah. Thank you. A couple of questions. First of all, on Germany you talked about how a good portion of the market is still being served by offshore operators. I was wondering, can you give us an idea of what you think percentage of the market is right now that's offshore still?
Uhmm, 65%.
Yeah. Okay. To that... [crosstalk]
Maybe a little bit more. The reason why it's that high, if you think about the sort of 80/20 rule, the really sort of profitable players or high rollers, they're all playing offshore. Just disproportionately, it's a higher sort of proportion of the revenue which is offshore currently.
We're going to need some action from the regulator to tail that. Is that going to be the primary driver to get that down?
Well, I think there's a couple of things. There's the onshore regulated market, which we expect to bottom out. I actually think it will grow considerably once operators start to market as new players come in. Remember what's happened overnight. You've gone from a market that had on a game an RTP sort of 94%-95%. Those RTPs are down at 90%-92%. It's going to take some time for players to adapt to that new market. I think it's too early for us to comment. I'll leave that to people that are much more qualified than me from an operator's perspective. We're sort of slightly pleasantly surprised with what we've seen so far, it's still very, very early days. You have this offshore market, which theoretically will probably continue for some time, especially the bigger high rollers.
You've got this new market, which people obviously adapt to the new sort of world of this sort of different RTP. Slowly with more time as it goes by and more innovations and games and then just the industry just growing from a marketing perspective onshore, then hopefully you should see some reasonable growth from the actual regulated marketplace. Over time, I guess what we've seen in other markets is that the offshore market will slowly decrease. To get that big chunk back onshore, given a 5.3% wagering tax, I think would be an optimistic assumption.
Okay. Just in terms of the new markets, I'm just looking at slide 8 here. In terms of new markets, the Netherlands, you announced a customer, a very big customer that you're going to be serving.
Yep.
Can you talk about any customers that you're going to be serving in the U.K. and only in Canada, or is it just too early right now?
Not really. I think you can go through the relationships we have, and with quite a lot of the big operators specifically in the U.K. The big operators in Italy are more the incumbent operators that don't tend to operate in multiple jurisdictions. We have a lot of relationships already with the U.K. operators that are operating into the markets where we focus. I think we obviously applied for our license. We're still waiting for that, and once we get that, then I think it would be prudent to just wait for that, and then we'll talk about it. Clearly, there's quite a bit of overlap with customers we have today in other markets that are in the U.K. I think we said it before that there's not particularly a great deal of investment needed to sort of turn that on the U.K. It's a little bit more in Italy.
I guess in Canada, we'll hear announcements of deals that you've put in place.
Yeah, we've got the British Columbia deal, which is a very nice deal with Spin.
Yeah.
They're talking to the other lotteries, so I would expect more of the other lotteries to follow. The regs I was reading came out in the last few days, so we've been going through them. I think operators should start to be ready sort of Q4-ish, late Q4, and you'll hear from us around that. Given the Wild Streak business, and obviously given how well those games perform land-based we're very optimistic about that content and that really resonating in the Canadian market. Just as an example, Dragon Power, which is a game that whilst it was launched, is a top-performing game in New Jersey that month in, month out, continues to be performing very strongly. We've got a lot of confidence that the content we have will really resonate in the Canadian market and create a really sizable new revenue stream for the company.
Okay. Just on slide eight, you talked about the 2021 pipeline. Existing customers in various markets forecast to grow annual growth rate of 10%. Is the primary driver there them taking more of your games? Yeah. [inaudible]
Say that again, sorry.
Is the primary... [crosstalk]
Say that again.
Is the primary driver for these existing customers to grow 10% in the 2021 pipeline, is that from them taking more games from you and just using more of your content more?
Yeah, it's a combination of different things. Obviously, them growing their business, they're growing. If you look in most markets, most operators are growing 10% to 15%, depending on the market. They're bringing new operators in, they're going to play your content. There's also an element of some existing content and then new content. It's a combination. Generally, though, it's the underlying market growth.
Okay. All right. Thanks for the slide deck. It is very helpful. Thank you.
All right. Thanks.
Your next question comes from the line of Lisa Thompson with Zacks Investment.
Good morning.
Good morning.
I have a few questions about what you're thinking about next year. Do you have any feel what your revenue breakdown might be between North America and Europe by 2022?
I do but I don't really want to get into that level of detail right now. Clearly I think we've given some guidance on Wild Streak, and a good chunk of that is going to be U.S. and North America. We'll update on that probably later on in the year. I don't want to get drawn on dissecting the market.
Okay. Is there any significant difference in gross margins between the two geographies, or is it just based on how many of your proprietary games sell where?
Yeah, it depends, obviously. Is there any difference between gross profit margins in the U.S. and Europe? Not materially. You could probably argue we get more scalability in Europe than the rest of the world because it's not the same processes, and obviously the U.S. is sort of at the moment four smaller markets. It's not material.
Do you ever anticipate that maybe your top 10 customers might not be the same top 10 next year?
Yes, definitely.
Okay. Just trying to relate to your proprietary games, and as an old video game analyst, is there a possibility to have breakout games that are wildly profitable and popular?
There is, obviously, and we're hoping we get that. We're not assuming that. We've taken extremely conservative assumptions around that because it's very difficult to forecast that. If the games in the U.S. are anywhere near the same level as Dragon Power, then we're massively underestimating the performance of our games. If the games are going to be anywhere near the games that have been launched so far on Pragmatic, again, we're significantly underestimating, and it's very difficult. You can talk to all the content studios. It's very difficult to predict. I speak to all these entrepreneurs that run these studios, and they can't tell you if a game's really going to be a breakout game. They can tell you if it's going to be a good game. Yeah, it's very difficult to predict a breakout game.
As a business, we need to provide a consistent level of performance to our partners. If we're able to just do that, then that just will materially strengthen our relationships, and that will allow us to grow and be an incredibly profitable business. If we obviously were able to get a hit, then obviously that would have a halo effect as well, and that will just obviously lead to the advantages of having that in terms of just publicity and obviously underlying performance from that game. It's about consistency rather than having a one-hit wonder. We want to be in a position where we ramp up into 2023 and 2024 and our games are just consistently performing, which is what's been the case with the Wild Streak Games over the last year.
In your industry, do you have the opportunity to say, license things, characters, or on the opposite side, get ad revenues to incorporate, do a game for some hit movie or something? Is that a thing?
Yes. In the last three weeks, we've been having conversations with third parties and looking at brand licensing. A lot of the major land-based operators, specifically in the U.S., will tend to have a brand licensing portfolio. Scientific Games has James Bond, IGT has its brand licensing, House of Cards has it. It's similar in the online space. Yeah, we're currently looking at those options. I think we will probably definitely look to have some branded content over the medium term.
Your next question comes from the line of Daniel Weiss with MCO.
Hi, Richard. How are you doing?
Yeah, good, thanks.
I'm just wondering if you could give the update on the NASDAQ listing. Any color there?
Well, not really. The color is we put in the presentation. Yaniv, do you want to talk about where we are with it in terms of the process?
Thanks. It's just a procedural process, as Richard said, Daniel. The paperwork has all been filed with the regulators. It's just a waiting game now. It's obviously hard to say how long is the waiting game because it's regulators, but we're confident, as we said in our last press release, that it will happen soon. We're just waiting to get the approvals.
Okay. Thank you very much. This is cool.
Your next question comes from the line of Peter Wylie with Crestmont. Peter, your line is open.
Hi, good afternoon. Thanks for the call. Just a final question from my side. Most of my questions have been answered. Just on the competitive landscape for acquisition targets like Wild Streak and Spin, can you maybe just talk to us how competitive is that market out there?
Sure. I think it's got a lot more competitive in the last three or four months. I think you're starting to see more people sort of looking at the sort of strategy that we've been putting in place. SciGames bought Lightning Box. There's no doubt that the valuations on these businesses are definitely increasing. We've been very fortunate that we were able to do the acquisitions when we did them. We're also very fortunate that we have the technology and the infrastructure to significantly scale up our business with just adding a few more mathematicians and a few more game producers. We don't need to go out now and pay the sort of prices that people are asking for.
There are still opportunities out there, and I think one of the advantages that we bring is that we are obviously pivoting to list on the NASDAQ and just having that equity angle. Obviously, the two deals we've done so far, a very significant proportion of those two deals, the two founders took equity, and obviously, they believe in the long-term combination of the businesses. Yeah, there's definitely a bit more competition. I think there's definitely a bit more people sort of circling and looking at casino content. I'm sure you've all seen the DraftKings Golden Nugget. Also the commentary around casino and the profitability of casino and the growth that it offers. I think it's definitely a bit of a hot space. Yeah, just a bit of that. I hope that answers your question.
At this time, there are no further questions. I will now turn the call back over to management for any closing remarks.
Thank you everyone for joining the call, and I hope we answered all your questions. Of course, as always, if there's any questions remaining, you can always reach us at info@bragg.games. Thanks everyone, and enjoy the rest of the day.
Thank you.
Ladies and gentlemen, that does conclude today's conference. We thank you for participating. You may now disconnect.