Earnings Call: Q4 2020

Mar 25, 2021

Earnings release

Ladies and gentlemen, thank you for standing by, and welcome to the Gaming FY twenty twenty Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. I would now like to introduce today's conference call to Mr. Yanis Spielberg, Chief Strategy Officer. You may begin. Thanks, Kevin. Good morning, everyone, and thank you for joining our fourth quarter and twenty twenty earnings conference call. Really appreciate your participation. I'm Yaniv Steelberg, Chief Strategy Officer for Bragg Gaming Group. I'll be leading today's call along with Brag's CEO, Adam Arviv and our CFO, Ronen Kanor. In this call, we'll review Brag's financial and operating results for the fourth quarter and the full year of 2020. And following our prepared remarks, we'll open this conference call to a question and answer session, which will be led by Adam. 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 questions that you may ask 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, regulatory changes that may affect the corporation, its subsidiaries, and their respective customers and 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, and 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 our publicly available disclosures, which we'll file this morning on SEDAR. Thanks for joining everyone. I'll now provide a business update, and I'll walk you through our recent operational and corporate developments. Following my comments, as I mentioned, our CFO, Ronen Kanor, will review our key financial results for the fourth quarter and the full year, and then Adam will take questions from the participants. I'm very happy to announce that we've had an exceptional strong quarter, the best to date and year, achieving exceptional growth and accelerating our progress on our company's strategic plan. We welcome two new Board members to the Board, Paul Godfrey, who all Canadians and maybe even the Americans know, and Lara Falzon. Very excited to have them. Lara Falzon was just appointed starting this month. We also announced yesterday the planned move of Brad, chair of the board of directors, Richard Carter, into the CEO role effective 05/01/2021, and we're very excited for this move. Cofounder and BRAG interim CEO, Adam Arviv, has chosen to no longer hold a formal role within the company, but will continue to be actively involved in the company as a significant shareholder. So Adam Arvi will step down from the board and the CEO position, when Richard takes on. Brad's stellar performance in 2020 also prompted the company's graduation to the TSX in your exchange in January, moved from the TSX Venture, which we were trading on for about two years. So very excited to be on the big board in Canada and looking forward ahead. Ords gaming performance has been exceptional. For those of you who are first on our call, Auric Gaming is an innovative b to b gaming platform technology provider. We offer full turnkey retail online mobile and iGaming solution as well as an advanced content aggregator with score book lottery and marketing and operational support. ORIX has continued its rapid growth trajectory through 2020, building on the foundation established last year in 2019 and accelerating its path as we continuously enter new global jurisdictions. I'd like everyone to note that on the call, both myself and Ronen will use euros, which is our operating currency. For the trad equivalent, you you can look at our press release that that was released this morning. Revenues, grew rapidly in 2020, increasing by 74.6%, to €46,400,000. We also look at wagering revenue as a measure of the activity through the ORIX platform. The wagering revenue has increased significantly, rising 73.5% to €11,800,000,000 as compared to €6,800,000,000 during the full year of 2019. Another KYC that we look at is unique players. We've seen a 113% increase in unique players using broad gaming and content, 5,870,000, up from 2.75 during the same period of 2019. We continue to transform the business into a global player in the b to b gaming sector as evidenced by our recruitment of Richard, Paul, and Lara and by our adherence to three pillars of growth that we set out at the beginning of the year. The three pillars that we focus on are enhancing our technology and product offering to offer full tech stack and be in line with the new changes in the industry, diversifying our revenues and expansion into new geographies, collaborating on key players in each jurisdiction through strategic partnerships and content deals. So talking about the enhancements of our technology and product offering, primary growth is derived from its casino product and aggregator platform. ORIX now offers more than a 100 more than, sorry, more than 10,000 seamlessly integrated casino games that can be accessed through a single player account. These games are provided by more than a 100 of the industry leading content studios such as Red Tiger, NetTant, Evolution, Amatic, and Progmatic Games, and also include exclusive ORIX RGS remote gaming service studios such as GammaMat, Peter and Son, CandleBets, Arkadan, and Colombo Games. We continue to launch new games on a quarterly basis and continue to sign partnerships with these and other providers in order to provide a wholesome portfolio of games for our customers. This is a very important point for us. The exclusive and unique content that we offer provides us with a unique, competitive advantage in the market. We continue to invest in platform enhancements, including new data driven end user engagement tools, build on gamification engines such as leaderboard and tournaments. Even with our rapid pace of expansion, we've been able to maintain our ability to close contracts and integrate new content and customers at a significantly faster pace than industry standard as quickly as two to four weeks rather than the industry standard of sometimes three to six months. This is critical in ensuring that we stay ahead of the latest trends in in gaming. We also work on diversification and diversifying our revenues. We continue to add new customers and expand our global footprint. We've signed agreements with 21 operators in the quarter, just the fourth quarter, and 54 operators for 2020. Our pipeline continues to grow, and we've retained 100% of our customers since Bragg's inception in 2018. We've also focused on signing bigger, longer term deals with larger operators who were able to offer more of our platform services. Although our customer retention is excellent, in 2020, we decreased our dependence on our top 10 customers from 71% in 2019 to 58 in 2020. We also look at expansion into new markets. We entered five new regulated markets in in 2020, including Spain, Denmark, Estonia, Latvia, and Mexico. Looking ahead at 2021, while the global outbreak of COVID nineteen has had significant impact of global economy in 2020, we continue to, and continues to affect the world in 2021. RAD has not experienced a negative impact on revenues, but has actually experienced a significant revenue in traffic as people look for entertainment that they can enjoy in their homes. 2020 was an extraordinary year for Brag, and we're continuing the momentum in into 2021. Our twenty twenty one year strategy continues to focus on rapid expansion of our b to b gaming technology solutions towards gaming. We will continue to invest in our platform and integration capabilities in order to provide the best products and services for our customers. We'll focus on expanding our presence in global regulated markets and strengthening our client base. We're also well capitalized, as you'll hear soon from Ronen and Adam, and positioned to move ahead and execute on our strategic priorities. As we have already indicated to the market, The US market is a key target for us at Brag, and we concentrate on increasing our share of this rapidly expanding market with iGaming being a larger vertical than sport betting. The latest numbers that we've seen is that the total addressable market for iGaming is anticipated to be greater than $40,000,000,000 in The US at a 100% legalization, with the total addressable market for sports betting at 22,000,000,000 or just over 22,000,000,000 at full legalization. We also believe that to the Canadian market, a strong long term potential. And with us being a Canadian company and a strong Canadian representation of the board, we believe that we can achieve great numbers in the Canadian market. The TAM for total addressable market for both SportBetting and IBM in Canada is projected to be anywhere between 5,000,000,000 to $8,000,000,000 with full legalization. We continue to explore M and A opportunities in The US and globally to allow us, to enter the market, potentially integrating content providers that will provide an entry into the new markets by providing existing licenses and revenue or competitors where significant synergies can be realized. The company is also in advanced discussions with incremental customers across multiple license jurisdictions in North America, Europe, Latin America, and, of course, US and Canada. With that, I'd like to turn the call over to CFO, Ronen Kanor, who will run through the results. Ronen, to you. Thank you, Anir. Good morning, everyone. I'm glad to have you here on the call. As a start, I'd like to remind you all that all figures show reported currency for Canadian dollars. You can see the result in the press release. Fourth quarter highlight. BRAG revenue ended on thirty third increased within the previous 75.7% to 13,800,000.0, year twenty seven point eight plus year, maintaining a solid quarter on quarter The rate generated by customers were up by 16.1 to 3,200,000,000, 2,100,000,000.0 in the February. We also seen an increase of 17.1% in unique tickets using Bright Games and Content up to 2,500,000 from the one entering the comparable period of 02/2019. The adjusted EBITDA is zero 70.8% to 1,300,000 from zero decreasing 9.4% to 9.1%, but it's professional fees and corporate costs increasing from venture exchange to the Toronto Stock Exchange. For the period, the price of which is in line with the q four nineteen numbers. For the increase from the same period in previous year by 74.6% to €46,400,000 as compared to twenty six point five last year. RAC's revenue growth was mainly in the games and content services as demand for the group unique games and content proposition continued to grow. The company's growth has been underpinned by continued investment innovation in its technology and product offering. The adjusted EBITDA increased for the year by 400 to 5,500,000.0 as comparable to last year for 1,000,000 only, with margin increasing significantly by from three point adjusted EBITDA margin to achieve the result of reaching high scale and high cost con The net loss for financial year '20 was up to 14,600,000.0 from 11,900,000.0 last year, and primary, the the remeasurement of deferred and continued consideration and accretion of liability for earn outs. The cash and cash equivalents for the fundraise, November fundraise, warrants exercise as of 12/31/2020 amounted to €26,100,000 as compared to 700,000.0 only in 12/31/2019. And as of today, the balance sheet has no outstanding debt with positive net working capital. With that, I would like to know that if you're interested, you can find more detailed information of financial performance in our 12/31/2020 financial statements and MD and A on SEDAR and on our Investor Relations page of our website, the www.braggingains. And with that, I'll now turn the call over to operator for a q and a session. Thank you. Our first question comes from Matthew Lee with Canaccord. Really great quarter. So just a quick house keeping question first. Will you be switching over to Canadian dollar reporting in f twenty one, or are we gonna continue to see euro based reporting for the year? We believe it's gonna be the report sorry. Yep. That's that's for you to answer. Go ahead. Yes. Thanks. No. Yes, Matthew. How are you doing? Good morning. Yes. We're gonna still report the euro itself, function currency. Majority of the revenue comes in euros. And we'll see how the year progressing and and and which kind of, you know, they can be currently trading on this one. The stock exchange. We'll be looking at it look looking forward probably towards the end of the year. We make a decision. We definitely cannot do it in the middle of the year. It's not advisable. The loss of gap and and and and remeasurement needs to be done. That's what the end of the year, 2021, we take a decision, in what we're proposing the best, insignificant for all show. That's great. And then maybe just a bigger picture question. I mean, when you think about the North American expansion plan for Bragg, can you offer, you know, a little bit more color as to what you're seeing in the market in terms of, you know, the best entrance for your company as well as, you know, the potential to enter through M and A. So so, you know, obviously, M and A is something that Richard and I have been working on extensively. Okay. You know, when he when he comes in and and officially takes takes the home on May 1, I think, in the first few weeks, you'll you'll the the market will be told a a updated version of of our go forward strategy, which which will be focused in the North American market. As far as opportunities in North America, there's RFPs that we are actively pursuing on a daily basis. And, you know, we're highly active in in the North American market currently, you know, in the RFP area. Alright. Thanks, guys. That's it for me. Our next question comes from David McFadden with Cormark Securities. Oh, hi, everybody. A couple of questions. I'll just start off with Germany. If you guys could give us an update, do you still expect that the new regulation went to force on July 1? Last I heard is that there's still some debate amongst various states about actually all agreeing on them. And if you could give us an update there? Hey, David. Good morning. So so, yes, you're right. I mean, the German market continues to grow, but the legal framework is still cloudy. It continues to proceed, but as you said, there's some exchanges that are happening. But what we understand and from our discussions with our counsel, Saksony would it seems like will be adopted as the regulator. They'll set up the office, and we expect that they're giving out licenses in the second half of the year. There's been some discussion on when exactly that will be. And, of course, we continue to monitor the situation, and we'll update the market if and when required. Okay. And and then can you give us an update on The Netherlands? I know you guys announced a pretty significant partner in The Netherlands, and that's supposed to, go live with online gaming this year. Can you give us an update there and and when it's exactly expected to go live? Yeah. So we've signed a very big deal in The Netherlands with JGH. JGH is the largest private land based operator in The Netherlands. It's like a great Canadian gaming. The Netherlands is expected to go online. It's it's already done. The the law is passed in q four of twenty twenty one of this year. And so we will provide the iGaming platform and the player account management, and Camby, our partner, will provide the support book. So we're expecting that to go live in q four. We're working on the integration as we speak. Okay. Great. And then, you know, Canada, there's a lot of discussion in Canada, particularly with Ontario, about allowing private operators to do online gaming in in Ontario. I think it's q four to '1 next year where it's expected to go live. I was just wondering if you could comment on your plans there and and whether you're expecting announce any partnerships in the short term. So on that note, I think Adam mentioned that we're very active in The US, and I'll echo that and say that we're very active in the Canadian market. I can say without getting into too many names that all the Canadian operators that you could think of or potential operators are working on their, Canadian strategy. You're right by saying that q four and q one are the dates that, you know, potential Canadian operators have in mind. We're active in, pursuing RFPs and RFIs, and we're hoping to be able to announce something very soon to the market on our Canadian, our Canadian opportunities. Okay. Okay. Great. And do you anticipate, I mean, most people expect Ontario to go live q four, q one next year. I haven't heard much chatter about any other provinces doing the same. Have can you give us any feedback there on the provinces in the short term? Yeah. So we've we've heard other provinces as well. I mean, there's some discussion about Quebec. There's some discussion about BC. Again, without getting into too many details, we we've been discussing it with various actors and the various jurisdictions. And I think that what you think about the market is probably what the operators are thinking q four of this year potentially for licensing in q one twenty twenty one to go live. Okay. And then lastly, just on The US, I get you know, just wondering, can you give us a comment on what markets or what states you would expect to to to to be more active in in the short term? Well, obviously, we're gonna focus on the the states that are casino focused or the online casino businesses. Yeah. IGaming is allowed. So so, you know, we're focused on that area. So you need to provide you with Yep. And and just just to echo just to echo that, so we've, of course, as part of our Seneca deal, we've we've, submitted our applications for New York. We're working on New Jersey application as well. And then the plan for us would be, like Adam said, to follow where iGaming is legal, so Penn, Michigan, and others. And, yeah, I I you know, we hope to have an update, substantial update for you for you guys, very soon, most likely when Richard joins, especially as we we continue to pursue opportunities in The US, both in terms of clients and M and A, of course. Okay. And then just looking outside of, the markets that we've talked about, are there any other markets that you see some pretty significant opportunity in the short term? I think, Latin America continues to be a big a opportunity for us. I mean, ultimately, as a as a general global move, there is a move towards online gaming legalization, and I think it presents a significant opportunity for us. You know, the The Netherlands is one example, but South America and Eastern Europe are going through a similar shift. And so we're focused on these markets, and we continue to, go after every opportunity globally where we see that the the current is shifting towards online gaming. Mhmm. Okay. Okay. Thanks a lot, guys. The next question comes from Colin George with Harwood Securities. Hey. Good morning, guys. Congrats on the quarter. It's really, really impressive across all metrics. My my first question comes with regards to the the expanding margins, and where you kind of see that going. The margins have expanded quite substantially while diversifying your customer base and increasing revenue. So if you could just provide a bit more color on that and how that's achieved and where you see that going, that'd be great. So sorry. I feel I feel like I I missed the first part of the question. What was that? Just how just a bit more color on the margin expansion for both EBITDA and overall of the business. You kind of diversify your customer base and expand into new markets. You almost expect that to kind of stay flat, but you've achieved quite a substantial expansion over the past year. Absolutely. Ronan, do you wanna take that? Sorry, guys. Thanks, Carl. Good morning. I'll I'll I think I'll take up the margin question. And so we had quite a quite intensive year and got a lot of customers during the year. And that's but March, so majority of our revenue comes from gaming content, which about gaming content and about about 7% comes from gaming platform. So, yeah, the more the more we start gaining plus gaining segment where the cost of goods is so yeah. So that is the result. The the cost of goods and the mixture between gaming platform, which is the three of any profit happening and again get it and get the mix margin by two percent and three percentage points. Going forward, we're working on to improve that by listing our own content, which is to the margin. We're also trying to sell more and introduce more of our gaming platform, which is also gonna be improving much accordingly. But as as as as more this this growth this year will can significantly So although we increased the revenue by 74%, it's the gross profit and the profitability actually declined, but this is something we knew, and and this is actually what we're focusing right now. Okay. Thanks. That's helpful. And then, just maybe, guidance on during the q three call, you provided guidance both for q four and and into 2021. You were in line with the on the EBITDA, kind of surpassed your revenue guidance. Would you are you providing any guidance for 2021, an update to the previous one, or or maintaining that relatively modest guidance that I provided at q three? So so sorry. Go ahead. Subsequently, you know, with with Richard and I working on a a North American strategy for, you know, a true expansion into North America, we we decided to to not provide guidance right now. I think we lost. That thing cut out a bit. Did you hear me? Yeah. Now we can. Yeah. Sorry. So I was saying that we provided guidance. We we provided an update to our guide provided an update on January 26, And, we've decided to hold back on giving guidance now because, you know, we're working on our US and Canadian strategy. So so there is no point to update it or provide any new guidance. We will provide new guidance at our next earnings. Our next question comes from Ibsen Lai with Stifel. Morning. Thanks for taking my question. Certainly, back on the M and A question. With the year of COVID behind us, can you talk about the impact on valuation for some of the targets you're looking at? And have the recent new lockdowns around the globe impacted your ability to close some transactions during the pandemic? No. It has the COVID actually helped our business. Everybody that has lost their brick and mortar business is actively pursuing online business. So so, you know, like, we're one of the few that they come running to. So it's been great for us. Also, I think there's a change change in habits. So so you're gonna see, even at over, you're gonna see all a lot of the customers not go back to the the the old, way of gaming. So it's, we'll we'll retain a lot of those customers, and clients will retain all those customers. As far as the M and A go, I as you're aware, it's a very hard, though, you know, evaluations. So we're gonna make sure that we start trimming opportunities that we we buy right because we understand the market, you know, moves all over the place, and we're looking for a long term benefits for our shareholders. Okay. That's good color. Can you speak to the product road map for VRAG for 2021? I think the press release called out analytics and bonus features. Are there any other major products or service launches worth noting for the upcoming months? Thanks. Yeah. So so that that's right. I mean, we so so now that we have that many customers, over a 100 customers, you can imagine that we aggregate a lot of data. That data is very useful for us, and, we we we we drive a lot of significant changes to the platform and the services that we offer from data analytics. And so we continue to expand on these services, which ultimately allow for better gamification engines that we embed into the platform. In terms of additional kind of products for the road map, I think we we, I mean, we continue to focus on that and enhance the the current product that we have, whether it's the Sportbook or the iLottery product offering that we have. And then, ultimately, I mean, this will all be complemented by MMA, whether it's whether it's game games and content, so game studios or complementary businesses to us. Okay. Awesome. And then my last question is, can you talk about the penetration of the existing customer base? Like, what what what what has it been historically? What's the opportunity here to expand the the current suite of services and kind of upsell additional services to the customer base? Yeah. So so when we when we sell to customers, the the bigger customers, we normally start the games and content. I think that, you know, for the for those of you who've seen our presentation, competitive advantages, one of our competitive advantages is the exclusive and unique content platform, and I refer to some of the content during the call, GammaMatt, Peter and Son. These the studio hosted on our remote game, which in the cut. And so it's a great foot in the door for us because any operator that wants the content will have to come to us. And then that opens the opportunity because, ultimately, for us, integration is integration is integration. Once they're integrated onto the platform, it's easier for us to upsell them existing, products and services and new products and services, which means that when we open the door with the exclusive content that we have, we have the opportunity to increase the wallet share from our customers by upselling to them other products and services that are on the platform, whether it's the aggregator or the player account management or the, score book or the iLottery product, instant win games. So, you know, the the the entry point for us mostly is games and content, which we have a competitive advantage on the, exclusivity with these titles, and then the rest is is just following up from that. Awesome. Thank you. I'll pass the line. The next question is a follow-up question from David McFadden with Cormark Securities. Oh, thank you. Sorry. I forgot to ask you. Can you give us an update on your Nasdaq listing? What plans are? We're gonna revise that update to the market Monday. On Monday, you said? Yeah. Yeah. Okay. Okay. Thank you. Our next question comes from Isaac Wimolski with he's a private investor. Yes. I was about to ask also about the plans to register a break on the Nasdaq. Any target date, and do you plan a reverse split in order to qualify to be listed? And you should be aware that some brokers don't let the buy break in The United States. Yes. Again, on Monday, we're we're gonna we're gonna market our. Okay. You. And I'm not showing any further questions at this time. We'd like to thank everyone for joining the call, and we're looking forward to updating the market in the next few weeks on more exciting news that are coming out. Everyone. Thank you very much, everyone. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.