Q4 2022 Bragg Gaming Group Inc Earnings Call
Speaker 1: Thanks for watching!
Speaker 1: Thanks for watching!
Speaker 1: Thanks for watching!
Speaker 1: Thanks for watching!
Speaker 2: Thank you. Ladies and gentlemen. Thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the brag Gaming Group, fourth quarter and fiscal year 2020-2022 Games for license rights and parole. substag th
Speaker 2: All lines have been placed on mute to prevent any background noise.
Speaker 2: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. It is now my pleasure to turn today's call.
Speaker 2: over to Mr. Yennif Spielberg, Chief Strategy Officer. Sir, please go ahead.
Speaker 3: Thank you, operator. Good morning, everyone, and thank you for joining our fourth quarter of full year 2022 earnings conference call. I'm Yanis Spielberg, Chief Strategy Officer for BRIA Gaining Group. I'll be hosting today's call alongside my colleagues, Chief Executive Officer Yanis Sherman.
Speaker 3: who will comment on our fourth quarter and full year performance and Ronen Canor, our CFO , will review and discuss our fourth quarter and full year results. If you have not already done so, you can follow our earnings call presentation from our website at investors.bragg.group in the section called latest presentation.
Speaker 3: Following our prepared remarks, we'll open the conference call to a question and answer period.
Speaker 3: I'll start the call with some brief cautionary remarks regarding certain statements that may be made on this call. Certain statements made on this conference call and our responses to various questions may constitute forward-looking information or future-oriented financial information within the meaning of applicable securities law. Statements about expected growth, prospective results, and other financial information may be considered.
Speaker 3: 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.
Speaker 3: While we believe these assumptions to be reasonable, they are subject to a number of risks, uncertainties and other factors, many of which are outside of the company's control and which could cause the actual results, performance or achievements of the company to be materially different.
Speaker 3: There could be no assurances that these assumptions or estimates are accurate or that any of these expectations would prove accurate.
Speaker 3: For a complete discussion of these factors, please refer to our recently filed press release and other publicly available disclosure.
Speaker 3: With that behind us, I'd like to turn the call now to our CEO , Yaniv Sherman. Yaniv?
Speaker 3: Thanks. Hi everyone. I'm Ineeb Sherman, BRAC CEO . Thanks for attending our 2022 fourth quarter and full year results presentation. We're excited to take you through our strategic, operational, and financial highlights, as well as sharing some more of our plans for 2023 and beyond.
Speaker 4: Moving to slide four, 2022 marked a transformational year for BRAG.
Speaker 4: Beyond our financial results, our record revenues and adjusted EBITDA, we've continued the transition from a regional, central European leading online platform to a global content-led iGaming solution provider with extensive distribution across US, Europe and Latin America.
Speaker 4: We've integrated our teams and sites under a unified brand. Brag!
Speaker 4: Integrated our teams and sites under a unified brand, Bragg, working toward a joint mission and vision.
Speaker 4: The braggart of persistency executing against the strategy in the course that we've charted and I'm very happy to share the progress we've made
Speaker 4: On slide number 5, after concluding our US acquisition, we are perfectly positioned to fast-forward Bragg into its future. We marked the launch of two new Bragg game studios, Atomic Slot Lab and Indigo Magic, and we were able to develop the first batch of proprietary and exclusive market-tailored games for the US and Europe .
Speaker 4: Our US rollout is progressing well, leveraging Bragg's cutting-edge tech stack and development core coupled with unique game production know-how.
Speaker 4: Having launched a new regulated market in Europe , our recent success in the Dutch market was complemented by customer and game roll-out in the UK, Switzerland, Belgium and the Czech Republic, just to name a few.
Speaker 4: On the product front, we are religiously developing our products, tools and features to introduce our partners and their players with the best possible customer experience in online gaming.
Speaker 4: While 2022 and 2023 are by no means the end of the journey, I'm happy to say we are definitely on our way.
Speaker 4: I'd like to turn this to one end for a view of our financial results and then take you through some more operational highlights in more depth. Well, then
Speaker 5: Thank you, Yaniv, and good morning, everyone. I'll begin my comments on slide 7.
Speaker 5: As Yaniv indicated earlier, 2022 was transformation a year for the group, and we can see that in our financials and operation results.
Speaker 5: The group continued to execute very well during the fourth quarter.
Speaker 5: The fourth quarter total revenue was up by 50.3% year-over-year to 23.7 million euros and up by 13.3% from the previous quarter, representing an all-time record revenue for the group.
Speaker 5: In addition, the group's year-over-year revenue growth was 45.3% and reached record of 84.7 million euros.
Speaker 5: The growth was mainly derived organically to its existing customer base, new onboarded customers in various jurisdictions, in particular the Netherlands, with a solid revenue performance from the Wall Street Game Studio and Steam Games, existing US customer base.
Speaker 5: From a professional and KPI perspective, the total wagering generated by games and content offered by the group during the quarter was up by 65.4% from the same period in the previous year to 5.1 billion and up by 24% to 17.7 billion year over year.
Speaker 6: operations..
Speaker 5: Gross profit for the quarter increased by 61 to 6 percent to 30 million euros.
Speaker 5: with gross profit margins increasing by 390 base points to 54.9%.
Speaker 5: On a full year basis, the gross profit increased 59.2%, reaching €45.1 million, moving margins by 460 base points.
Speaker 5: to 53.2%.
Speaker 5: The margin increase is a direct effect of a change in our composition of revenue derived from the increases iGaming platform, Man-Ed services, and proprietary game studios which have no cost of sales compared to third-party games and content which have associated third-party costs. Adjusted EBITDA for the quarter was up by 120.
Speaker 5: 64% to 12.1 million, a record result for the group.
Speaker 5: The change in margin was mainly as a result of scale, a change in the product mix of high gaming, alongside with high investment in salaries cost as part of the group strategy to expand its software development and product portfolio, all with the focus of margin control.
Speaker 5: Operating profit from the quarter amounted to 0.2 million euros, an improvement of 2 million euros from the previous year, and on a yearly basis it saw an improvement of 5.5 million euros to an overall 0.8 million euros operating loss, as a result of improved underlying performance.
Speaker 5: Finally, we are pleased that in the first few weeks of the year, we have seen a strong current trading matching our expectations. Now turning to slide 8. As I mentioned earlier, our entry into new markets, particularly the Netherlands, has been exceptionally strong.
Speaker 5: This, coupled with new client wins and the ramping up with operators launched early in the year, has given consistent quarterly growth since Q3 2021, with Q4 2022 seen a 13.4% increase QoQ and 50% from the previous year.
Speaker 5: The key drivers for the fourth quarter art performance is new launches of iGaming and Turkey solution customers mainly on the Dutch market, which is Coman and VetNations and Mecor in the Czech market.
Speaker 5: Performance of customers launching in financial year 2021 and in financial year 2022 was better than expected mainly on the content segment.
Speaker 5: and North America content revenue tracking in line with our expectations with a rollout of new content in Michigan and New Jersey.
Speaker 5: Overall, new business pipeline, new market entry and more focus sales
Speaker 5: underpin the financial year 2023 revenue targets.
Speaker 5: As you can see on slide 9, gross profit margins.
Speaker 5: are in the growing trajectory since third quarter of 2021 due to the shift of BRAC's product mix.
Speaker 5: We are scaling up our business in line with both our revenue growth and the continued movement in product mix, as indicated on the right hand side of the slide.
Product Nix has changed noticeably since last year's third quarter. It is trending towards spam, 10K solution and proprietary content.
leading to improving gross profit margins and profitability.
The gross profits increased by 61.6% to 30 million euros in the fourth quarter with a full year growth of 59.2% reaching 45.1 million euros with margin approving for the quarter by 390 base points to 54.9%.
and for the full year by 460 base points to 53.2%.
The fourth quarter revenue performance driven mainly from the content
aggregate and third-party, exclusive content and proprietary content, while platform and 10k solutions were slightly lower proportionally.
In the fourth quarter, total games and content revenue segment amounted to 18 million euros and represented 76% of the total revenue compared to 11.4 million and 72% of last year.
Proprietary content deployment is positively progressing both in the US and EU market by increasing both distribution and gains performance.
As we indicated in the previous quarters, the group is targeting gross profit margins improvement to reach 60% by financial year 2024, mainly by increasing its revenue portion of its proprietary content, PAM and 10-key solutions. Moving to slide 10, adjusted EBITDA amount at $3.6 million against an operating profit of $0.2 million.
and on a full year basis to 12.1 million against an operating loss of 0.8.
The gap was driven by the following non-cash and exceptional items. Depreciation and amortization, the increase in intangibles amortization is part of the Wildstreak and Spin acquisition in June 2021 and June 2022 respectively and the increase in capitalized software development costs.
Share Best Payments, the charge of awards granted to senior management during the period composed of referred share units, restricted share units and share options.
Transaction and acquisition costs, costs mainly associated with acquisition of SPIN acquisition in June 2022, EMA activities during the year, and costs associated to the convertible debt financing completed in September 2022. Exceptional costs
The cost mainly associated with the strategic review process took place early in the year with one-time board compensation and recruitment fee. As you'll see on slide 11, we ended the quarter with cash balance of $11.3 million compared to $16 million of December 31, 2021, with outstanding liability of $10 million in convertible debt. As of this date,IZM
the total outstanding liability after share conversion is 9 million US dollars.
Our net working capital is approximately 8 million, excluding current convertible liabilities.
compared to 11.6 million at the beginning of the year. The cash difference between the start of the year and the end of the year is explained by 9.1 million euros consideration paid upon the spin acquisition, we continue an investment in CapEx and tech in the total of 7.3 million euros.
and this offset by 8.1 million net proceeds from the convertible debt and improvement in the group performance. Looking forward, we are projecting a positive free cash flow from operation, while there is no cap-text or technology debt required in the business.
Management is confident that there is no immediate refinancing or further debt requirements need for the business.
Turning now to our outlook for 2023. We started off the year so far with continued momentum and expect that we will continue to successfully execute on our growth drivers throughout the year.
This morning we provided revenue guidance in a range of 93 to 97 million euros and adjusted EBITDA guidance in a range of 40.5 to 16.5 million euros.
The midpoints of these ranges represent year-over-year growth of 12% for revenue and 28% for adjusted EBITDA.
With our record fourth quarter performance and strong current trading, today's guidance compares positively to the initial outlook we provided last November when we reported our third quarter's results.
With that, I will turn the call back to Yanit.
Thanks, Ronan. Our games and product development machine has been reinforced with top content partners and complemented with Tier 1 customers.
Partnerships with leading companies like Blueberry and Galaxy Gaming produced online-first games and deployed with blue-chip operators in the US and Europe , including our newly launched turnkey partners, the Netherlands and the Czech Republic. Our ability to successfully operate on both sides of the Atlantic and our focus on iGaming
has proven to be a key differentiator for Bragg in what is a crowded and competitive marketplace. Slide 15 showcases our recent content production and development headed by our Las Vegas content hub, developed and integrated by our amazing teams across Slovenia and India.
Within a year, we've established two new studios and managed to develop and deploy 20 new titles across our network. We aim to more than double this production capability within 2023.
On top of this proprietary portfolio, we've developed and integrated 23 titles from our exclusive partners under our Powered by Bragg program.
This combination offers another point of differentiation, and by working closely with our operating partners, we are already optimizing game performance and applying the growing dataset to the 2023 development roadmap.
This is a key driver in our quest to become a must-have content partner in all markets we operate in. Type 16 demonstrates the initial impact already apparent of our content-led strategy.
By expanding our proprietary and exclusive portfolio, we are able to offer a unique selling point and simultaneously expand margins towards our long-term goal.
This is just the beginning. Game development, when done right, takes time and persistence.
However, the team's ability to set up, produce, and roll out this new game portfolio in a short timeframe is an amazing achievement.
We're now focused on ramping up our game production and distribution through 2023.
As we want to leverage this early success, create momentum and brand recognition as proven performers. The bottom graph also demonstrates our strategy of execution effect on revenue and market
Another key differentiator in our ability to offer content coupled with regulated and compliant tech stack. It's not just about the game.
It enables us to create new revenue sources that serve as a foundation to future growth.
We're going toe-to-toe with much larger competitors and aim to disrupt our field and gain additional market share.
Online gaming has always been a super dynamic sector and Bragg's agility and creativity has allowed us to succeed even under extremely challenging conditions.
Product excellence and market diversity are key to our future success and will eventually win the day.
Moving on to slide 17, specifically in the U.S.
which is the fastest growing iGaming market in the world. Our existing distribution and existing relationships are helping us roll out new content across major gaming states at a growing pace.
Online casino is now recognized as a key component in the US growth and profitability story for the operators and we see an increasing demand for well-performing games.
Atomic Start Labs' game development philosophy, which leverages proven land-based titles and game mechanics, has resulted in a new content portfolio we are very excited about, and has already been well received by American players and complements the already established Spin Games roster. We are now focused on cranking up our production capabilities and improving the development of our game.
aiming to introduce more proprietary and exclusive games from our partners, and working closely with the operators in order to deploy and promote these games. Our clear goals for 2023 and beyond is to position Bragg as a content must-have partner across the key iGaming states.
And in slide 18, 2022 is no different than previous years in terms of online market regulation, which has only accelerated. For Bragg, it has been a year of new market entries alongside existing market expansion.
Establishing Bragg as a market leader in the Netherlands was complemented by new content deployed in the UK, Sweden, Canada and Switzerland.
Our hub aggregation platform was deployed into the Belgian market and our cam went live in the Czech Republic This of course follows our new content deployment in the US.
Deals to introduce our content in the Italian market, the second biggest in Europe and in Mexico have been signed and we are now looking to launch and expand our lenses in these important markets. Looking ahead, new opportunities lie in markets going through different stages of regulation.
Brazil is one key Latin American market we have our sights set on. We also continue to monitor the developing German online sport and casino regime. We launched earlier this year. Our tech and games have long been proven performance in this market.
In North America, our license and certified proposition will help us capitalize on future US states and Canadian provinces regulating online gaming in the mid and longer term. To summarize, we're now wrapping another Record Year for BRAC financially and operationally.
We are consistently executing against our product and market strategy, entering new markets with our multi-product approach and increasing our proprietary content footprint. We're continuing to reinvest into our product and teams as we grow Bragg into a B2B key player organically. This also enables us to take on additional inorganic opportunities in the future.
With our strong current trading and 2023 guidance of between 93 and 97 million euros in revenues,
and 14.5 to 16.5 million euros of adjusted EBITDA, we're excited about the opportunities we have in front of us, and we can't wait to execute against them.
I wanted to thank this opportunity and thank our braggers for their dedication and an amazing year. Thank you for achieving their achievements.
Thanks again for listening. We'll be happy to take any questions you may have.
At this time I would like to remind everyone, in order to ask a question, press star followed button number one on your telephone keypad.
Your first question comes from Edward Angle with Roth MKM. Your line is open.
Hi, thank you for taking my question and congrats on a nice quarter. Last quarter you had this slide up that showed a timeline of your state by state US rollout of proprietary content, which was largely being completed by the end of 2023. Can you just talk about how you're tracking in terms of rolling out in new US states and then major operators within the US state?
Pennsylvania has planned, as we communicated last time around, on-plan on-target and final stages of testing and we hope, pending regulatory approval, that we can go live there immediately. So in terms of our roll-out plan, both with operators and within the different U.S. states.
We're on track now. It's about, as we mentioned, getting more share out of the operators and also moving down the list, sort of increasing our market share in each one of those states and our share of wallet in each one of the operators. It's progressing for the plan we've communicated.
Perfect, thanks. And then on slide number 16, it shows there's a pretty decent uptick in your gross profits from Bragg Studios. Was that just a factor of a lot of game releases, or I guess what was kind of driving that strength in December ? Well, it represents the fact that we're always seeing the effect of over indexing in terms of monetary value. This is still
around it. So that is trending well and the initial batch of games has been performing per expectation, in some cases exceeding them. But these are good initial signs.
Perfect. Then just one last one if I could squeeze it in. The gross margin, the fourth Q had a nice uptick. Just wondering, would it be fair to assume that gross margins should be higher in the second half of the year as they're kind of rolled out with your provider content across more states? Yeah, well that was the original plan again, focused on deploying.
to develop the product or the proposition further, we may choose to apply more capital towards that. At this point, that seems to be the direction we're heading in. But again, if we wanted to ramp up our game development and product development capability, we could do that. But the trend is to expand gross margin through the second half of the year through 2024.
Great, and congrats again. Thanks sir.
Your next question is from the line of Matthew Lee with Canicord Genuity. Your line is open.
Hey, good morning guys. So I'd love to start by breaking down the updated guidance in terms of what's changed both in terms of revenue and more importantly, profitability. So the midpoint of your guidance suggests high teams, even a margin, which is a pretty substantial jump in current levels. So just want to get your thoughts there.
What changed, we maintained consistency in terms of our previous guidance just with monetary value. We communicated low teams on revenue and at least 20% growth on adjusted EVDA. The fourth quarter was stronger than we anticipated on the back of a…
good, mostly activity around the World Cup. That momentum continued into this year. So that's mostly we revisited the growth trajectory and we wanted to make sure that we were bullish enough estimate at this point. But that was mostly when we spoke last November .
It was pre-World Cup and we were cautious about our participation because frankly no one has ever seen this type of event at this time of the year. But again, we were pleasantly surprised by increased gaming activity around it which led us to reviving the guidelines.
Right, that's fair. And then maybe on the content side, you know, proprietary, it's something that makes it worth 10% of total revenue.
Can you help us understand what you said that would be for 2023 and maybe longer term given your expectations of acceleration of that business? And then, have you changed the number of proprietary games that you're expecting this year and then maybe next year? Sure, so I'll take the second one first. We're changing the number of proprietary games. We're putting more development resources behind them. So we've established, and again as we outlined, that we're going to be changing the number
In record time, we were able to regroup or reestablish two new studios around the resources that were in the company and then acquired through the US acquisitions. And we're building around them, so more developers, more game production, more...
And we're looking to increase both production and deployment because deploying in regulated territory is not a trivial task and we're streamlining that process so we can... Q- resolved data can it beivationed for use for deferral zone storage?
do more with the existing resources. On the proprietary content, basically what we're expecting is that production and the deployment capability ramp up will result in accelerating their proportion of the total revenues.
Right now it's taking up to 10% and then naturally every percent we expand there should have a bigger impact on the bottom line and that's basically the plan. We don't have a separate target for proprietary content for 23 and 24, but we do realize that is embedded inside the guidance in our project.
So if you look at the budget, you know where the guidance and the number of proprietary games that we're planning to deploy, you pretty much get the full picture of the effect that it will have. The bottom line is growing faster than the top line.
All right, I appreciate that. Thanks, I passed mine.
All right, I appreciate that. Thanks. I passed mine. Thanks, man.
Your next question comes from the line of Edir Kadvi with 8 capitals. Your line is open. Thanks guys. Good morning and congrats on the quarter. So lots of new content in New Jersey, Michigan. I'm just wondering, can you give us kind of like early feedback on how this content is kind of being received by the players and by the market?
Yeah, so we've had a good initial experience, just a small group of these gators have gone live in these markets still. It's upset about five or six games since November through today and we're looking to redeploy a few more batches.
inside Q1 and then Q2. The initial results are encouraging in the sense that every game that we've put out there made a impact.
and specifically with the leading gaming operators that we deployed them with. We'll be talking mostly in GGR and activity level. And it's now about two other factors that we need to make sure that we consistently improve, one is positioning.
These games typically are well accepted, but then you need to make sure that they are promoted and positioned in a way that will keep activity high. That's something that we're working with the operator towards. And the second is cadence, making sure that we release those on a steady and well communicated platform.
That goes to, that saying is also very relevant to Europe with the larger operators. So creating visibility and road mapping in the second half of the year is very important. I think that would create a long lasting effect. But the initial sign shows that the games are working and they are getting traction and also –
getting the appropriate attention from the operators. And that's what we're looking to build as we scale up.
Okay, thanks for that color. And then just on the back of that, aren't the gains that you have, for example, in New Jersey and Michigan, are they easily transferable into markets like Connecticut? So if you see very good results in New Jersey, do you require a lot of investment into the games? Kind of launch them into a new state or potentially a new country? A new state, no. The gains are...
Consistently across the US the only thing is the main thing is
the US, the main thing is certification.
which means that each state requires a slightly different certification process with the operator. So once the game is live in one state and certified in another, it's pretty streamlined or...
I wouldn't say easy but it's more transferable. Other markets, again from the US into Europe and vice versa, it's not as trivial as people initially saw. That's the reason why we structured this both market specific or call it continent specific.
Some US games are accepted well. We've seen some atomic slot lab games received well in the UK and other territories. But generally speaking, we're trying to cater for each market. And if we get the benefit of transferability, that's great. But we assume that the players in each market sort of have their own taste, especially when you talk about several Europe losses.
The U sokay. Excellent, maybe one last one from me and then I'll passast a line G R generated on the platform was fairly high this year this, this quarter, at five point one billion. I assume a lot of that is on the back of transaction activity from the world cup. But can you can give us with like a second order benefit of that when you?
the big acquisition event but what we as I said we were pleasantly surprised at the gaming activity and most of this is still gaming activity not necessarily sport but we do provide sport in some markets like the Dutch market but this is predominantly gaming activity and if you see an increase in that it means the players are playing the one thing that you want to make sure that
in terms of engagement that players keep on playing, the levels of activity or the number of actives keeps increasing to increase that wagering activity. Once the bets are increasing, you are able to acquire and retain the players.
Again, this is a lot to do with the operators CRM and acquisition, mostly retention and engagement efforts. We do offer them an increasing number of tools with greater depth so they can retain those players and increase activity like views.
that have seen some great initial success, and making the games and the events more sticky. But so far that increased, as I said, the momentum persisted into the first quarter which suggests that the players stay with both the content and the platform which seems to be sticky in that regard. So, featuring is a good parameter of activity generally speaking.
Thanks a lot guys. I appreciate the color. Thanks a lot. Your next question is from the line of Mike Hickey with the Benchmark Company. Your line is open. Hey, Ronnie. It's good morning guys. Good morning, Bragg team. Congratulations.
fourth quarter a year and your strong guidance here. I guess the first question, I realize fourth quarter was strong. Your current trading activity seems to have been a little bit too long. I'm not sure if you can see it, but it's a little bit too long. I'm not sure if you can see it, but it's a little bit too long.
I guess carried a lot of that momentum. I'm wondering sort of how you factor in the macro environment into your thinking for 23. Obviously a lot of pressure on the consumer, the player. I'm curious how that's impacting.
your business in key markets. Thanks Mike. I think the major factor behind your diversification.
You're absolutely right that in a sort of recession prone or I don't want to call it recession mania rizzled environment and consumers are generally more conscious of expenditures and free cash flow. Generally speaking when we diversify revenue flow.
and our revenue sources, especially across different markets, but also through different product verticals. We create a safety net around that.
I have to say that some of the growth that we were seeing is sort of on a broader level.
So more entertainment and consumer driven spending. Some of the content is also well received, as I call it, on the entertaining or entertainment side. But generally speaking, the way we think about this, the macro environment is definitely something that we need to keep an eye on, it's mostly on the side of the operators.
and markets themselves. So our customers, our partners are directly impacted. And in that regard, we're very focused on creating long-term partnerships.
that have two-way incentives so both parties can demonstrate margin and control, especially in a regulated environment. But this is the long game and that's the way we're building it. And the right types of deals is really the right strategy.
You're sort of going through this challenging period which we'll eventually end. Nice. Thank you. I guess the next question on your U.S. expansion, it seems obviously some puts and takes here, I think, coming into a new market, especially one that's expanding so fast. Just curious, I guess, any incremental...
internal development. I guess just broadly speaking curious what you're seeing in the market, what you're learning and how that maybe reshaped some of your thoughts on the US and then also just curious if you think there's any further regulatory relief, it seems like online casino is obviously behind sports betting in the US in terms of
we ventured into the market is, and I've been involved in the US market for a decade now, is that two things prevail here. One is the investments, the resource investments, you need to be prepared to put in and really lean into it. It's not just another market, the price is big.
But so is the investment and in some cases it's just a different type of DNA. I think two acquisitions maybe it's been gained and lost or gaining has proven themselves with game changers and going into the market directly would have probably been either prohibitive or extremely challenging at Eckeron Structure and those.
acquisition really provided us with the shortcuts that we were looking for because it's mostly around both distribution and your ability to work with the American deployment and regulatory compliance mechanisms which are very different from Europe or the rest of the world.
They're very business-prone, but they're very detail-oriented. This one thing is, that's exactly what we're currently focused on in making sure that we streamline our global European, India, and US delivery machine to and towards the US market and the US operators who are different organs. They're different companies.
on
the regulation development in the US. Naturally, a casino is a different, very different than sport. We have 30 sports states but only six gaming states. On one side it is more politically charged and requires a lot of changing forms of cycling.
and says it and bipartisan support. On the other side, you just see a small group of states making such a material impact and creating such an enormous town.
I think that we don't need to get to 30 states, we only need to get a couple more across the line to do two things. One is significantly increase the tan, which is already big. Working off the level base, we don't need additional states, but any other states added will be a net.
to our addressable market and help us really increase that gearing effect. Deploy the content as I mentioned into additional states is marginal, it's not dramatic. And the second point is once a state adds casino to its existing sport products.
I think that will serve as an important precedent because the two states, the six states that have regulated gaming alongside sports betting have done it pretty much the same time. Once the game, or once sorry, a state demonstrates its ability to pass casino on top of sports, I think that will write sort of the blueprint.
for other states to do that and I think that will accelerate this, I believe it's 24, onwards but once we do that and putting aside the larger states, the top three states, anything in New York, Illinois or any of the larger states, naturally we will move the needle for everyone and for us as well.
that I should lift all ships.
Your next question is from the line of David McFadgen with Cormark Securities. Your line is open.
I was wondering if you could give us an update on the German market. Have you seen much of an improvement in that market and are you banking on much of an improvement in your 23 guidance from Germany? Hi there. In short, we were encouraged to see that the German market is not a market that is a market
The local federal government has relaunched its regulatory regime so they now have a new body issuing licenses, which was a bottleneck in the past, really slowed down the development of the market. Having said that, one thing that still remains challenging is the actual tax framework there, which is very high. I actually don't know.
basis which is prohibitively expensive. Without significant change in that, I think that that market would be challenged to really go back to what it used to be. Having said that, we are hearing
We've had increased conversations about addressing that in several contexts. That's why we mentioned it. We're encouraged. We haven't included that in our R23 guidance.
We're assuming that that development will take more time, but we've mentioned it because to us it will be a pure upside of the platform and mostly the content that we have developed and integrated into it with some of our local partners in our proprietary portfolio. We know how to operate in that market from a consumer perspective.
and adjusting it towards any regulation should be relatively straightforward. But again, now that they're issuing licenses, the tax framework is probably the next order of business and I hope they will go forward and make it a more business oriented market as opposed to a restrictive one. But that's our...
We don't have any formal data yet, or recent formal data around it, but we're assuming we're about the same market share, give or take. We've had great success with our partners there. We've launched two more operators. This launch is as Lomond has indicated in his presentation.
where we're better than we expected. They were quickly ramping up even during the World Cup, which is typically a sports-led.
were better than we expected. They were quickly ramping up even during the World Cup, which is typically a sports-led event.
So they were able to acquire and grow inside that market. So the market is growing, albeit in a more moderate pace naturally, since it's inception as you expect. And there right now, we're very focused in working with our partners to make sure that we keep adjusting and improving the platform, also from a competitive and more importantly from a compliance perspective. The local role in property, the local market events, nothing knows exactly what's being done. When you look at corporate contracts, I would say at the top of the table, you would see
I'm very happy with the performance in that market. We're looking to fortify our market position there with increasing our existing partners and potentially adding new ones.
Okay, and then just lastly, you talked about the content rollout in the U.S. being accelerated in the latter half of the year. So I'm just wondering, does that have the potential to potentially raise guidance as you bring out more and more titles that are back out waiting?
Well, we've taken into consideration our plan. And naturally, if we are able to roll out the one thing that
an accelerating rollout would naturally have a positive effect, but more importantly, we're trying to work off some working assumptions around the game's performance. What could change, potentially change guidance, is if some of the games produce or perform better than what we expected. There's no real way of knowing it.
before you launch a game like most consumer-facing products. But I would say that alongside our production and deployment capabilities, the game's innocent performance has the potential of moving guidance in that regard. So that's something that we will naturally monitor and...
keep you guys and investors updated as we make progress through the second and third quarter. Okay, all right, thank you.
investors updated as we made progress through the second and third quarter.
Your next question is from the line of Jack vendor ARD with the maximum group. Your line is open. Okay, great. Good morning, guys. Congrats on the strong 2022 finish and strong 2023 outlook.
I want to just point out maybe in the fourth quarter, the number of unique players using Bragg's games and content, excluding Wild Street can spin that increased by 51% to 2.8 million it looks like in the fourth quarter. Really robust growth in players.
Especially considering the macro can you just remind me of what what this actually includes and what's driving this kind of robust player growth? Because it seems like the fourth quarter particularly stood out relative to the rest of the year. Thanks. Well, unique players is also a function of marketing activity around the brand we power and as we mentioned some of the market activities.
around the World Cup, so that created a surge, not just in sports activity but also in gaming activity, depending on the country that you were in. Imagine when we have a large presence in places like the Netherlands and some of the UK and Western Europe , some of them have teams in the tournament, so a lot of the marketing was done around it, and I have to say it very cleverly.
sort of adjacent to the sports event before and after them. And a lot of this also stems from a higher penetration on mobile. This was naturally the highest mobile penetration in the world of history, so people were actually able to in some cases play through a game using their mobile devices. So overall what you are seeing is mostly an effect of a seasonally typical fourth quarter supercharged increased market.
or subcontractors. Just how are you thinking about headcount in 2023 and is that baked into your adjusted either dog guide? Thanks. Yeah, sure. Of course it's baked into our guidance. We made a push, as I mentioned, we have an opportunity and we wanted to put more resources behind our.
18 billion dollars in processed funds and so forth, that also projects and requires the more manpower around it, both from a development and competitiveness perspective, and especially in a regulated environment. 18 billion dollars in processed Hard MIA, All Dental With collapsed parentheses component 100 billion dollars.
Again, the Netherlands, just to give context, the company was heavily reliant on the dotcom market back in 2021. It's a completely different business now, both from a global but also from a practice perspective. So in that regard, it affects both the investment and margin, but going forward, as I mentioned, it can increase our output after an other crisis, even in other cases. In other cases, it may also increase our bag size, as a question about getting more debt
In the second part of the year and into next year, we are looking to start harvesting the results of that investment. The fact that we're able to do that while maintaining growth and profitability, so top and bottom line, is a remarkable achievement, I have to say. Most companies at this point, they will have to sacrifice one or the other. We're able to do both. We just want to use this momentum in the back of the—
the growth trajectory to make sure that we put that to good use and a good return. But right now, our main capital is human capital. And I expect that beyond this year, there will be more of a steady state or incremental growth as we go into new markets rather than this development push that we're trying to cater. We're shortening timeframes instead of sort of...
stretching them out further into the future. We'd like to do that sooner rather than later. Okay, great. I appreciate the call. That's it for me. No, thanks, James. Again, if you would like to ask a question, press star followed by the number one on your telephone keypad. Your next question comes from Jan Luca Tucci with Haywood Securities. Your line is open. Hi, good morning, guys, and congrats on a strong quarter.
You mentioned that current trading is off to a strong start. I'm just wondering, do you expect normal seasonality this year, or given your state launch plans for 2023, this year might look a bit different? By now, I don't really know how to define normality over the last two or three years, but this year, hopefully, we'll see.
we're getting back to a more seasonal, let's call it foreseeable, calendar with no major sport events in Europe or globally. And also the post COVID effect is sort of subsiding back into a calendar.
So, yeah, I mean, I expect this now to be more driven by the business agenda rather than external events. And yeah, I mean, it's the only X factor here.
Travel seasonality has been quite high over the past two years. People have been traveling a lot so we have seen some of that effect. The flip side was a higher mobile penetration on gaming product which traditionally was lower than sport. So that compensated for some of that. I mean this calendar I think we're looking at.
something that resembles more of what we used to see up to 2019 than 22 and 21. Okay, perfect. Thanks, Genevieve. And on the proprietary content side, it's hanging around 10% of revenue. When you see that in the low to mid teens, is that also a back half of the year story?
Yeah, I mean we're looking to wrap up the deployment and that should follow soon as soon as we get that soon after. The content is the end of the day and again I'm stressing the fact that we're transforming or transitioning the company into that position. Other companies take years to build the portfolio and the gaming brand.
and distribution and presence. We are trying to leverage our existing capabilities, we are leveraging our existing capabilities and distribution to short circuit that. But content is always a persistent game. Once we get more and more content out there with more and more of our operators, that will take an effect and expand those. That's a mathematical...
sort of blueprint. We're not inventing anything new here. The only thing that we're doing is leveraging it as opposed to establishing this separately, which required a much different and…
a bigger effort on existing capital and resources. So that base would expand if we need to further invest into it and then have it ramp up quicker into next year. That may be the best decision but generally speaking that is the direction of travel we're very, very focused on. Okay, thanks and just lastly from my...
perspective, from a CapEx perspective, let me just give you some kind of how it actually was involved. In 2021 we invested 2.9 million euros. This year it was 6.7. When I'm mentioning CapEx, I'm talking about the software development course is actually taking our team and allocating the
which is creating of new content. And we are projecting from 2023 around $10 to $11 million of software development costs in our balance sheet which is quite prudent with keeping the same ratios. We know what we're investing, we know we have a limited of.
of maintenance, all about launching new customers, building games which is the most highly investment part of this particular year in the last 2022 and definitely in 2023. So that's roughly as you mentioned before, we are ramping our human resources and the majority of the Catholics, I'd say 90-95% of the Catholics
is predominantly software development costs. All the rest is IP and trademarks, a protection and investment in those particular items. But that's in certification of course of games, when you're launching on those particular markets. If it's the US market specifically, and you're paying slightly different, you are specifying games that's also part of your capex.
But the line chair as I mentioned, the majority of it is our development team which is all built in-house and by consultants that are fully, fully dedicated and inclusive of us. Excellent color. Thank you guys. And again, congrats on the strong Q4. Keep tabs on the MIMI statement page for more content Kevin.
Thank you, Luca. There are no further questions at this time. I will now turn the call back to Mr. Yennes Spielberg. Thank you everyone for joining our call this morning and thanks to all the braggers for their hard work and a very successful year. We're extremely happy with the year of the past and even more excited about the year ahead.
We look forward to hosting all of you guys on our next call and for the time being have a great day. Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.