Q2 2023 Bragg Gaming Group Inc Earnings Call
Ladies and gentlemen, thank you for standing by my name is Sharon and I will be a conference operator today.
At this time I would like to welcome everyone to the bracket.
2223 earnings conference call.
All lines have been placed on mute to prevent any background noise.
Our speakers' remarks, there will be a question and answer session.
If you would like to ask a question during this time.
Please press star followed by the number one on your telephone keypad.
If you would like to withdraw your question Press Star one again.
I would now like to turn the call over to Denise Bill Burke Chief strategy Officer.
Please go ahead.
Yeah.
Thank you operator, good morning, everyone and thank you for joining our second quarter 2023 earnings Conference call.
Steel Bird Chief strategy Officer for broad gaming group I'll be hosting today's call alongside my colleagues.
Sherman, who will comment on our second quarter performance and were not nor our CFO will review and discuss our second quarter financial results. If you have not already done. So you can follow our earnings call presentation from our website at investors talk broad Dot group again, thats investors with an S. A broad group.
In the section called latest presentation.
On this call, we'll review broad financial and operating results for the second quarter of 2023. Following our prepared remarks, we'll open the conference call to a question and answer period.
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 future oriented financial information within the meaning of the 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, where the market and economic conditions business prospects or opportunities future plans and strategies technological developments and anticipated events or trends and regulatory changes that may affect the corporation and its subsidiaries and their respective customers industries, while we.
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 Companys control and which could cause the actual results performance or achievement of the company to be materially different there can be no assurances that these assumptions or estimates are accurate or that any of these expectations will prove accurate.
For a complete discussion of these factors. Please refer to our recently filed press release and other publicly available disclosure I'd like to turn the call now to unique Sherman you need.
Good morning.
Sherman Black CEO welcome to our 2023 second quarter presentation.
I'm going to touch a few notable highlights from our first half of the year and then I'll. Let al will then take you through our financial Kpis in more detail.
Okay.
Turning to slide four another busy quarter behind us and which we continue to execute our strategic vision for brands we have.
Been expanding <unk> top tier partner network across Europe , with landmark deal signed and new markets launched <unk>.
Dutch dominance was complemented by a successful rollout in Switzerland.
In parallel we are progressing our content production with <unk> studios, taking its game development capabilities up a notch and producing at titles and growing catering.
Delivering more differentiated content that started resonating across our different partners in markets and receiving recognition for such as our recent rollout of Devils lock.
Also marked the launch of new games across our North American States, namely, Pennsylvania, Michigan, Connecticut, and New Jersey.
I'll share more details around each one of these highlights shortly I'd like to turn this now to women.
We review our financial performance.
Thank you Ian Eva and good morning, everyone I'll begin my comments on slide six.
As Ive indicated earlier the second quarter of 2023 was another successful step in our digital journey.
We continue to execute against our mission and strategic plan and we can see that in our financial and operational results in the second quarter total revenue were up by 18, 9% year over year to $24 7 million euros, continuing our growth momentum since the third quarter of 'twenty to 'twenty one.
The growth was mainly derived organically through our existing customer base launch in 2021 and 2022 in particular.
<unk>, Pam and turnkey solution customers in the Netherlands content offering and a solid revenue performance from Wall Street gaming studio customers.
From an operational Kpis perspective, total wagering generated by games and content offered by the group during the quarter was that by 31, 2% from the same period in the previous year to $5 5 billion euros.
As you can see from the wagering child on the right hand side, Blackstone and ongoing positive trajectory from the third quarter of 2021, which demonstrates our ability to transform and diversify our operations.
Gross profit for the quarter increased by 18, four 9% to 13.8 million euros with gross profit margin remained at 50, 549% level the.
The gross profit is primarily the result of increased revenue performance in all content products, while recording slightly lower Pam in managed services revenues adjusted.
Adjusted EBITDA for the quarter was up 51% to 3% to $4 7 million euros with adjusted EBITDA margin, reaching 19, 2% an improvement of 410 basis points from the same period in the previous year. The change in margin is mainly as a result of scaling revenue, while maintaining control investment in salaries and subcontractors.
As part of the company's strategy to expand softer development product and senior management functions.
Operating income for the quarter amounted to one 3 million euros and improvement of about half a million euros from the previous year and net income also increased by 0.3 million euros to zero footfall millions.
We're pleased with our current trading and we are updating our 2023 revenue guidance range to <unk> $95 million to $97 million and adjusted EBITDA range to 15.5 to six and 25 million euros.
As you can see on slide seven the gross profit margin continuing a growing trajectory since the third quarter of 2021 due to the shift in bread product mix, we continue to executing as a mission and strategic plan and we are scaling up our business in line with both our revenue growth and continued movement in product mix as indicated on the right hand side.
Of this slide.
Product mix has changed noticeably since third quarter of Duane 'twenty, one, but the revenue scaling. It has also trended towards proprietary content, Pam and turnkey solutions by leading to improvement in gross profit margins and overall profitability.
Gross profit increased by 18, 9% to $13 8 million with margin stable from previous year to 50, 549%, while increasing by 240 basis points from the previous quarter.
The second quarter revenue growth was driven mainly by the Dutch palm and turnkey customers together with the outperformance of our content offering which is breck studios pod, but bragg and brag hop aggregated content in the second quarter content revenue segment increased to 18, four 9 million euros and represented 76, 6% of total revenue.
Compare to 69, 3% in the previous year, highlighting brakes positive execution of content strategy for.
For project content deployment is positively progressing both in the U S and EU markets by increasing both distribution and gains performance.
And as Ive indicated we have recently marked another key milestones.
With the launch of <unk> newest tech stack in Pennsylvania, with a fourth U S state to date with launching another strategic partner in Michigan and Connecticut.
As we indicated in our previous quarters, we're targeting gross profit margin improvement to exceed 60% by full year of 2025, mainly by increasing the proportion of revenue, which comes from proprietary content, Pam and turnkey solutions.
Moving to slide eight adjusted EBITDA amounted to $4 7 million euros against an operating income of one for $3 million. The gap was driven by the following noncash and exceptional items.
Depreciation amortization the increase of intangible amortization is part of wild streak and spin acquisition in June 'twenty, 'twenty, one and June 'twenty, 'twenty, two respectively and the increase in capture the software development costs over the period.
Sure this payment a reduction in the charge of four awards granted to teams, including senior management during the period composed of the issues or issues and show a prince.
Exceptional cost, which is mainly associated with the discounted contracted relationship with several employees.
And gain on Remeasurement of deferred consideration, it's costs, mainly associated with the acquisition of spin in June 2022 on.
The total outstanding deferred liability.
Moving to slide nine as you'd see on the slide we ended the second quarter with cash balance of $10 7 million euros compared to 11 for 3 million euros at the beginning of the year with outstanding liability of $7 million of convertible security we expect.
To continue exercising the right to pay down the existing convertible security subject to ongoing management assessment during.
During the second quarter and post quarter end the company made cash repayment of $2 million, leaving outstanding balance of $6 million as of today's date.
Our networking capital at the end of June 2023 is $8 3 million euros, it's excluding deferred consideration compared to $6 6 million euros at the beginning of the year.
From a cash flow perspective for the six months ended June 32023, a total of $5 2 million was generated from operating activities with underlying performance, reaching $7 4 million euros offset by negative movement, working capital and income taxes of $2.2 million.
A total of $3 9 million euros invested in intangible assets, mainly related to the capitalization of software development costs in the period.
And in a total of $1 3 million euros used to finance activities, which is predominantly related to repayment of loans in relation to the convertible security in the total of zero 9 million euros.
Going forward management of projecting a positive free cash flow from operations. While there is no campus of technology that required in the business. In addition management and confident there are no current financing or debt requirements needs of the business.
Improving net working capital position and free cash are primary objectives, and we will explain that in the next slide.
I would like to take this opportunity to reiterate brags clear plan to further improve financial performance by increase in gross profit and adjusted EBITDA margins to enhance networking capital. The three fundamentals revenue diversifying revenue mix focusing on distribution of an in house studio content and maintaining a profitable relationship.
She put out exclusive partners.
U S acquisitions and exclusive partner studios support accelerated U S market penetration.
And our strength, our long term relationship with our tier one customers in various markets and positioning Bragg is must have I gaming content and tech solution for our partners.
From a margin perspective, improving gross profit margin by optimizing product mix, leveraging our pan aggregated and exclusive content.
Optimizing investment in tech and people ensuring efficient revenue rose.
Capitalizing on synergies to lower cost base and utilizing global operational functions.
And committing to a long term strategy of exceeding 60% gross profit and 25% adjusted EBITDA margins by 2025.
And for networking capital strong performance, leading to increased free cash flow.
Optimize capex and operation expenditure.
Exploring options to credit facility or line of credit to enhance working capital position and continue to utilize free cash from operations to repay convertible security to avoid further dilution.
With that I would like to turn back to you need to continue without business operational update.
Thanks Lynn.
In Slide 12, you can see our recent progress further expanding brags parking network with new tier one contracts and relationships. These deals give us access to multiple markets and brand portfolios in one go.
Sooner and really extending our addressable market and distribution.
Ability to swiftly integrate and certify our tech and product has proven to be a competitive edge time and time again, taking brag to the next level the landmark contracts and launches with fathers pokerstars in the job that the global deal with aided at William Hill for their school brand portfolio are just two examples of how our near and long.
Term strategy being pursued with local and global partners stepping stone in our growth and ability to continue to scale the business going forward.
Moving to slide 13.
Our distribution you can now see the cumulative effect of proprietary title releases, which we expect to accelerate in the second half of the year and into the next.
This already has a demonstrable effect on margin as our proprietary content portion of gross profit is consistently increasing.
Brian Studios are continuing to make great progress in taking a larger share of wallet across different customers are.
<unk> developed fuse engagement platform, coupled with some of our best performing titles like for the loop and Big Rore has been powering much of this activity a wide range of competitions and promotions has resulted in increased engagement and gained stickiness with players and we're only getting started with this exciting product portfolio.
Moving onto slide 14, I presented our content led strategy in the past, but we're starting to see the results of our persistent investments into it.
Establishing a high end game production factories, the monumental task basically setting up a new business within the existing one.
The core competency developed in <unk> studios to adapt land based titles and bring them online is beginning to bear fruit on the back of proprietary titles, coupled with exclusive relationships with the likes of King show gains blueberry incredible technologies and more the.
Production and rollout of dental is locked a hit game developed in partnership with Blueberry is a great example, the game was very well received by players on both sides of the Atlantic and Mark Brags foray into the alias rankings of the top 10, new title for June in the U S.
This is an important milestone as it provides brag studios with credentials and data back track record that our pivotal and the competitive landscape or content roadmap includes several more land based titles currently in development as we look to leverage on this early success.
Turning to slide 15 in past presentations I've outlined the importance of gaining access to new territories monetizing our superior tech and products with competitive time to market. The Dutch market is a great example, as we became the leading online platforms through our successful partnerships driven embark Pam in turnkey.
Opposition.
As you can see from this representation of our growing footprint. We've recently marked another successful rollout in the Swiss market. This time behind our proprietary and exclusive content signing deals and integrating with almost 100% of the markets operators in a relatively short timeframe.
Naturally complements our ongoing rollout in North America.
Looking to run this playbook in other major markets such as Italy.
In Latin America, just to name a few.
It's also important to note that we're using our entire product portfolio not just games to gain access to growth markets aiming to further diversify our revenue sources. This will continue to be a major focus for us to expand <unk> global distribution and penetration.
And my last slide I wanted to leave you with some key points for the first half of 2023.
We are already deep into the second half of the year and into 2020 for a.
Our record first half of brag on both revenue and adjusted EBITDA, including achieving positive net income.
Utilizing free cash flow to proactively address our convertible security and maximize shareholder value going forward management is focused on leveraging our 2023 momentum to continue executing against our strategy, namely U S deployment and proprietary revenues into 2024 <unk>.
Commercial relationship negotiations are in flight with the aim of extending and expanding existing key partnerships.
And we're pleased with current trading updating our 2023 guidance for revenues and adjusted EBITDA.
I wanted to thank you all for attending this presentation.
Before we take your questions I would like to acknowledge latest natural disaster, which occurred in Slovenia last week.
To hundreds of Braggers, they're now trying to put their lives back on track that we support them and their families. During these efforts will.
We'll be happy to take any questions. You may have at this point. Thank you.
At this time I would like to remind everyone that in order to ask a question Press Star then the number one on your telephone keypad.
We will pause for just a moment to compile the Q&A roster.
Yeah.
Yeah.
Your first question will come from the line of Jan Luca tissue from Haywood Securities. Your line is now open.
Hi, good morning, guys and congrats on a strong quarter.
Just wondering firstly can you extrapolate the growth for US is it mainly coming from new geographies or is it new customer logos in existing markets.
Okay Alright.
Well, it's it's a it's a combination.
We've seen actually good traction with existing customers, but we're also seeing.
New customers, we mentioned the the.
The Swiss market is one market that we've been able to.
Get to market very quickly from contract to deployment phases, we've actually parallel process. Some of these processes.
Processing.
And so.
So we've been able to enjoy the effect. That's just one example, and generally speaking we've been very focused on shortening our development commercial development and deployment cycles.
So this is a combination of logos or customers from.
'twenty, one cohort, but also newer customers on the back of 22 and even a few from early 'twenty three mostly around content that are starting to show the effect towards the back of the first half, but it is a combination of.
And legacy customers.
That's great. Thanks, Geneva and on that point in terms of product development. It seems like you're on a good cadence here of titled Development. How is the roadmap for the second half in terms of new content look like.
We're very excited about the second half of the year and then into 'twenty for we've been very focused over the past, let's say nine or 10 months streamlining further streamlining the content production.
We've signed some very interesting partnerships, we have great assets.
So we're on track for hitting our even exceeding our game development deployment our roadmap this year.
And the first half of next year is also looking very exciting both for the U S focused content and the global content.
And naturally a few of the titles have been deployed.
Several markets, but we're sort of also.
Focusing some of the content development on specific markets and partnerships now that the data is starting to sort of accumulate.
And were able to craft the gangs based on specific operator or market.
Preferences, so you'll be seeing more versions of successful games.
That's exactly what we were aiming for in terms of our contract deployment strategy that we have resource up and invested graysby over last year. So we're starting to see the results there will probably stabilize the number.
Okay.
Titles produced.
And then distribute them a more ongoing basis into 'twenty four.
Awesome. Thanks, Geneva, and then just lastly from a R&D.
And in your press release, it talks about optimizing key customer partnerships, what does that exactly mean that you can help us extrapolate that.
Well, it's a few things naturally with some of the markets that we ventured into like the Dutch market.
Like will it start to switch those will be new but most of the Dutch market another European.
And operator relationships.
These are contracts that relationship to sort of are are maturing.
Past the launch.
The initial market share grab.
Going into two three even four years in and we're now restructuring or renegotiate some of them with the aim of extending and expanding these key relationships.
Naturally you have a few some of them are in flight. So I can't comment directly but some of them are good examples like a flutter or contracts and pokerstars and draw a bit.
New contract with 88, William Hill are good examples of existing relationships that were essentially extended and expanded so we can now access more brands and more.
More markets and also offer more products like fuze, and additional titles and partners our content partners.
Two one contract touch point and that's our aim we want to make sure that every contract that we signed a maximizes the effect is part of the operational efficiencies that Don discussed sign once and deploy many.
But that's just one example, so we're sort of.
Mid flight on a few key partnership negotiations and hope to be updating further on some of them.
Okay. That's great color. Thank you guys and again congrats on a great quarter.
Thank you Luca.
Your next question comes from the line of Matthew Li with Canaccord Genuity. Your line is open.
Hey, good morning, guys.
So I wanted to ask you about the confidence around some of your partnerships in Europe , particularly just given some of the M&A that they occurred in those markets. How are you sort of the long term opportunity around.
I think that we're we've been naturally there'd been focusing on some of these conversations in and and relationships.
The near past, we've been very focused on are the dialogues I can say that they've been going.
Very well.
I think that the overall target for everyone is to make sure that you sustained momentum.
We've proven ourselves as a good partner and a platform and a team that you can.
Rely on and ride with and really create an impact.
And markets are central European markets are a good example of that.
And I think that the focus right now is how do we preserve that momentum and help our partners compete and grow further.
In the mirror and being more long term.
And I think that's part of what my previous answer around key partnerships as well.
Some of these contracts are getting into the second third or fourth year and that's exactly our focus is prolonging them.
Right now we have we have good relationships and I think all of these conversations are held with a very good degree of good faith and the desire to preserve momentum.
Okay right. That's good color and then in terms of margin.
19% on EBITDA was really much stronger than we expected now I know some of that's due to mix shift, but how sustainable is that high teen margin for 2023, and then maybe you know without getting into guidance do you expect that to continue to gain strength in 2024.
Well, if you're referring to the 19% EBITDA margin.
Our goal is definitely to maintain that level and as outlined.
Outlined our strategic goal is to exceed the 25% and 60% gross profit threshold that we set initially reset its 24, we want to actually exceed that to be more profitable into 'twenty five and beyond so that's that's definitely something.
Three near term focus and we'll be looking through.
Preserve that.
Naturally balance our growth needs and if we need to invest specifically around opportunities. We can do that but we also wanted to demonstrate our ability to streamline and enjoy some of the synergies that we now have as a global organization. So that's definitely something we're looking to further expand.
Alright fair enough and then lastly from my side just in terms of the U S market can you just perhaps provide some updates into your progress there or even more preliminarily and.
If you've had any success in your games and in that market.
Okay.
Well first of all we are progressing well.
One of the key points around or the traits of the American market in the U S market is bad once you're in.
The entry barrier is quite high and we are definitely and we're progressing.
We're pushing very hard this is.
We are also dependent on our partners. So we have to work with them and some of them have or in some cases unforeseen circumstances, and we work with them to expedite some of the distribution, but so far we've been.
Working towards towards plan actually launched in Pennsylvania are slightly ahead of schedule and now we're looking to expand in each one of the states. Each one of the core gaming States where library.
To further.
And both in terms of operators and share of wallet in terms of the games.
As I've outlined in my presentation, we've had some good start to rollout and then an even better one with some of the recent titles.
So we've seen good success.
Around some of our titles in the U S.
Some of our exclusive relationships like a Devil's like was mentioned, but it's not just that some of our proprietary games launched in Michigan.
And.
And then new Jersey.
Good early success that we're now trying to preserve in terms of momentum, but the games are definitely being adopted by players I think we the game development philosophy led by our head of content Dovetailing out of Las Vegas.
It's definitely showing that.
That's the direction, we want to go into land based themes going online has been a great way to capitalize on it. So we're very excited about it and we're happy with the performance so far.
Alright, thank you.
Thanks Mary.
Your next question comes from the line of Jordan Bender with Bank. Your line is open.
Thanks for taking my question.
I guess heading into the NFL season, traditionally more sports betting, but it is a big cross sell opportunity for some of us.
Online operators in the United States. So what are you seeing in terms of like distribution from the operators as well as yourself then I guess should we expect kind of an uptick in player adoption of your titles versus kind of years past.
Yeah.
Well, it's a great question. Thanks Jordan.
Every year, but we think that will be a normal steady year and then we started looking into the future that we see the development I think the recent developments in the market. We've had some very exciting news over the past couple of weeks from some of our existing partners.
Some some that we hope will be future partners soon.
But I think what I'm hearing.
What manifests itself at this point is they're all very excited about the upcoming NFL season, but I think what everyone is talking about right. Now is gaming are predominantly online casino.
And I think that was put to the forefront I think they're more successful partners are the ones that are have been able to cross sell just as you alluded to.
I would expect on the back of the new partnerships formed in a market that will see an uptick in marketing, but we'll also see I expect more increased effort on product and and player cross sale into casino and I think that it's great.
It's a great time to offer U S focused casino content.
I think we will see much more competition in the market I'm, putting aside any future gaming states, even with the existing states I think the season last season was more of a steady state I think are more companies were.
Looking to stabilize their marketing expenditure I think with increased competition we.
We will see two things more marketing dollars and more cross sell because people understand that profitability is tightly coupled with the gaming and sports.
Synergy.
That's why we're definitely putting more focused on.
On deploying into.
Improving and streamlining our deployment capabilities in North America, we want to be able to have a steady cadence of.
U S focused titles.
Going into the NFL season early next year, but that's just one of our prime goals. So.
So we can be a good partner and helps them and support them in there.
Profitability long term profitability goals.
Yeah.
Great and then on my follow up you know you talked about the margin target of 25% for EBITDA should we think about that as kind of a linear track towards that or will there be kind of investment needed or would there be any choppiness that'll get us to that margin target.
I think right now what we're seeing is that and again looking into.
Two our year over a year of operation and Oh sort of.
Revitalized strategy and.
Mission and values a lot of it is around efficiencies. So we are constantly focusing on streamlining the business.
And doing more with existing resources, having said that.
What can affect that are only opportunities.
If we see opportunities mostly around content production, either accelerating or creating.
New or new partnerships or new types of games, we may elect to focus or put a focused investment into those areas and they have a near term effect and in most cases, it's hiring more people in a shorter amount of time.
He said that.
You know the business has ramped up quite significantly over the past I would say three years.
Given the last two years and we're now looking at a more stable.
Organization and again this is now optimizing we're still hiring people we're still looking.
Looking to grow but in a more controlled fashion. So we utilize what we have so I would think about this thing early.
Is there some specific opportunity that we'll have a good reason to go the other way for a certain amount of time, but at this point, we're definitely focused on sustaining that trajectory.
Okay.
Thanks, and nice quarter.
Yeah.
Thank you.
Your next question comes from the line of Edward Engel with Roth Capital Partners. Your line is now open.
Hi, Thanks for taking my question and again, congrats on a nice quarter.
You noted in the press release that you're aiming to continue to pay down the convertible note that you have about $6 billion today.
Kind of based on the cadence that you talked about in the press release. It seems like that will be fully repaid sometime maybe in the second quarter of next year is that a fair way to think about it.
That is the current pace and that's.
Again, barring any assessment or unforeseen events that would be the linear progress of that process yes.
Helpful. Thanks, and then if I look at the revenues from the proprietary content segment. It looks like you had a nice uptick it looks like its record revenues for you there in that segment.
Also looks like that was mostly from outside the U S. I just wanted to kind of get some more information on.
Where that proprietary content is coming from today and then on at what point do you have the distribution that you think you need in the U S to really start to ramp revenue on the proprietary content side in the U S. Thanks.
Problems and I said, well first of all the Europe . The European portion of proprietary revenues have grown significantly, but it's only because it's growing faster or we even showed good progress nominally.
The content.
Prior to a new proprietary content grew on both sides.
So we're seeing more revenues with proprietary content both in the U S and our R&D proprietary content the atomic stopped lab.
Wild streak and in Europe .
That content, both proprietary and exclusive content.
We also enjoyed rapid growth so it's sort of two two rabbits facing each other in that regards.
That's the reason why we're seeing faster or more proportionate growth on the European side.
On the U S side.
Satisfactory distribution would be when we have every operator in the market signed up for a direct integration.
We're not there yet.
I think we're already at a situation as we explore.
Explained in.
Overview the overview that we've just provided that we have the vast majority or the majority of operators under contract and either.
Integrated into our new tech stack or the existing spend one.
So we believe we already have enough distribution to start creating more impact with more titles.
On the on the operators.
But I think that once we hit that inflection point.
And it's pretty easy to take top six or seven operators with our new content.
We should hit that 90% Mark in each one of those states I think that will be a fantastic achievement that will allow us to really crank up.
New effect of these games were.
Pretty close, but we're not there yet and we're also looking at besides the actual distribution. We're also looking to deepen those relationships. So we can actually deploy more content faster and help the operators monetize those games better it's not just about deploying the gains it's also creating traction with the play.
<unk> promotions, all sorts of marketing activities. Some in some cases some exclusive efforts.
And some features that you're building into games that are focused on specific markets just to name a few things. So it's a bit more complicated than just distribution, but we definitely have enough challenges ahead of us in that regard we have a lot of runway in the U S and I hope to that inflection point sort of towards the back of the year and into the next.
Yeah.
Great. Thank you for the color.
Okay great.
Your next question comes from the line of Jack Vander idle.
Your line is now open.
Okay, great. Good morning, guys solid results.
Thanks for taking my questions.
Yeah.
You guys had another strong top line quarter slightly raised the 2023 guide you launched 30, new games in the first half plan to launch another 40 in the second half.
It seems like your implied second half outlook is rather conservative for all of this momentum are there any notable headwinds that you are being cautious of in particular that you'd stay too.
Well I think we've sort of touched on it with some key partnerships.
The discussions that we've been having recently, we've had a long and.
Discussion around that we thought we'd be prudent.
To take all those into consideration, where we were a second especially in the second half of the year.
Having said that we have decided to update our guidance on both revenue and adjusted EBITDA, considering or including an assessment of the potential effect there.
So we knew we needed to balance those two things out and we see good momentum in the first few weeks of the second half.
So we're confident.
In our guidance at this point, but again, we have to take these discussions some of these discussions into consideration that we have a line of sight into.
Into the outcome of those discussions and naturally we're aiming to extend and expand those.
But again, we wanted to I would like to have shared more details at this point, but because they are in flight.
We'll need to wait a little bit longer and once we have more information, we'll be able to share it but that was a balancing between the two the current momentum and a potential new deals that will be securing hopefully in the near term.
Okay, Great. That's helpful. And then just one more for me.
In terms of ranking your key markets.
Considering you've only kind of recently entered the U S and that will continue to ramp significantly Dutch market can you top market I know in the past, Germany used to be your top performer historically and that's kind of been on pause.
Just maybe as you know as you go forward and things Youre recent I guess market penetration and expansion is continuing to ramp just as you look in 2020 for 2025 can you just help us understand what you see your envision is your top markets.
Well first of all Brian .
Deployed its latest tech stack and content as you've mentioned recently 22 in the U S, but the spin.
Spending wild streak that were acquired and now part of the brake family have been operating in the market almost since its inception.
I think we've had a good.
The track record that we've adopted sort of assimilated into our DNA that we are trying to leveraging our deleverage on.
And yes, we have a lot of runway in that market looking ahead.
On the back of our existing top markets.
I believe that we have so much runway still.
Besides the U S.
In the U K, which is still the single biggest if you break down the U S and to state the UK still the single biggest all my regulated market in the world.
We're just getting started there we've seen some great.
Yes, without proprietary content in that market, but we have so much to do there Italy. The second biggest market is also a prime target for us and we want it we want to start.
See progress with content and other products in that market.
I would say that and then considering our position in the Dutch market.
And our latest license securing them.
Licensed in Sweden.
I would definitely see us or it looks for us to be in 'twenty 'twenty, four 'twenty five and beyond that.
To have those western European central and Western European higher on our own.
Marketplaces further diversifies towards the U K, Italy.
It's it's Sweden, the Judy around these marketers that some of the deals that we've signed that I've mentioned like Pokerstars and 88 already cover all of these markets and what slipped. So we will be looking to utilize leverage on those new contracts to do exactly that to be able to.
Develop once deploy many.
Canada I think is another runway, Ontario.
Again, we've only seen some early success, there, but that market shaping up to be a major north American market and the other provinces.
Also higher on our list.
And and our recent deployment.
Deployment in Mexico, and Latin America, I think Brazil has reached the regulated sports gaming sports betting. So main markets there the top two or three markets in Latin America. So we'll be looking to include each one of these markets, especially around content.
Our content delivery and turnkey services.
Longer term mid and longer term the Columbia times, we've already had some good initial success in each one of these markets.
Stuck with a flag in and now we need to start expanding our presence in them. So we can further diversify but these would be our top focuses for the next two or three years.
Okay excellent I appreciate the color and again solid results. Thanks.
Thank you.
Our next question. Our final question comes from David Mcfadden of Cormack Securities.
Your line is now open.
Okay great.
Yeah I was just.
Another question on the gross margin.
I'm just wondering what it would be contingent on here.
And then within a matter of just keeping the class.
Okay.
But I would think that would be more for the EBITDA margin.
Alright.
Yeah.
Yeah, Dave could you just repeat the question for you a bit cutoff.
Sorry.
What would be.
What would it take or what is it contingent upon to achieve the gross margin of 60% that youre looking at to achieve in fiscal 'twenty five.
I don't want anyone to think that.
Okay.
Sure David Good morning, how are you doing.
As we indicated in the past the success to getting 60% and above all depends on how we can grow our revenue, but more more importantly to grow up a project content as you can see in the last couple of quarters.
The top part of the buy in slide seven we are were growing not only the nominal value of the revenue, but we're also growing the proprietary content itself.
I believe once as you indicated is it going to be more how does they extended our revenue in the U S and our titles will be accepted well with already accepted well, but it will be much more distributed through all our network, including the tier one customers.
And in the European and the U S side. This $9 seven could be easily 10% to 15% that will be the differentiator to heat the 60% not to mention that we still keep the Pam because Pam and managed services are keeping your margin very high aggregated content improvement of our commercials and and scalability with customers.
So those revenue buckets also come with better cost.
Cost of sale or better gross profit and that will automatically mathematically we're just full full.
4% off from the 60% and I think it's just a matter of couple of quarters, we're going to be there. We said it two years ago, we're gonna be 60% by 2024 and above that by 2025 and I think that's the only items, we are focusing on because that's going to bring us higher and of course that will also increase our adjusted EBITDA margins.
Because it is an invention before we we investing but we're not heavily investing only unless we have particular opportunities. So we're keeping a close quite control.
And hence we managed to achieve 19% of adjusted EBITDA This quarter, 70% last quarter, and we are progressing on that side as well.
Okay and then just on just a question on the Georgia market.
Is that a new market for you guys and I'm just wondering how optimistic you are about that market.
It is a new market for us in terms of our content in our products, Georgia market has proven to be.
I'm quite excited about it.
Tier, one European or Asian market, but.
It's definitely a market punching above its weight class over few years.
Total addressable market there.
And I think it was two fold one is we're partnering with a market leader drawback is clear market leader and it's always good to hit the ground when you're riding the biggest horse.
And it was another milestone in our relationship with the Flutter group.
And to my point around single.
Appointed relationships that are sort of they're not duplicated because in some cases, you need to do a little bit more.
Overhead and deployment, but generally speaking accessing family and some of the tier one operators are now our family of brands.
And markets and this is a good example between the job it and focused stores two.
Building that relationship and start deploying VR content more frequently.
Cross more of these brands so our job it has definitely been a Greg that's been in the works for quite some time.
And we were very excited to be launching in that market. Because they are also relatively short timeframe.
Okay, Alright, thanks, guys.
Thank you.
I will now turn the call back over to Chief strategy Officer, almost nothing for closing remarks.
I would like to thank all of you guys for joining our call today and we look forward to hosting you on our next call for Q3 of 2023 have a great day everybody.
Ladies and gentlemen that concludes today's call. Thank you all for Jamie you may now disconnect.
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