Bragg Gaming Group Inc. (BRAG) Q2 2021 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. And welcome to the Bragg Gaming Group Q2 2021 Conference Call. At this time, all participants’ lines are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker Yaniv Spielberg. Thank you. Please go ahead.

Thanks, Elise. Good morning, everyone and thank you for joining our second quarter 2021 earnings conference call. I'm Yaniv Spielberg, Chief Strategy Officer for Bragg Gaming Group. I'll be hosting today's call, alongside my colleagues Ronen Kannor, our CFO, who will present the results; and our Chief Executive Officer, Richard Carter, who will comment on our H2 performance and give an update on the business. For the first time on this call, we will be presenting a Q2 presentation. So if you've not already done, so you can download our Q2 earnings call presentation from our website at bragg.games/investors. And on that, page you'll see Investors presentation. The presentation is called 2021 Second Quarter Earnings Presentation to follow the points that Richard and Ronan will walk you through. In this call, we'll review Bragg's financial and operating results for the second quarter of 2021. Following our prepared remarks, we'll open the conference call to question-and-answer period. I'll start the call with some brief cautionary remarks, regarding certain statements that may be made on this call. Certain statements made on this conference call and our responses to various questions may constitute forward-looking information, or future-oriented financial information within the meaning of applicable securities law, statements about expected growth, prospective results, strategic outlooks, and financial and operational expectations, opportunities and projections rely on a number of assumptions concerning future events, including market and economic conditions, business prospects or opportunities, future plans and strategies, technological developments, and anticipated events, trends, and regulatory changes that may be – that may affect the corporation and its subsidiaries and their respective customers and industries. While we believe these assumptions to be reasonable, they are subject to a number of risks uncertainties and other factors, many of which are outside the company's control in 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 but many 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 just like to remind the ones who haven't heard and just joined the call. So this time, we'll be presenting a Q2 press release. You can download the press release on our website Bragg B-R-A-G-G dot-game/investors. And under the Investors presentation you'll see 2021 Second Quarter Earnings Presentation. I'd like to turn the call now to our CFO, Ronen Kannor. Ronen? So I think that, we have a little bit of a problem at Ronen's connection. Just let me give us one second. Richard, do you want to take it and start with the rest of the presentation, and Ronen will join in a minute. He said that, he was cut off, so he's calling back.

Sure. Do you want me to start with my slides then?

Sure. Sure. We'll go back to the financials only, because Ronen was cut off from the call.

Okay. Good morning, everybody. So throughout the second quarter, we made meaningful progress with our strategic growth initiatives, including expanding existing customer relationships, building out a pipeline of premium in-house iGaming content and providing our content and offerings to new markets. These and other strategies are transforming Bragg into a leading global content focused B2B iGaming provider. Now before reviewing our strategic growth initiatives in more detail, I want to address the new iGaming regulatory regime in Germany. So following the new iGaming regulatory regime in Germany which became effective on July 1, this year revenue contributions from this market are expected to decline in the second half of 2021 and into 2022 compared to historical levels. Now the changes are fully unanticipated in Bragg's growth forecasts and are expected to be offset by strong growth in both new and existing markets as well as from new clients and from increased profit margins as a result of developing more proprietary content and from our acquisitions. In the first half of 2021, German revenue outperformed and represented 65% of total revenue, which has resulted in a higher base going into the July rule changes. Since those rule changes came into effect player behavior and invoice revenue has trended in line with our expectations. We have budgeted that monthly German revenue will bottom out in Q4 2021. Looking into 2022, we expect to launch additional new license clients in Germany coupled with launching new in-house developed casino content. There is also an expectation that the German regulator should start to address the unregulated offshore operators later in 2021, which should limit some of the offshore flow to unlicensed operators. However to be cautious, we are not assuming any recovery on the Q4 2021 run rate and anticipate German revenue to compromise approximately 10% of 2022 revenue. This slide that shows that German regulatory impact for 2021 has been fully anticipated in Bragg's growth forecast and is expected to be offset by strong growth in both new and existing markets as well as for new clients and from the acquisition of Wild Streak. We expect German regulatory impact of 2021 revenue to be €8.2 million and for this to be offset by €4 million from underlying market growth and €4 million from the launch of new clients. We also anticipate that Wild Streak will now contribute €2 million of revenue in 2021. This results in an updated 2021 revenue guidance for the group of €49 million up from €47 million, previously. We've also today increased our EBITDA guidance from €4 million to €5.4 million. Our previous €4 million EBITDA guidance has been maintained. We have reflected €1.4 million of EBITDA for Wild Streak. Now let's turn a look at the group's 2022 revenue outlook. So as already commented, we expect 2022 German regulatory impact to be more material and are estimating an €18 million impact, but we expect this to be offset by entering to new markets like the UK, Italy, Canada, the Netherlands and the US, which I'll talk about a little bit later. We also expect to see growth from clients launched in 2021 coming into 2022 and from the addition of new clients and by the ramping up of the delivery of games from our proprietary in-house content studio. We'll also see a full year contribution from acquisitions. Taken together this is expected to result in 2022 revenue of between €54 million to €56 million and we anticipate that EBITDA will be at least at the same level of 2021. Now let's look in more detail at strategic growth initiatives we started to advance in Q2 including our in-house content strategy, third-party content and new market entry plan that will not only rapidly mitigate a near-term German regulatory impact, but will enable the group to transform its future revenue growth opportunity and significantly expand group EBITDA margins over the medium-term. An important building block for accelerating the strategic transition was the acquisition of Wild Streak, which we completed on the 2 of June this year. Wild Streak will significantly help transform Bragg's business going forward as we shift from primarily providing third-party online content to be predominantly focused on providing in-house developed online content that will carry significantly higher gross profit margins. Wild Streak a leading US and European focus proprietary casino content studio provides Bragg with the library of 40 casino content titles as well as expertise in game design slot massive and advanced game features. As of June 30, Wild Streak had seven online casino games live in key iGaming markets including New Jersey, the UK and other regulated jurisdictions in Europe, which have helped grow Wild Streak's adjusted EBITDA by 940% during the first half of the year. Now looking forward, we believe that material further growth opportunities exist for the following reasons. Wild Streak had only seven online games at the end of the second quarter with four released during the first six months of the year but now has planned to release a minimum of 16 games a year in 2022 with that ramping up in the following years. In the US, Wild Streak was operational in only one state, New Jersey and expect to grow into other regulated US states in the second half. And finally, Wild Streak's offering will benefit from the large distribution network available to ORYX, RGS and from the company's claim engagement tools. Further underpinning growth, Wild Streak has also shown significant growth in GGR from Europe, since the beginning of 2021, as shown in the next slide. It released four new titles with pragmatic play and plans to release one more game in 2021. These games achieved US$37 million in GGR in the first half of 2021 and proven to be very sticky since being deployed underpinning the quality of the Wild Streak game mechanics and features. As you can see in the next slide, compared to the average of our Q1 exclusive game releases by the ORYX RGS [Technical Difficulty] after release, when compared to the first month of release. For example, in month three Wild Streak game should [indiscernible] at around 50% of the levels seen in the first month compared to 30% against we launched from other studios. As already stated, we expect Wild Streak to add €2 million to group revenue in 2021 and €1.4 million of EBITDA, which represents a seven-month contribution, while in 2022 at this stage, we expect Wild Streak to add €5 million of revenue and close to €4 million of EBITDA in 2022. Now another important milestone in the quarter was the acquisition of Spin. We continue to make progress with the US and Canadian licensing process related to the Spin acquisition, and we expect to complete the acquisition in the fourth quarter as previously communicated, pending regulatory approval. The technical integration between Spin Games and our ORYX Hub distribution platform is already completed and the combined offering will deliver the benefits of ORYX's RGS in-house content as engagement and data tools alongside Spin US market content and operator relationships, providing a differentiated and widely distributed iGaming product offering. Following the completion of the transaction, we will gain access to key strategic operator relationships in the US, where Spin Games has over 30 customers including iGaming customers such as DraftKings, Golden Nugget Penn National to name a few. We plan to leverage these relationships to initially cross-sell our existing European casino content followed by the new proprietary online casino content that we are taking to something to address the US and Canadian market. Now let's turn to the near-term and medium-term market size opportunity for the group. We believe the greatest opportunity for growth is in the online casino segment of the online gaming sector. Within the key markets of North America and Europe, online casino the larger TAM relative to sports betting and has historically tended to be materially more profitable for operators. We expect the current trend for online casino regulation in North America to continue, underpinning the group's growth opportunity. Now Bragg, historically, given its European focus has operated and targeted markets that represented only US$2.8 billion. We're only 20% of the $14 billion European online casino market. Looking forward into 2022, we expect to increase the group's total addressable market by a factor of six-fold to $18 billion. This will be driven by entering the UK market with an estimated market size of $5.5 billion, entering the Italian market with an estimated size of $2 billion, the Dutch market with an estimated market size of $0.4 billion and the U.S. market with a TAM currently run rate of over $3 billion. And we expect all this to open-up for Bragg, during the fourth quarter of this year. Then, as we move into 2022, we are very excited about the opportunities that the Canadian online casino market, presents the group, given we will have relationships with many of the leading North American operators by the acquisition of Spin, coupled with our existing European operator relationships. In addition, via Spin, we expect to be licensed in British Columbia with a Q2, 2022 go-live date already slated. And we are in the process of building our go-to-market strategy for Ontario, for a Q1 2022 launch, following the recent securities law that creates a regulatory framework for a competitive iGaming and mobile sports betting market. Now today the Canadian online casino market is estimated to be currently worth approximately USD600 million which includes offshore operators. But following the privatization of Ontario and the expected market entry, and investment from many of the leading global online gaming and sports betting operators into this province, the total online Canadian casino market is expected to grow materially with an estimated TAM of between $2 billion to $3 billion, by 2025. Now as a way of reference, Ontario represents about 40% of Canada's population. And if Ontario was a U.S. state it would be the fifth largest state by population. And based on the current New Jersey online casino spends per adult will have a TAM of approximately $2 billion. Now taking a closer look at, our road map to expanding our market reach, we're already ramping up our presence in new European markets. We received our BT license to supply in Greece last week. We have completed the certification of our games to the Netherlands, in preparation when the market opens currently anticipated October one this year. We've signed a platform deal with JBH, one of the leading Dutch LAN-based operators. And expect to announce more deals in the run-up to this market opening up. As mentioned, we expect to be ready to supply our games in the top European markets of the U.K. and Italy, from late Q4 this year. While in 2022 we expect to ramp up in all of the territories as well as rolling out in the U.S., Canada and other markets globally. As you can see, on the next slide, the other core pillar of our future growth will be driven by our in-house and third-party content strategy. We have made strong progress during the first half of 2021, in commercializing our in-house studio. And with the addition of Wild Streak, we're now in a strong position to increase our output of games produced from our in-house studios, which capture a greater share of the value chain compared to distribution of third-party gains. The completion of the Spin acquisition in Q4 will also significantly add to this. In addition, we will continue to look to add differentiated and appealing third-party exclusive content and are currently in discussions with several Tier 1 studios, for the exclusive rights for further slot titles for both, the U.S. and Europe. On the next slide, we illustrate graphically the progress we are making and expect to make into 2022. This year in 2021, we expect to release a total of five games from our in-house Oryx gaming studio, which will represent about 11% of all exclusive games were released this year via the Oryx RGS. In 2022, we have a road map of 19 proprietary games to launch in Europe from our Oryx gaming studio, representing 33% of exclusive gains which we plan to release by the Oryx RGS for the year. In addition, in 2022, we expect to release a further four proprietary games from Oryx gaming studio in the U.S., while our Las Vegas-based Wild Streak studio will release 10 proprietary games in the U.S. giving a total 40 fully owned online slot game titles expected to go live in the region and representing 37% of all exclusive games expected to be launched by the company in the U.S. in 2022. Overall, we plan to launch the combined 96 slot titles in 2022, which implies more than 100% year-on-year growth. And out of the 96 titles 33% or 30% will be in-house generated content versus 11% this year. Now let's look at how these key growth initiatives are expected to change our revenue and margin profile going forward. Today, as you know, the majority of our revenue and gross profit comes from the distribution of exclusive games built by third-party studios on our Oryx RGS. The revenue generated from these games is shared with our third-party studio partners in the form of a royalty fee, which depresses our gross profit margins, while revenue from our in-house platform and our in-house developed gains converted close to a 100% gross margin. As we pivot towards our in-house live content strategy, we expect to take our gross profit margins from around 43% today up to 60% by 2024, which in turn will drive our EBITDA margins from 12%, which were in 2020 to between 20% to 25% by 2024. Now in conclusion, Bragg possesses many competitive advantages including proprietary modern technology and development resources that enable us to innovate rapidly and develop content quickly. We, with our technology platform, growing proprietary premium content portfolio, value-added player engagement tools and global distribution capabilities, we believe Bragg is well-positioned to capture a growing share of the large global iGaming market. These factors combined with our low-capitalized expenditure requirements and predominantly fixed cost operating model will enable Bragg to materially grow revenue and adjusted EBITDA margins over the medium-term. That concludes my comments. If Ronen is on the line, I'll pass it over to Ronen.

Yeah, yeah. Thank you Richard and good morning everyone, and apologies for the technical issue. I will start with slide number 3. Our revenue continued to grow in the second quarter and increasing by 27.6% up to €15.5 million. The key driver for growth derived from the gaming content segment and was driven organically by German facing customers alongside promising growth from European and rest of the world customers, which grew 20% sequentially and represented close to 40% of the total Q2 revenue. During the first half of 2021, the group launched approximately 20 customers, which has also lead to further growth and a continued improvement to the new customer pipeline for the following years. The wagering revenue generated by customers has increased rising by 15.9% to €3.8 billion as compared to €3.3 billion during the second quarter of 2020. We've also seen a 21% increase in this period using the Bragg games and content, which is up to €2.3 million from the €1.9 million last quarter. Both operational KPIs were in a positive direction. These strong growth numbers demonstrate strong demand stemming from our unique content portfolio and continue develop technological advancements. The gross profit increased by 37.5% to €7 million while improving the margin by three points to 45% as opposed to 42% last quarter. This is predominantly attributed to the shift in the proportion of revenue from the gains on content into the iGaming entertainment services, which were presented today 12% of our revenue that has no cost of growth impact. The group profitability continued to improve. The adjusted EBITDA for the quarter was up by 8.5% to €1.9 million with a margin of 12.3%. The margin decreased by 2.2 points mainly because of the group investment in challenging our technology, compliance and sales teams as part of the group expansion plan. Now I'll comment on the business highlights in the second quarter. We are continually adding new customers and expanding our global footprint. During the quarter, we added five B2C operators in various jurisdictions. During the quarter we also strengthened our foothold in Spain and Mexico by launching new partnership with Casumo and Logrand, respectively. We increased our casino gaming offering by launching 11 new exclusive slots, of which two were developed by our own in-house ORYX studios. We launched this new proprietary games across our network with encouraging trading signs with additional games planned for the remainder of the year. Our pipeline continues to grow and have retained 100% of our customers since Bragg inflection in 2018. Although our customer retention is excellent, our dependence in our top 10 customers has also improved with a decrease from 64% in Q2 2020 to 57% in Q2 2021, and we anticipate this trend to continue. Now we'll move to the next slide, page 4, and I'm going to talk about how we reconciled operating loss to a positive adjusted EBITDA. The adjusted EBITDA amounted to €1.9 million with 12.3% margins and representing underlying improvement performance with an operating loss of €1.8 million. The gap can be defined by three main non-cash and exceptional items. The first is share-based payment charge as a result of the words directors of management in Q1 of this year's and last year's. Second is the transaction acquisition costs related to the transaction of Wild Streak and Spin Games and the deployment of the corporation M&A strategy. And third is, exceptional costs. This includes legal and professional fees on the master listing and other non-recurring regulatory and legal matters. I'll now pass to page 5 in the presentation. Bragg has a solid balance sheet with improved working capital from continuing operation. Cash balance in the end of June 30, was €21 million as opposed to €26 million in December 2020, with no debt facilities that this have hold been cleared early this year. And net working capital was €11.7 million as opposed to €6.7 million at the beginning of the year. The group has a projected positive free cash flow generation, and there are no main CapEx of technology debt requirements for our strategy. From a cash flow perspective, in Q1 the group completed the acquisition of Oryx Gaming with a payment of €11.5 million. In Q2, we completed the acquisition of Wild Streak in the value of €8.2 million and we raise financing for the exercise of warrants relating for last year fundraise in the value of €11 million. Now, Richard and I are available to take some questions. Thank you.

[Operator Instructions] Thank you. Your first question comes from the line of Matthew Lee with Canaccord.

Hi, guys. Congrats on good quarter. I just kind of wanted to talk about the acquisition strategy here. Can you maybe highlight your priorities in terms of targets? And if you feel like you have the adequate capital to capture the full acquisition opportunity right now.

Good morning. We've made a couple of acquisitions recently, which basically closes the hole that we had. So, as of right now, we are just integrating those into our portfolio, and we don't really still believe that we need to make any acquisitions near term. So we're quite happy with where we are, and I think we've got enough on our plate to manage in the sort of near term.

Fair enough. But I mean if you're thinking about the content library and building the proprietary assets that you own, would that be possible to be supercharged by a couple of additional studio acquisitions, or is that not something in charge?

We can supercharge that and we're in the plans of putting that in place by adding a couple of games producers, which given our scalability and given the resources we've got in place. If we add one games producer, we could probably add 20 titles a year. So, if we have two or three games producers, we can turbocharge or supercharge our growth profile and obviously have something we're looking to do.

Of course, if we were to the right acquisitions out there, which is at the right price that we think add value then we would obviously look at that. But, I think with -- it has to be an acquisition that adds value to our business and improves our business. And I think, as we alluded to in this presentation, the performance of the Wild Streak games are the top percentiles of this industry. So, it's going to be quite difficult to find that type of acquisition. We've been very fortunate. So, we don't really want to be buying things that is dilutive to the underlying performance of what we're trying to win at which is at the premium end of the market.

Right. And then maybe I could just clarify on the Canadian market. Is it fair to say that Bragg is going to be ready to go in terms of every province as iGaming gets liberalized?

Yes. Well, through this Spin acquisition, we’re obviously got British Columbia covered, obviously in the process and talking to other provinces. So -- and, obviously, if they pivot and regulate that, then they'd be well placed, but we're talking to the incumbent lotteries. And then, obviously, from an Ontario perspective, I think, we're well positioned. So, yes, is the answer to your question. I think we're well positioned to capture the opportunity in Canada.

All right. Great. Thanks and congrats again.

Thanks.

Your next question comes from the line of Neal Gilmer with Haywood Securities.

Yes. Good morning. Yes. Congrats on the quarter and appreciate the slides that you walked through, particularly, sort of, understanding the moving parts there with Germany and your revenue guidance. I guess, I wanted to touch on one thing -- or actually a couple of things. Number one is, your guidance -- your revenue guidance for 2022. I assume that includes the acquisition of Spin. I know you expect it to close in Q4. So I assume that that sort of factored in for the start. You made some comments that, what was in the press release, sort of, the EBITDA should be, sort of, similar to 2021. I guess, I was thinking, with the launch of all the games that you were talking about, I think you said 33 going into next year. Obviously, the contribution of Wild Streak into that. Surprises, now, a little bit of an opportunity for margins expansion next year, aside from what you walked through on sort of your plan to get to 2024. Can you just sort of help understand the reconciliation?

Yes. I mean, obviously, as we go through next year, the plan is obviously to build out and establish a -- this content strategy. So we've assumed quite a bit of costs, specifically, on the technology side, which will then enable us to significantly ramp up in later years at much lower cost. So from that investment, if we were to take that out and yes, you'd have definitely a bit more of expansion. And obviously, we're also growing next year into a lot of these markets, the UK, Italy. So there's definitely a bit of costs that we need to put in to outgrow that. So as we go through next year, we'll look at that and hopefully come back with some more positive news around that level. But, yes, I mean, I think, what you're saying makes sense. But we just -- given its very early days and there's quite a few moving parts in terms of growth. And obviously, we want to -- this is not about next year. This is about 2023 and 2024. We really think, given the content we have, we have a real opportunity here to capture a sizable part of the market and we want to make sure that we lay that investment to be able to do that.

Okay, great. That makes sense and helpful. I guess, my second question, then I'll pass on line. Just maybe digging a little bit further on some of your comments with respect to the German markets, what you put here is your expected impact or whatever. Is there a chance you're being overly conservative or you really think that that's sort of where things sort of trend out? So there's that one slide. I think, its slide six here, where you sort of have where it comes down to sort of flat lines in that Q4. It looks like a €0.5 million a month. Is that sort of the worst-case scenario? Is there a couple of different things that you think that might transpire that could be slightly more positive to the impact of the German business for you guys?

Yes. We've, obviously -- given there are quite a few unknowns in terms of Germany, we've tried to be very conservative with how we've factored that into the business. But in terms of, what I'd tell you, in terms of what are the sort of moving parts, the key is obviously a huge part of the market is still being played offshore. So if, over the coming quarters, we start to see the regulator being a bit more aggressive, then that is the really big delta. And it's -- more of the market comes onshore, that's obviously going to significantly help with our growth there. So that's the big sort of unknown. And we've, sort of -- it's, obviously, difficult to predict when that will happen and if it will happen. So we've taken the view that that's not going to happen. Now, obviously, July has done very well and we'll have to see August looks good. So we'll have to see how that continues -- that trend continues. But, yes, I hope we're being conservative. But given that a lot of the market is still being played offshore, it's difficult to hide when the regulator will make any news, but -- and we've seen this in other markets across Europe, where significant demand in the market. If you look at Sweden people estimate like 30% or 40% is still offshore. The other obviously important bit in Germany is, still very, very early days. It's the summer. So I don't think operator has started to really spend a lot of money on marketing. So, I think as they get a bit more confident and if we start to see a bit more move back onshore, then I think, you should get some of our operators spending more money on marketing and that will obviously transpire into greater revenue for us. And then the other area obviously is that, we believe with the content we have and what -- and our understanding of the given market, we are going to release content into January next year. So that will hopefully also help us from a competitive market position. So there are quite a few sort of moving parts there and we try to be as conservative as possible to give ourselves some upside into next year, given the sort of unmanned, but we have to go with that.

Fair enough. Thanks. Appreciate your insights on that. I’ll pass the line.

All right. Thank you.

Your next question comes from the line of Adhir Kadve with Eight Capital.

Good morning guys. Congrats on the quarter. I just wanted to maybe touch on your customer pipeline. You said, you're going to be entering all these -- several new markets and you've obviously had a good strength of customer acquisitions. Can you maybe talk about, what's in the pipeline? I know last quarter you said that, several different customers in the pipeline. And maybe just speak to how they're converting and which markets maybe you see a more stronger entry into?

Sure. So, the pipeline, I think is significantly strengthening and it's strengthening based on the fact that, we now have market-leading content. And we're still going through the presentation and the road map. And the real drive in terms of sort of customer acquisition is going to occur over the next sort of three to four months. So -- but based on very early feedback and sort of very -- it's been very, very positive. So -- and you can see from Q1 and Q2. So, as we go through the second half of this year and obviously, as we go into more markets, we're naturally just going to add a lot more operators because these are virgin territory for us and there's obviously a lot of incumbent operators in these markets that we don't have relationships with. So, I think when we come back in the next quarter, I think we've been a bit of a stronger position and we'll give a bit more update on actually, what we've seen in terms of that pipeline. But from what I see right now, it's expanding significantly and I'm very optimistic about what conversion will get on that pipeline.

Okay. Great. Thank you. And then, I think last quarter you guys mentioned that you launched your first proprietary in-house consumer games with Oryx. And you said obviously, you have five more in the pipeline. Can you maybe speak on some of the early results from that one -- from the one game that you launched last quarter and kind of how you're going to use that for the five extra games that you're going to be adding this quarter?

Yes. I mean, the one thing I'd say is, since obviously we made the Wild Streak acquisition, the world has changed upside down. So we've got one of the best gaming designers in the world and access to some of the best mathematician. So, looking at their game right now versus what's coming down the pipe, it's not really comparable. Now, in terms of the performance of that game, it compared very favorably with the games we launched this year. So that's obviously exciting from that perspective. And then, the second game obviously performed better than that. And recently Doug Fallon who is the founder of Wild Streak has been overviewing the sort of upcoming games from the Oryx studio. So, you can't really compare on things because just in the recent game is -- basically just to give you an idea, I think over a three-week period, we reviewed it and I think changed the math model five times and some of the jackpot features. So it's a completely different proposition and game from what we're happy for. So -- but from that perspective, we're -- I'm pleasantly surprised with the performance given there it's our first two games. And I think with the oversight of Doug and his team you will see a material improvement in the next games coming.

Okay. That’s great. Thank you very much guys.

Thank you.

Your next question comes from the line of David McFadgen with Cormark Securities.

Great. A couple of questions. Just first of all in Germany you talked about how a good portion of the market is still being served by offshore operators. I was wondering can you give us an idea of what you think the percentage of the market is right now that's offshore still?

65%.

Yes. Okay. And so that...

Maybe a little bit more. And the reason why it's that high, if you think about the sort of 80/20 the really sort of profitable players or high rollers, they're all playing offshore. And so just disproportionately is a higher sort of proportion of the revenue which is offshore currently.

So, we're going to need some action from the regulator to sell that? Is that going to be the primary driver to get that down?

Well there's -- I think you've got -- there's a couple of things. There's the onshore regulated market which we expect to bottom out. I actually think it will grow considerably once operators start to market as new players come in. Remember what's happened overnight. You've gone from a market that had on a game an RTP sort of 94% 95%. Now those RTPs are down at 90%, 92%. So it's going to take some time to players to adapt to that new market. And I think it's too early for us to comment and I'll leave back to people that are much more qualified than me from an operator's perspective. We're sort of slightly pleasantly surprised of what we've seen so far but it's still very, very early days. Now -- so you have this offshore market which theoretically will probably continue for some time especially the high -- bigger high rollers. And then you've got this new market which people obviously adapt the new sort of world of this sort of different RTP and then slowly with more time as it goes by more innovations and games and then just the industry just growing from a marketing perspective onshore then hopefully, you should see some reasonable growth on the actual regulated marketplace. And over time, I guess what we've seen in other markets is that the offshore market will slowly decrease. But to get that big chunk back onshore given a 5.3% wagering tax, I think it would be an optimistic assumption.

Okay. And then just in terms of the new markets -- I'm just looking at Slide 8 here. In terms of new markets, the Netherlands you announced a customer -- a very big customer that you're going to be dealing. And can you talk about any customers that you're going to be serving in the UK and Italy and Canada, or is it just too early right now?

Not really. I think you can go through the relationships we have. And with quite a lot of the big operators in -- specifically in the UK, the big operators in Italy are all being incumbent operators. They don't -- and operate in multiple jurisdictions. So, we have a lot of relationships already with the UK operators that are operating in some of the markets where we focus. But I think we obviously applied for our license. We're still waiting for that. And once we get that I think it'll be prudent to just -- for that and then we'll talk about it. But clearly there's quite a bit of overlap with customers we have today in other markets that are in the UK. So I think we said it before there's not particularly a great deal of investment needed to sort of turn that on the UK. It's a little bit more in Italy.

And then I guess in Canada we'll hear an announced about the deals that you've put in place?

Well yes. I mean we've got the British Columbia deal which is a very nice deal, it’s a free spin. We'll have other -- they're talking to the other Wild Streaks. So we'd expect more of the other Wild Streaks to follow. And then the ORYX I was reading came out in the last few days. So we've been going through that. And then I think operators will -- should start to be ready at sort of Q4-ish -- late Q4. And yes and you'll hear us around that. And given our the Wild Streak business and obviously given how well those games perform LAN-based we're very optimistic about that content and that really resonating in the Canadian market. I mean just an example Dragon Power, which is a game that Wild Streak launched as a top-performing game in New Jersey in a month in month out continues to be performing very, very strongly. So we've got a lot of confidence that the content we have will really resonate in the Canadian market and create a really sizable new earning stream for the company.

Okay. And then just on that -- just on Slide 8 you talked about the 2021 pipeline. So existing customers in various markets for fast to grow in growth rate 10%. Is that the -- is the primary driver there is them taking more of your gains? Is that -- I'm just wondering ….

Tell again. Sorry?

Is the primary driver for these existing customers to grow 10% in the 2021 pipeline is that from them taking more gains from you and just using more of your content or more in market?

Yes. It's a combination of -- yes different things obviously then growing the business then growing our games. If you look at most markets most operators are growing 10% to 15% given in the market. So the bringing new operators in we're going to play your content. And then there's also now and then of some new existing content and the new content. So it's a combination. Predominantly there's just the underlying market growth.

Okay. All right. Thanks for the slide deck it's very helpful. Thank you.

All right. Thanks

[Operator Instructions] Your next question comes from the line of Lisa Thompson with Zacks Investment.

Good morning.

Good morning.

I have a few questions about what you're thinking about next year. Do you have any feel what your revenue breakdown might be between North America and Europe by 2022?

I do but I don't really want to get into that level of detail right now. But clearly I think we've given some guidance on Wild Streak and a good chunk of that is going to be US and North America. But we'll update on that probably late in the year. I don't get drawn on dissected the market.

Okay. And should -- does there any significant difference in gross margins between the two geographies, or is it just based on how many of your proprietary games for Europe?

I mean yes it depends obviously is there any difference between gross profit margins in the US and Europe? Not materially. I think you could probably argue there's probably -- we can probably -- we get more scalability in Europe and the rest of the world because you don't -- it's not the same processes. And obviously, the US. is shift at the moment in four smaller markets but it's not material.

Okay. Do you anticipate that maybe your top 10 customers might not be the same top 10 next year?

Yes. Definitely.

Okay. And just as trying to relate to your proprietary games as the old video game analysts is there a possibility to kind of like breakout games that are widely profitable and popular?

There is. Obviously, and we're hoping we get that. We're not assuming that. We've taken extremely conservative assumptions around that because it's very difficult to sort of forecast that. But if the games in the US are anywhere near the same level as Dragon Power then we're massively underestimating the performance of our games. If the games are going to be anywhere near like the games that have been launched so far on pragmatic, again, we're significantly underestimating. And it's very, very difficult. You can talk to all the content studios, it's very difficult to predict. I speak to all these entrepreneurs that run these studios and they can't tell you if the game is really going to be a breakout game. They can tell you if it's going to be a good game. So, yes, I mean it's very, very difficult to predict a breakout game. But I mean as a business we need to provide a consistent level of performance to our partners. And if we're able to just do that then that just will materially strengthen our relationships and that will allow us to grow and be incredibly profitable business. If we obviously were able to get a hit then obviously that would have a halo effect as well and that will just obviously lead to the advantages of having that. So, in terms of just publicity and obviously, underlying performance from my team, but it's about consistency rather than having a one-hit wonder. We want to be in a position where we ramp up into 2023 and 2024 and our going to just consistently performing, which is what's been the case with the Wild Streak games over the last year.

In your industry, do you have the opportunity or the to like say license things characters or on the opposite side get ad revenue you should incorporate -- gain for some hit movie or something, is that a thing?

Yes. So, in the last three weeks, we've been having conversations with third-parties and looking at brand licensing. So, a lot of the major LAN-based operators specifically in the US, we'll tend to have a portfolio -- brand licensing portfolio. Sci-games as James Bond and IGT has its brand licensing and how --. And it's similar in the online space and so yes, we're currently looking at those options. And I think we will probably definitely look to have some branded content over the medium term.

Your next question comes from the line of Daniel Weiss with MCO [ph].

Hi Richard, how are you doing?

Yes, good. thanks.

I'm just wondering if you can give the update on the NASDAQ question, any color there?

Well, not really. I mean the color is we've put in the presentation. I mean Yaniv do you want to talk about where we are with it?

Yes. Thanks. It's just a procedural process. As Richard said Daniel, it's -- the paperwork has all been filed with the regulators. It's just a waiting game now. It's obviously hard to say how long is the wait game because it's regulators, but we're confident as we said in our last press release that it will happen soon. So, we're just waiting to get the approvals.

Okay. Thank you very much.

Your next question comes from the line of Peter Riley with [Indiscernible]. Peter, your line is open.

Yes, good afternoon. Just a final question from me, and most of my questions have been answered. Just on the competitive landscape for acquisition target like Wild Streak and Spin. Can you maybe just talk to us how competitive is that market out there?

Sure. Well, I think it's got a lot more competitive in the last three or four months. I think you're starting to see more people sort of looking at the sort of strategy that we've been putting in place. [Indiscernible]. And there's no doubt that the valuations on these businesses are definitely increasing. So we've been very fortunate that we're able to do the acquisitions when we did them and we're also very fortunate that we have the technology and the infrastructure to significantly scale up our business. We're just adding a few more mathematicians and a few more game producers. We don't need to go out now and pay the sort of prices that people are asking for. But there are still opportunities out there and I think one of the advantages that we bring is that obviously we will -- we are obviously pivoting to list on the NASDAQ and just having that equity angle. And obviously, the two deals we've done so far are very significant proportion of those two deals. The two founders took equity. And obviously, they believe in the long-term combination of the businesses. So definitely, a bit more competition. I think there's definitely a bit more people sort of circling and looking at casino content. And I'm sure you've all seen the DraftKings, Golden Nugget and I think -- and also the commentary around casino and the profitability of casino and the growth that it offers. So I think it's definitely a bit of a hot space. And yeah, it's a little bit of that. Hope that answers your question.

At this time, there are no further questions. I will now turn the call back over to management for any closing remarks.

Thank you everyone for joining the call. I hope we answered all your questions. And of course, as always, if there's any questions remaining you can always reach us at info@bragg.games. Thanks everyone and enjoy the rest of the day.

Thank you.

Ladies and gentlemen, that does conclude today's conference. We thank you for participating. You may now disconnect.