Bragg Gaming Group Inc. (BRAG) Q4 2021 Earnings Report, Transcript and Summary

00:04 Good morning, my name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Bragg Gaming Group Fourth Quarter and Full-Year 2021 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. 00:37 Yaniv Spielberg, Chief Strategy Officer, you may begin your conference.

00:44 Good morning, everyone and thank you for joining Bragg Gaming’s fourth quarter and full-year 2021 results. I'm joined today by my friend and colleague Ronen Kannor, who will be hosting today's call. So on the second page you guys will see the forward-looking statement. And so I'd like you all to familiarize yourself with the forward-looking statements as some statements on this presentation will constitute forward-looking statements for the presentation. With the [indiscernible] behind us, let me talk about what we will talk about this morning. I'll provide an overview of Bragg Gaming, then we'll talk about operational and strategic highlights, we'll then turn to business performance, product strategies, and then we'll talk about M&A, licensing in new markets and then financials and guidance and we'll conclude with an outlook and conclusion. 01:34 And so with that, let's start with the Bragg overview on page 5. You will see an overview of the Bragg business. Bragg is a fast-growing vertically integrated global business-to-business gaming and Content Technology Group, we are dual-listed on the Toronto Stock Exchange and NASDAQ under the same ticker BRAG. We offer a full turnkey proprietary iGaming platform and content from our in-house studios, partner studios and aggregated content. We're operational and licensed in Europe, North America and LatAm. We have 286 employees pretty much around the world with offices in Toronto, Los Vegas, London, Ljubljana, in Slovenia, Malte and as soon we closed the Spin acquisition we’ll also have offices in Reno and Chennai in India. We're growing really well. We currently serve over 140 customers and growing, very excited about the future of the company and the customers that are coming on board. 02:35 With that let me turn to page 6 and talk about Bragg’s products and services. Bragg offers platform technology content and services to online and omnichannel casino brands in regulated markets globally. Our technology stack is composed of our player account management system, which is a platform for omnichannel casinos and sport book. We also offer our remote gaming server and content distribution, and more recently we have developed player engagement tools, we name it Fuze and it's been going quite well. Data driven player engagement tools that are very favorable for operators. 03:13 We also offer content games on proprietary studios, which include our recent acquisition of Wild Streak, our newly founded Atomic Slot Lab, of course, Oryx Gaming and soon to be upon closing the Spin Games, we offer exclusive games in partner studios and of course aggregated gaming content from suppliers across the industry and we'll talk about the content strategy in a few slides. We complement our technology and content offering to services, we offer managed and operational marketing services, business intelligence and software development. And so if you think about the 3 facets of the business, technology, content and services taken together, Bragg offers full turnkey solution, everything that is required to run an online casino operation. 3:56 On the next page, we'll talk about operational and strategic highlights. It's been a very exciting fourth quarter as you can see on page 8. Strong growth, driven by new market strategy and ongoing content and platform expansion. The fourth quarter strong financial performance, you can see the Q4 revenues rose 14% to EUR15.8 million, Q4 2021 adjusted EBITDA rose 15.4% to EUR1.5 million and our gross profit margins increased by 7 basis points to 51% with an adjusted EBITDA margin increased by 23% to 9.8% of the total revenue. 04:34 There's also been a lot of exciting business highlights. We entered newly regulated markets in the Netherlands. And we are -- we've been established as a major platform and content supplier in this market. We obtained our license to supply and launch content in the United Kingdom, which is the world's largest regulated iGaming market. We also transitioned to supply in the newly regulated German market. And the performance so far is in line with management expectation. We expect that as licenses will be given and enforcement will start taking place, the German revenues will grow in line with the market expectation. 05:12 Finally, we have some key highlights for the quarter. I want to emphasize that our new pipeline of revenue for the fourth quarter increased 500% compared to Q3 of ’21. We've done significant investments in technology and content partially to grow our North American expansion and focus on that. And we've had continued success in the integration of Wild Streak and the soon to be Spin acquisition into the Bragg business. 05:40 With that, I'll turn to the highlights for the full year of ’21, which has been a transformative year for the business and operations, M&A and capital market strategy. In terms of financial performance, the full-year ’21 revenue rose 25.6% to EUR58.3 million, the adjusted EBITDA in the same period rose 30% to EUR7.2 million and the gross profit margin increased by 5 basis points to 48.6% with the adjusted EBITDA margins increasing by 30% to 12.3% of the total revenue. 06:15 It's been an exciting year. The business highlights for the year include the uplifting to the Toronto Stock Exchange in January. And then we do listed the business on the NASDAQ in August, we've also done 2 acquisitions, the Wild Streak which was announced and completed in June and the Spin acquisition, which was announced in May and will be completed soon and we'll talk about the acquisition in more detail shortly. And these 2 acquisitions and the strategy shift accelerated our North American market entry. 06:45 In the year, we've also entered 5 new regulated markets with the combined total addressable market of $9.5 billion, further strengthening our growth in the online gaming space globally. The fantastic performance of the business in ‘21 paved the way for really good start for 2022, we've launched our first game from our proprietary studio Atomic Slot Lab, Egyptian Magic. There is a slide dedicated to that with the case study and we'll talk about it in a few slides. We also enter a new market in the Czech Republic, which is the sixth regulated market entry in the last 10 months. And of course, I'm sure for those of you who followed the story, we've obtained 2 new licenses in Bahamas, and the highly anticipated Ontario market, which is planning to open April 4th to operators. 07:38 Next, I'll turn to my friend and colleague Ronen Kannor to talk about the business performance of Bragg.

07:46 Thank you, Yaniv. Good morning, everyone. I'm turning to slide number 11. Bragg Q4 ‘21 revenue performance and underlying revenue, including regulated German market was ahead of company's expectations. Q4 2021 reported revenue was EUR15.8 million, which amounted 22% above our reported guidance. The main catalyst for the underlying performance was EUR2.5 million from a stronger than expected start from launches of new customers, mainly in Netherlands driven by PAM managed services and content. EUR0.3 million from a better than expected existing customers, including recurring German regulated revenue and Wild Streak gaining revenue that was kept in line with expectations. The strong underlying performance further strong momentum going into Q1 2022, an upgraded guidance for the full year. 08:41 Now turning to slide 12. As I mentioned earlier, our entry into new markets, in particular, the Netherlands, which has been exceptionally strong coupled with new client wins and the ramping up with operators launched earlier in the year give us a significant momentum for the coming 2022 financial year. During the quarter the year 2021 business revenue was up by 500% from Q3 to Q4, driven by new market launches. Existing customers revenue, excluding Germany has also seen a growth in Q4 by more than 40% on the previous quarter. And the underlying recurring group revenue, including licensed Germany increased by 22% quarter-over-quarter. 09:24 In the following chart we presented the 2021 Bragg revenue split during the quarters. As you can see on the right hand side, representing the Q4 underlying revenue mix that is rolling into 2022 financial year, plus implementing the headwinds from Germany since the new regulatory changes took place in July 2021. 09:44 As a conclusion, Q4 performance further grew foundation to drive a significant acceleration of growth in ‘22 and beyond. Now back to you, Yaniv.

09:57 Thank you. Ronen. As you can see, the business has been performing well. And next, I want to talk about the product strategies that underline the business. First, on page 14, we'll talk about our content strategy, which is a rich portfolio of casino games from in-house and partner studios. We really divide internally our content into 3 buckets. The first bucket is Bragg’s proprietary studios. These are the fully-owned studios which produce in-house games, names that you know, the Wild Streak, the Oryx, the Spin and the newly founded Atomic Slot Lab. We offer online land based and social games, slots and table games. And of course no royalties to pay on proprietary content, which means higher gross profit margin start stay with the business. 10:41 The second bucket of content that we offer is our exclusive third-party content, essentially it means third-party studios who offer games via our remote gaming server for exclusive distribution by Bragg. And so we take the content from our partner studios, we host it, we certify it and then we sell it. It's diversed and localized portfolio and it caters to player preferences in different markets. Some of the names that you can see on page 14 include Gamomat, Bluberi, Blue Guru and others which are exclusively distributed through us. 11:14 The third bucket of content is the aggregated portfolio, where we offer thousands of online game titles from top studios and we continuously update our titles every month to get the best new games releases through our platform. And so, proprietary studio content and exclusive new offering have been driving and continue to drive our margins and boost revenues. 11:35 I want to take you through a case study of the game that we released recently through our newly founded Atomic Slot Lab. Atomic Slot Lab is our brand new in-house studio. In Q2 of ‘21 Bragg acquired Wild Streak and appointed Wild Streak Founder and CEO, Doug Fallon as the Group Director of Content. With the help of Doug Fallon in Q3 of ‘21 Atomic Slot Lab was established, which is a new game studio with a mission to forge a new generation of online casino games. Each of Atomic Slot Lab games has at least 2 map variations, 1 that is tailored to the North American taste and 1 that is tailored to the European market. Atomic Slot Lab launched its first title Egyptian Magic in Europe in January of 2022, and we expect to release at the North America later this year. 12:25 The performance of Egyptian Magic has been phenomenal. Egyptian Magic is an all-time top 5 slot releases for Bragg’s exclusive content portfolio, which includes over 270 games from proprietary studios and third party studios. Egyptian Magic was also named Slot of the Week by online casino content focused outlets SlotBeats.com. I think this point illustrates that the launch of Atomic Slot Lab highlights the successful execution of our new proprietary content strategy, which helps us drive higher margins and bring in new customers to this proprietary content that is only available through our platform. 13:02 Next, I want to talk about our iGaming platform strategy. Our player account deployments enable stable long-term growth for the Bragg business. Our player account management iGaming platform is chosen carefully by online casino brands which typically look for a partner to power their casino for 5-plus years, which means that we have long-term contracts with our partners. Online casino taking Bragg’s player account management are more likely to be stable long-term partners. And of course, we control most of their operations because we're fully integrated into their operations. 13:35 Player account management is the backbone our SaaS, software as a service iGaming technology offering. It's encouraging and enabling the deployment of other revenue generating products and services, including the exclusive content from our in-house and partner studios, aggregated content, platform fees for sport book, wagering, fees for manage and operational services, and of course, the new [indiscernible] Fuze player engagement tool sets, which helps with promotions, retention and acquisition of customers. New regulated online casino markets present opportunities to win new PAM customers. And talking about newly regulated markets, I think the best case study to illustrate that point is the newly regulated Dutch market. 14:17 In the Netherlands, in early 2021 we secured deals for several local casino and sports betting brands as the supply our player account management in anticipation of the market opening. In August of 2021 following bespoke development to comply with local regulation, Bragg’s player account management is one of the first to be certified for the Dutch market. On October 1, 2021 the Dutch regulated online gambling and in October 2021 BetCity, which is one of our customers is one of the first operators to receive a license. We launched BetCity successfully on our player account management at the market opening and it's been a very, very successful launch. Since October 2021 JACKS launched on Bragg’s player account management system and iGaming platform and Bragg also launched content with state operators Holland Casino and TOTO. 15:09 The operations and the execution in the Dutch market is just an illustrative point of our agile operator friendly iGaming platform and the Netherlands is now Bragg’s top market with very exciting opportunities ahead for a market that is over $1 billion in total addressable market. Our flexible modern platform technology puts us in a strong position to win market share in newly regulated jurisdictions. And we're very excited about the recently announced Ontario license, which we hope will present a significant opportunity for us in a similar fashion to the Dutch market. 15:43 I think the next slide is important to talk about our continued growth, which is complemented by substantial margin expansion. We talked about the importance of content, we talked about the importance of our player account management. And this slide, slide 18 illustrates why these are important. If you look at our profitability margin for 2020, you can see that our gross profit margin was 43% and our adjusted EBITDA margin was 11.9% as we were selling mostly third-party content. Third-party content has a lot of royalties attached to it, so the cost of goods sold is more expensive and we have to pay out. As we transition to more platform and proprietary content, you can see that in 2021 our gross profit margins increased by over 5% and our adjusted EBITDA increased as well. 16:31 As we look into the future, we would like to focus more on our platform and we would like to focus more on proprietary content, both carry much higher gross profit margins in terms of the profitability for the business. Our target profile for the business is to achieve 60% gross profit margin and an adjusted EBITDA margin of 25%. And so, Bragg operating leverage is expected to increase given the limited growth in employee cost and other overheads. 17:00 Next, I'd like to talk about M&A licensing and new market opportunities. First, I'd like to provide an update on the Spin Games closing. We recently announced that we expected Spin to close in Q1 of 2022, now given regulatory delays we expected to in Q2 of 2022. The reason for it is because the regulators now have the applications, they have concluded their investigation and it's now a matter of reviewing the investigated reports. We're awaiting Pennsylvania Gaming Control Board award of the Bragg license, which will allow us to close the transaction. We've been approved by the New Jersey regulators with the transactional waiver and the Michigan regulator with the transactional waiver. And so, what we're waiting for is the Pennsylvania regulators to approve the license and once the license is approved we will be able to close the Spin transaction. 17:54 It's important to mention that in the time that we're waiting for the regulatory approval to close Spin transaction on paper, we've been doing the integration between Bragg’s European remote gaming server and Spin remote gaming server and that's already been completed. We're also submitting for and working on certification in the various markets that Spin is already operational in, and we anticipate a very smooth go-live date once the transaction closes. We expect that to close in Q2 of 2022. Hopefully, sometime in May of 2022, subject to regulatory approval. 18:32 And so, now that I've updated on the Spin closing, I just want to remind everyone what Spin is. Spain is our recently announced acquisition at May of ’21. Spin has been an established U.S. B2B gaming supplier as well. They have their own remote gaming server and content aggregation business, it of course, accelerates Bragg’s entry into the United States. It's an established provider of proprietary and exclusive third-party casino content. It was founded in 2012 by Kent Young who will remain with the business as a Director for Americas. 19:03 Spain's acquisition fast forwards our U.S. rollout for Bragg’s exclusive content. And we're expecting to rollouts Bragg’s exclusive content via the Spin acquisition in Q3 of 2022. Few other quick thoughts about Spin, it's license in 5 jurisdictions, New Jersey, Pennsylvania, Michigan, Connecticut and BC in Canada. Over 35 proprietary games, over 30 customers and as you can see the biggest customers in the United States [indiscernible] and others. We're very excited about the acquisition. We are working together closely as if we're already together as one company. And once the acquisition gets the final approval from the regulators, we will continue to work together on rolling out Bragg’s US strategy. 19:49 So if we're talking about licensing in new markets. The next slide, page 21 is an update on the licensing in new markets. Bragg continues to roll out its content and technology in newly regulated markets, in Europe, North America and globally. In Q4 of 2021, in October high impact launch of our player account management and content in the Dutch market as we already discussed. In November of ‘21 Bragg obtained its UK license and we started rolling out our content in that market. And overall, 6 newly regulated markets entered between March ‘21 and January ‘22, which include the Swiss market, the regulated German market, Greece, the Dutch market, UK and the Czech Republic. 20:33 We've also had key developments in Europe in the process of certifying our games for Italy, a EUR2.3 billion iGaming market. We also have license pending in Belgium, which is a smaller market and we have our game certified and were pending launch in the Portuguese market. With respect to North American progress, as we've already discussed, we applied for licenses in the US, in New Jersey, Pennsylvania, Michigan and Connecticut, we expect the total addressable market growth of about $4 billion by the time we get the licenses, which is very soon, as I mentioned. In February of this year we announced that we will obtain our Bahamian gaming license or Bahamian supplier gaming license and recently, a couple of days ago we announced that we were one of the first B2B companies to be granted our Ontario gaming supplier license, which is expected to be one of the largest iGaming markets in North America. Ontario will be newly regulated markets on April 4th and we're very excited about the opportunity, especially given our presence in the Canadian, especially in the Toronto market. 21:41 So talking about growth in the business and the licensing and new market opportunities. I want to turn your attention to slide 22 with a roadmap of expanding market opportunity. Bragg’s addressable market continues to expand rapidly as online gaming companies grow aggressively and land-based gaming companies look to migrate online. If you think about where Bragg started in ‘21 focused on a small region of about $3 billion, by Q1 of 2022 we're licensed and operational now in about $13.5 billion of TAM. As we continue to apply for and be granted licenses in new jurisdiction, including the United States, Italy Canada and other new markets, we're expecting to grow our total addressable market by the end of this year to about $21.5 billion. It presents a significant growth opportunity in terms of revenue and new customers in all these newly regulated markets as we present our content and iGaming platform, and of course, supporting services to newly regulated entity. 22:43 It is expected that our total addressable market will grow to about $43 billion with North America growing at a higher pace than Europe and will represent very exciting market opportunity for us as we continue to grow our operations in Europe, North America and rest of the world. 23:00 With that, and the growth in our revenue and our expected total addressable market, I'll turn it again to Ronen Kannor to talk about the financials and the guidance for Q4 and the full year.

23:12 Thank you, Yaniv. Thank you very much. I'll begin my comments on slide 24. The fourth quarter revenue was up by 14.4% year-over-year to EUR15.8 million and up by 22% from the previous quarter, mainly attributed to a stronger than expected start through launches of new customers in various markets, with our PAM and managed services which was offsetting the impact of the new German regulatory changes introduced in July 1, 2021. The gross profit increased by 33% to EUR8 million with margin increasing as well by 7 basis points to 51%, this is primarily attributed to a higher proportion of revenue derived from our platform and managed services, alongside with our Wild Streak games revenue, which has no cost of goods associated compared to games and content, which I’ve said, by the gross line. More about the gross profit will be explained in the next slide. 24:05 Adjusted EBITDA for the quarter was up by 23% to EUR1.5 million, up by EUR0.2 million from previous year, representing margin of 9.8% which is an improvement of 0.7 basis points compared to the previous year. Operating loss reduced by EUR3.4 million to EUR1.9 million, mainly as a result of reduction of the further continued consideration, reduction of selling, general and administrative expenses and with the improvement of our total gross profit for the period of about EUR2 million. From the business highlights perspective, during quarter 4 we obtained license to supply in the United Kingdom, we launched 10 new customer, we founded a new proprietary content studio Atomic Slots Lab and we also continue to retain 100% of our customers since 2018. And while our customers retention remains solid, our dependence on our top 10 customers was up by only 2% to 68% of our total revenue, the trend we expect to remain. 25:05 Slide 25, gross profit expansion. As you can see from the revenue and gross profit margin slide, the gross profit margins, i.e. the growth trajectory since Q2 2020 and our scaling up in line with the revenue growth and movement in the product mix as presented in the chart in the bottom of this slide. As we indicated in the past, platform and proprietary content products are carrying outside party costs, which is giving us the ability to scale up gross profit margin. PAM and managed services improved quarter four gross profit margin as a result of strong performance of the new Dutch customers. And finally, Bragg is targeting gross profit margin to increase by 2024 up to 60% of the total revenue. 25:49 Coming to slide 26, revenue and adjusted EBITDA. On this slide I'll detail how we reconcile our operating loss to a positive adjusted EBITDA in 2021. Adjusted EBITDA was EUR7.2 million at 12.4% margin against an operating loss of EUR6.5 million. The gap can be defined with the following non-cash and exception items versus the share based payments, it was the new directors management and employees in Q1 and Q3, transaction and acquisition costs, expenses related to acquisition of Wild Streak Games and Spin Games and the deployment of our cooperation M&A strategy. And exceptional costs, which include legal deployment costs, professional fees on the NASDAQ listing and other non-recurring regulatory and legal matters. 26:37 Moving on to slide 27. As of the end of December, 31st 2021 Bragg had a solid balance sheet and continue to deliver strong cash flow performance. Cash balance of December ‘21 was EUR60 million compared to EUR26 million at the end of December last year with no debt facility. Net working capital was EUR11.6 million compared to EUR18.2 million at the beginning of the year. We continue to project positive free cash flow from operations. As a reminder, our business strategy requires little CapEx related to technology requirements. 27:09 On a cash flow perspective, in the 12 months ended December ‘21 we [indiscernible] EUR11.5 million for the acquisition of Oryx, we paid EUR8.2 million for the acquisition of Wild Streak Games and we continue to capitalize software development costs as part of the investment in our technology for the new North American and European market expansion. 27:29 2022 guidance. Given the building momentum across our entire enterprise which has establishing a foundation for underlying sustainable revenue and long-term growth, we raised our guidance for 2022 driven by performance in our newest market, our growing numbers of customers worldwide and our expanding roster in our in-house games offered by Wild Streak and our Oryx IGF. We now expect 2022 full year revenue guidance from EUR68 million to EUR72 million compared to EUR59 million to EUR61 million previously. And we also expect full-year adjusted EBITDA of EUR9.5 million to EUR10.5 million compared to EUR6 million to EUR7 million previously. 28:11 With that, I will turn back to Yaniv for the outlook and conclusion. And then we will turn up the call back to the operator where Yaniv and I can take your question. Back to you Yaniv.

28:22 Thank you, Ronen. 2021 has been a transformative year for the Bragg business which laid a strong foundation for the future. We're really very excited about the great work we've done and we're even more excited about the future. First, I want to thank each and every Bragg employee as we all worked really hard to deliver better than expected results in ’21, which laid the foundation and the groundwork for strong performance in ’22. Our strong Q4 performance led to an update of our numbers for 2022, both in terms of the revenue and the adjusted EBITDA guidance. We have a robust and scalable player account management supported by growing proprietary content portfolio which will, of course, as we discussed will increase our margins into the future. As we get more licenses, as we get more certifications, we're expanding our total addressable market, mostly driven by offline to online transition and casino gaming. We are increasing our gross profit margins and our adjusted EBITDA margin with limited CapEx needs and we present solid financial flexibility with a debt-free balance sheet. 29:26 The fourth quarter performance of ‘21 and all the hard work that has gone into 2021 highlights the opportunity and the excitement for the growth in 2022. And with that, I'd like to thank the whole team. Again, I'd like to thank Ronen and we can turn to your questions.

29:43 [Operator Instructions] And your first question comes from the line of Matthew Lee from Canaccord Genuity. Your line is open.

29:58 Hey, good morning guys. Let's start with the Canadian opportunity, given that it's probably on the top of everyone's minds right now. Can you just maybe frame how we should be thinking about Ontario in terms of upside versus your guidance? And is it fair to assume that the B2C players who already use Oryx and Spin will likely use you in Ontario?

30:17 Hi, Matt. Good morning. I think, yes, I'll start with the end first. Excluding some of our operators, both from the Oryx side and the Spin side, the European side, the North American side will become our customers in Ontario. Of course, behind the scenes, we've had various conversations as many of these operators are expected to or at least expecting to get their licenses in Ontario. So we're excited about the opportunity that some of these customers that we serve in the European market, and of course the American market will come to Ontario. 30:49 In terms of the opportunity, it's a significant opportunity. I mean we've had the case study in the Dutch market [indiscernible] new regulated markets, we've done exceptionally well in the Dutch market because we were one of the first platforms and the first B2B supplier to be certified and we're expecting to have good result in the Ontario market with respect to offering our product and services. As to guidance itself in our financials, I will turn to Ronen to kind of discuss of what we have in the numbers that are presented for 2022.

31:26 Thanks, Yaniv. Hi, Matt. Good morning. So we'll not necessarily define every single jurisdiction what is actually expected revenue is going to be, but I can assure that from a conservative perspective we included some revenue in the Canadian market, because we knew that we will get a license, we know we're going to -- how we're going to roll out in the year. But definitely, it's materially low that’s what the potential ahead of us. And I believe that going forward, especially from 4th of April we will be able to beat those numbers and even provide more, I’d say, guidance about the next Q1 and Q2 with our plan, but definitely there is a big roll up plan, we know who we approach, how do approach, how to continue with our -- with existing customers and the potential new customers. But overall, our estimations are very low.

32:19 Great. And then maybe we can talk with the Dutch market and Ontario market. Are you [indiscernible] those are kind of similar market in terms of size, maybe population, etcetera.

32:29 Actually, I think the answer is, yes. I mean if you think about the Dutch market and what analysts are estimating the Dutch market to be, they're talking about EUR1 billion in TAM. And so based on some of the analyst estimates on Ontario, at least for the first year, it's a very similar size in terms of total addressable market. And so I think that there are similarities, especially in the way that it's been rolling out. I mean Dutch market versus the Ontario market you're talking about relatively, a pretty good GDP in terms of the opportunity for the market. And so we believe, again, going back to the point about being one of the first supply with license, there is a lot of upside in the Ontario market. But as any new market that rolls out, it's kind of hard to have the mix of what will happen before you sign the first contract, before you go live with your first customer and before you see the adoption of your content and your platform. So as Ronen said, and I echo the sentiment, there is a lot of upside that is not baked into our numbers. And as we roll out the content on April 4 and as we certify our platform and on board new customers to the platform we will see how that rolls out and then we'll update our guidance accordingly.

33:40 Perfect. And then just maybe on cash flow, obviously all the investors are looking to invest in Bragg for cash, but certainly unless if you not burning cash like some of your peers, you are going to be cash flow positive in 2022.

33:53 Ronen?

33:54 Yes, sure. Yes, if you look at our guidance consensus numbers, we're going to generate about EUR10 million of adjusted EBITDA. We're going to have a positive free cash flow from a operation perspective. As you know, Matthew, we are reinvesting the entire profit we're making from our operation into recruits more developers, get into the North American market, in the US, the Canada in a quite accelerated pace. We satisfy our platforms as Yaniv mentioned, we are creating gains just let -- Just to give us some understanding, we're going to roll out 35 games next year, in 2022, all developed in-house. Not to mention other games they are going to [indiscernible] Wild Streak games, which wasn't going to go through other customers as well. So we really in 2021 will ramp this operation, in 2022 we're going to re-invest heavily on that particular side. 34:47 So from free cash perspective and working capital, I think from post-acquisition of Spin, we're going to have a narrow working capital, but again, we are controlling the cash we are reinvesting in the business and we definitely as a Board and the management we're looking for other opportunities to improve our cash position purely to accelerate growth and actually to capture on and capitalize on opportunities out there. As we did recently with launching and signing a new content provided.

35:17 That's perfect. Thanks and congrats on the good quarter. Thank you.

35:22 Your next question comes from the line of Neal Gilmer from Haywood Securities. Your line is open.

35:28 Yeah. Good morning. Congrats on the quarter. Thanks for taking my questions. Maybe I just wanted to see your perspective on the UK market, you got your license there in November. Just sort of what you're seeing from the first few months that you've been there? And what your outlook is for this year for that market?

35:45 Thanks, Neal. Good morning. Yeah. So the UK has been pretty much with our expectation, in line with the expectations. We received our license in November of last year, as you mentioned, we've signed various customers in ‘21 and we have [indiscernible] customers that will be signed in ‘22. I think it's worthy to mention that the UK iGaming market and gambling market is mature. It's probably the most mature market and very saturated [indiscernible] nationwide some of our proprietary content will lead our way into the market and that's exactly how it's playing out. [Technical difficulty] proprietary content, exclusive content that is not available elsewhere. And so far it's been within our expectation. And we're hoping to be able to announce more and more customers in the UK as our content becomes more desirable by the operators.

36:43 Okay. Thanks. Appreciate that. On your guidance for 2022, how is the Spin -- the closing of Spin acquisition factored into that as well as some of the licensing in some of those states that you've applied for? Obviously, the Spin transaction closing sounds completely out of your control and with the regulators. If that gets pushed out at all do you have -- is there any concern on how you might be able to grow into that US market?

37:12 Ronen?

37:13 Yeah. Hi, Neal. Good morning. Actually we factored it that it will take place around the second quarter, the end of the second quarter. So from our perspective, when we anticipated the close of Spin from our perspective, from our guidance we don't have any change. And as we said in the presentation, the integration already started, the inter-company relationship is already on the right pace, we are certifying – the games are certifying the integration. So in that respect, I would assume and we are expecting that guidance currently is on the lower base, not on the higher or the medium size.

37:54 Okay. Thanks, Ronen. That's helpful. Thanks and congrats on a good quarter, guys.

37:57 Thanks, Neal.

37:58 Thanks, Neal.

38:01 Your next question comes from the line of Adhir Kadve from Eight Capital. Your line is open.

38:08 Good morning, guys. Thanks for taking my questions here. I wanted to touch a little bit on your in-house developed content. I think you may have made -- you made a reference to how many games are in the market, but I didn't catch that. So I just wanted to kind of talk about how many games are in the market right now? How are those games are actually performing? And do you maybe potentially -- would you provide a target for how many games you would release here in 2022?

38:34 [Multiple Speakers]

38:35 Okay. Please go ahead.

38:36 Yeah. So as we said, we are shifting to some extent our efforts towards proprietary and exclusive content, because of the gross profit margins and because of the ability to sell that content better than third party, because, of course, it’s exclusive to us. And so as operators are looking for content, and they are looking for this specific content, we're the only ones that are able to supply it. In terms of the numbers, I know that there were some numbers that Richard have presented before. In our estimates for the year, we're looking at about 90 to 100 proprietary games developed on our RGS, some of them are third-party exclusive content from partner studio, we've announced Bluberi, we have Blur Guru and others. And then we're looking at about 30 to 35 titles that will be developed in-house from the Wild Streak, from the Atomic Slot Lab, from Oryx, O2X and from Spin, which will represent a great increase from ’21. And as we start rolling out this content we will get into the rhythm of having more and more proprietary content from our proprietary studios, which will, of course, drive margin and revenues into the future.

39:52 Helpful. Thank you. I appreciate that. And then you just talked about your 100% retention rate when it comes to your customer pipeline. So that's obviously very good to see. But from your current customers -- sorry, obviously very good to see, but then what about the actual pipeline? How is that looking in terms of new customer wins? Are you finding that you're seeing an acceleration in that one from that perspective?

40:14 I think it's tied to the TAM growth. I mean, as you can imagine and as you can appreciate, the more licenses, the more certifications we get in new jurisdictions it opens the door for us to sign up new customers. And so, as we get these certifications, as we get these license talking about the Dutch market which was not open to us pre-licensing, we now have an ability to sell in that market, the Ontario market, the US market, the Bahamian market, the Portuguese, Italian. As we roll our -- as we roll our strategy into all these new market, given the fact that we get the licenses and the certification, we're able to offer content and platform in these jurisdictions. 40:53 I think it's important to mention that in the European market a lot of our customers are multi-state operators. And so we have the integration and we serve them in specific market. As we roll out or as we obtain licenses and certifications in new markets it's safe to assume that these customers will grow with us into these new jurisdiction. One of the examples that is maybe worth to mentioned is, we announced recently that we've gone live with 888 in Spain with our content. And so you can imagine 888 is one of the first B2C operators to obtain their Ontario license. I would imagine that 888 would be a good customer of ours in Ontario as we sign addendum to serve them in the Ontario market, because they are already our customers in Europe. And so as we rollout into new markets it presents an opportunity for us to serve our customers that we serve in other markets.

41:46 Great. I appreciate all the color. I’ll pass it on.

41:52 Your next question comes from the line of Sid Dilawari from Cormark Securities. Your line is open.

41:58 Yeah. Hi, good morning, guys. First, on your Netherlands market. How are we doing there? Is the market share still around the 30% mark or has the market share improved materially from the last time we talked about it? And then, are there any other markets that you're looking at that are similar to the Netherlands market that you're looking to get licenses in?

42:23 So I'll start with the first question. I think the answer is still, yes. Look, we don't have the complete answers, because, of course, the numbers continue to grow in terms of the total addressable market for the Dutch market. And as the market rolls out, as more and more operators get licenses, analysts are updating their total addressable market as we [indiscernible] the market up. We do believe that we're still representing about 25% to 30% of the Dutch market. It's important to also mention that as more and more licenses are being rolled out to the B2C operators in the Dutch market, we are on-boarding more customers, we've had such a good launch in the Dutch market that we are now to some extent the go to platform and our content resonates really well with players in the market. So of course, as new operators get their licenses, they want to and they need to offer similar content to their competitors who are now our customers. So they'll come to us for the content, some of them will come to us for platform, we got the platform and the content certified. So for us, the gross margin and the expansion in the markets are just continuing to increase. And so we believe that the Dutch market will continue to present a great opportunity for us. 43:31 In terms of new market, it’s very hard to estimate how a launch of the new market would look like. Because it really depends on -- and I think Neal alluded to it, regulation, licensing and of course, the rollout of the certification. We do expect that some of the new markets that we get licensed in, Ontario and others will present a great opportunity for us. Because as we get the licenses, as we get the certifications and as we do the integration we become to some extent the go to B2B supplier for content, the go to B2B supplier of platform. And so it presents an opportunity for us to grow with the market as more and more B2C operator get their licenses.

44:15 Okay, great. That's helpful. And just one thing, in your prepared remarks you guys highlighted -- you guys -- like your long-term targets for your gross margins is around 60% and you guys currently stand around 49% and I know you mentioned that gross margins are expected to go up as you roll out proprietary content from your own studios. Is that sort of the only thing that's driving those targets or is there something else here at play that would result in higher gross margin? Because on the EBITDA line that makes sense, because you guys have operating leverage, so that seems highly achievable to me, but just on the gross margin some clarity would be appreciated.

44:58 Yeah. Sid, good morning. So, yes, there are 3 factors that’s affecting our gross profit margin. The first one is content, as you mentioned, which is correct. Once you have your own content, you don't have any royalties to third parties. So this is obvious. The second part is the managed services and iGaming platform. We literally utilize and scaling up our technology, so we're investing in technology rollout in different countries with different customers. The technology is there, the adaptation and that localization is something which, of course, we are investing in [Technical Difficulty] any sort of revenue. 45:28 If you look at our revenue mix, last year was 89% of content and about 11% of managed services and iGaming platform. This quarter it was 68% to 32%, that's improving significantly the margin because this quarter revenue does not have any cost of goods or royalty paid to third party. And the last thing where we're working on top of that is commercials with third party provider. The more we have -- we building our content -- building exclusive content into our RGS and scaling it up and distributing them in the US in few months’ time. And in Europe, we are trying to improve the margin. So A and B and C together improved the margins and from 50% to get to 60% [indiscernible] revenue more utilize your own in-house technology and game creation and manage relationship with suppliers that you get to 60% by 2024 or even earlier.

46:26 Okay, great. That's helpful guys. Thank you.

46:28 Thanks, Sid.

46:28 Your next question comes from the line of Barry Sine from Spartan Capital Securities. Your line is open.

46:37 Hey, good morning. Just wanted to better understand the results you just reported. And maybe dig into some of the key performance indicators. So revenue for the quarter was EUR15.8 million and then on slide 24, you talked about the number of customers, the amount of wagering. Could you kind of talk about how those operate? I'm assuming your revenue is solely based on the number of customers and the number of jurisdictions, not the amount that's wagered, but on that note, on slide 24 we do see a decline in the amount that's wagered. So if you could talk about those KPIs and how they roll-up to get to the reported revenue?

47:22 Ronen?

47:22 Yeah. It's a very good question. Thank you. Yeah, it's a very good question. I'll explain to you the narrative of that. So on one hand, as you see from Q2, Q3, Q4 there is a slight decline in wagering. This can be 100% attributed to our divestment from the German market. And as you know, the – from the 1st of July 2021 the new gaming relation actually took in place in Germany. And as a result wagering were kept up to the second point, the amount of beds have been cut, the deposit levels. So we can see the drop even in last quarter, we also notified it by last quarter. In addition, if you look at the revenue, as I mentioned just few minutes ago, the revenue composition is also scaling towards managed services and iGaming platform, the full turnkey solution that we're offering. So the revenue, yeah, it goes up but necessarily the content revenue goes up in the same line, and this is as a result that some of the German effect is still affecting us. But I believe the more we're going to grow revenue on both our content and our third-party content, we will see the numbers trading up back again. 48:31 So this is [indiscernible] like the headwind of the German regulation that's still affecting our customers and the ability to transact, but if you look at next year exposure to Germen will be significantly lower, I would say, that the numbers will start going up again and that will explain the drop.

48:54 So just to clarify, there is no relationship between the amount that's wagered. So are you doing doubles on one of your customers platform, your revenue doesn't go up, you have a fixed fee license, is that correct?

49:06 Yeah. We have a compulsion. So let me give an example. So if you take one only content compared to another content, the wagering is a very strong KPIs to reflect how much you transact for customers based on the content to content, but if you have changes in your revenue mix that the managed service and iGaming platform is increasing significantly. So your revenue is increasing significantly, but not necessarily the content revenue, especially when we have much more exposure to the German market. And now when we -- and some customers start divesting for the market, you will see some drop in wagering but we expect and we can see the trend that it's actually is going up again because it happened in Q3 and continued into Q4.

49:50 Barry, if I may just add a couple of more points. As we discussed, our breakdown of revenue mix is now going from third-party content to more proprietary content and to more platform revenue. And so therefore, you see the wagering numbers decreased but the proportion of the revenue that we keep is higher because the proprietary content derived our profitability, obviously more revenue -- more profitability on the same revenue and the same thing with the platform. And so as we diverse from purely third party aggregate content to exclusive content than the numbers that remain with us with the business as a proportion of the revenue get higher. Does that makes sense?

50:37 Yeah. That's very helpful. Thank you. Can I squeeze in one more question, please.

50:42 Sure.

50:42 In slide 28 you have your revenue build and obviously there is a negative red bar for the German regulatory affect. And I'm just want to take a look out going forward, maybe we can start understanding what drove the German regulators, were people going bankrupt with online wagering, they had to put a control on it? And if we look at other jurisdictions is there anything similar on the docket in other markets, New Jersey, for example or the UK or Netherlands that may have an impact on revenue going forward?

51:21 Yes. So look, let me start with the big picture and then Ronen can talk about the numbers per se, but the big picture in Germany is that, the German country have tried to regulate online gaming, I think for the past 15 years, maybe 20 years. Federally there was no regulation and then Germany is divided into 16 states. I think there was one state SH less than [indiscernible] held or provided some sort of regulated gaming regime. In 2020, in July of 2020 the regulate -- I mean the 16 states and the federal government in Germany agreed to regulate gaming on the federal level. And then you can see the effect of that regulation coming into full force and effect in July of 2021. And so, it's not about people going bankrupt, it's not about -- or maybe it is, we are not really sure of season in the German market, but it really has to do with the fact that German as a country wanted to regulate online gambling and they decided to do it on the federal level. 52:33 It is no different than other places like the Dutch market which had unregulated gaming until the Dutch government decided to regulate it on the federal level. And so, as they regulated online gaming, the framework that they put in place was – well, it had to do with a lot of player protection tools in place. 5 second spin, EUR1 spin limit, other player protection tools to make sure that the gaming market will be beneficial to operator [Technical Difficulty] players. And so that happen and came into full force and effect in July of 2021, the challenge is, that the German regulator has not really been established and licenses have not been granted yet. And so you have this dichotomy in the German market between the Gray, which I guess now turn black because of the regulator that is still affecting Germany and then the White operators. We as a regulated company, as a NASDAQ listed company, as the Toronto Stock Exchange company with licenses all around the world, we can’t support the black operators anymore so we had to shut down all the operators that are not complying with the regulation. And so, we've kept all the white operators which are applying for licenses and are operating within the scheme of the new regulated iGaming market, with sport betting market as well. And so, looking into the future that is our recurring German revenue, the nonrecurring German revenue is the stuff that we had to turn off because at some point the German government is going to start issuing licenses and enforce against the operators that are operating legally. Does that kind of give you color on it?

54:14 Yeah, on what happened historically. Looking ahead, are there any similar regulations on the docket being considered in any of your major jurisdictions? What's the likelihood we see in other red bar on slide 28 in the deck a year from now.

54:29 And so, look regulation is something that we think about all the time. In our view and based on analysts' estimates and the way that we see the market and the way that we see the world that we operate in, it's unlikely. Regulation is going with us, not against that. Germany was a one-off because of the nature of the market, but if you look all around the world, whether it's the Dutch market, the Ontario market, various US states, it's all going towards regulation rather than deregulation. And so we expect that red German bar to become green bars in many new jurisdictions that we enter into.

55:07Very helpful. Thank you for taking my questions.

55:09 No problem, Thank you.

55:12 [Operator Instructions] Your next question comes from the line of Lisa Thompson from Zacks Investment Research. Your line is open.

55:24 Hi, good morning.

55:26 Hi, Lisa. Good morning.

55:28 So you just finished up on Germany, as far as your guidance goes what are you thinking about in Germany? Is it kind of fourth quarter – 4 quarters or you have -- do you have something in there for licenses being granted?

55:47 So, Lisa, actually what we did to be super conservative, because to be honest with you, even the German don't know exactly when we are going to issue the licenses. So what we took, we took the run rate of Q4, which was very low after we made the changes internally as we guided in last quarter and we run some kind of very flattish type of growth. We have majority of the customers in Germany already. We know how the [indiscernible] waiting for license. So from guidance perspective, I don't think it could be worse than that. But definitely we have estimated some kind of potential growth with the market as the more is educated, as more license will be issued, as more black operators will be stopped, so there is a very flattish growth. So we believe this is the right way to approach that because we don't have clarity when licenses will be issued.

56:43 Okay. I had one more –

56:45 [Multiple Speakers] that I would like to add, just a big picture on the German market. Look, the German market, if we talked about the same conversation we're having right now in 2021 we would have said that it was a headwind for the business. We weathered the storm and now Germany can only [indiscernible]. We've taken the most conservative approach for the German revenue and once the licenses are starting to get granted and the enforcement is starting to take place against the black operators, when Germany scales up it's all gravy for us, because we're taking a very conservative approach and we think that it's actually going to drive our revenues up once the German regulators are set up and starting enforcement.

57:24 Great. Okay. So that's good to know about your guidance. One last question, can you describe a little bit more specifically what you're -- what happens on April 4th in Canada for you? Do you have an expectation of X number of customers signed up and do you flip a switch, how does that look?

57:45 So, new markets are always interesting markets because you kind of never know what happens and in our internal estimates we of course have many conversations with [Technical Difficulty] would be operators in Ontario. Some of them are current European customers that have applied for licenses and I gave 888 example, which has already been granted. Some of them are the Spin customers that will become Bragg customers, DraftKings, FanDuel, BetMGM, RSI, all of these that have applied for licenses. 58:17 The one thing I would say is that, it really depends on the regulator in terms of granting of the licenses. If all of these names that I've mentioned and others are granted licenses between now and March 10th and April 4the then we expect to roll out our content on day one. It's up to all of them. If some of them are in the next batch or a followed batch of licenses, then they will have to wait. I will say that from me a certification standpoint, we've been working with GLI and SIQ which are the certifying lab to get our content ready for the launch in Ontario. And so from that perspective, we will have games that are certified, and of course, Bragg is licensed, once we get -- once our customers get their B2C licenses, we're able to sign them on to our platform and then announced the deal for Ontario. But again, going back to the 888 example, we just launched 888 in Spain, we work with them in other jurisdictions in Europe, they announced that they just received their license. So it's more likely than not that someone like 888 will be a customer of ours in Ontario, because we're one of the only, one of the first B2B suppliers to be certified and licensed in the Ontario market. So it presents a great opportunity for us.

59:34 All right, great. Thank you for that. That's all my question.

59:38 Thanks, Lisa. Bye-bye.

59:40 And there are no further questions at this time. Mr. Yaniv Spielberg, I turn the call back over to you for some closing comments.

59:48 I want to thank everyone for joining the call today and I really want to thank the team for the hard work, putting the numbers and doing really great on the execution. We're very excited about the future of the company, very excited about the future of Bragg. A lot of exciting things ahead, we will speak soon on our next earnings call. Thanks everyone for turning in.

60:08 This concludes today's conference call. Thank you for your participation, you may now disconnect.