Bragg Gaming Group Inc (BRAG) 2026 Q2 法說會逐字稿

Hello, everyone. Thank you for joining us, and welcome to Bragg Gaming Group's second quarter 2026 earnings conference call. (Operator Instructions)

I will now hand the conference over to Robbie Bressler, CFO. Please go ahead.

Good morning, everyone, and thank you for joining us for Bragg Gaming Group's second quarter 2026 earnings call. If you are connected to our online webcast today, you should see our second quarter earnings presentation on your screen. And you should have control to flip through the slides yourself as you listen to the call. If you are joining by telephone, please note that you can find our earnings presentation as well as the financial results press release on our website at investors.bragg.group.

Please note that certain statements on this call may constitute forward-looking information or future-oriented financial information. The full explanation of these risk factors is available on the second slide of the second quarter 2026 earnings presentation titled Forward-Looking Statements, as well as in the press release issued this morning and our public disclosures. Bragg disclaims any obligation, except as required by law, to update or revise any forward-looking statements, whether because of new information, future events, or otherwise. Any forward-looking statements made on this call speak only as of the date of this call.

Bragg Gaming Group CEO, Matevž Mazij, and myself, the CFO of Bragg Gaming Group, Robbie Bressler, will discuss the company's second quarter performance and provide a business update. We will follow that with a question-and-answer session.

I would now like to turn the call over to Matevž.

Thank you, and good morning, everyone. Thank you for joining us for Bragg Gaming Group's second quarter 2026 earnings call. In the second quarter, we prioritized margin and cash flow performance over aggressive revenue expansion, which underpins our renewed group-wide strategy. Revenue was EUR22.9 million, down 12% year over year. Adjusted EBITDA was held static at EUR3.5 million, and our adjusted EBITDA margin expanded to 15% from 13% in the same quarter last year.

On July 9, 2026, we announced a further reduction of approximately 19% of our global workforce, expected to deliver approximately EUR6 million in incremental annualized cash savings, and bringing total expected annualized savings to approximately EUR10.5 million, together with the restructuring announced on January 8, 2026. Combined with the acceleration of our AI-first transformation, it leaves a leaner organization concentrated on our core technology, content, and platform products, and it accelerates our path to cash profitability and adjusted EBITDA growth.

Furthermore, I would like to highlight our content performance across North America, especially in Canada and the US. Our proprietary content being deployed by US and Canadian operators is building very positive traction.

This content revenue grew 44% compared to Q2 last year, driven by distribution, quantity, and quality of content. Proprietary content is our most profitable product, and the US is the most important market for us. So this level of growth is exciting, and it underlines the growth strength of the content we build. Against that, the Netherlands declined 14% year over year, reflecting the anticipated roll-off of legacy turnkey contracts following customer migration away from our PAM.

Brazil was static as certain operators moved to direct supply integrations, which moderated growth but improved the quality of the revenue we retained. Some other European markets were lower due to customer-specific factors and tightening local regulatory dynamics. Since quarter end, we have also closed the acquisition of Drayton International, and Matt Davey has joined us as Non-Executive Chairman.

I will come back to both of those after Robbie takes you through the financials. Robbie, over to you.

Thank you, Matevž, and good morning, everyone. All of the numbers I refer to have been rounded, so they are approximate. Our reporting currency is Euro, and I will stay in Euros on this call. For the benefit of North American investors, we've provided a US dollar equivalent conversion in our press release this morning.

Second quarter revenue was EUR22.9 million, a decrease of 12% from EUR26.1 million in the second quarter of 2025. Gross profit was EUR11.8 million against EUR13.7 million in Q2 2025, with a gross margin of 51.7% compared to 52.7%. Adjusted EBITDA was EUR3.5 million, static against EUR3.5 million in the second quarter of 2025, with the adjusted EBITDA margin expanding 212 basis points to 15.4% from 13.3% in the second quarter of 2025. We absorbed a EUR3.2 million reduction in revenue and delivered the same absolute adjusted EBITDA. As Matevž mentioned, we have completed several restructuring programs and are starting to see the results of these measures.

In the second quarter, there was a 14% reduction in gross compensation costs prior to capitalization compared to Q2 2025. Operating expenses came down from EUR25.7 million in the first quarter of this year to EUR22.9 million in the second quarter of this year. Adjusted EBITDA margin was held broadly flat over the same period at 15.4% against 15.7%. Holding margin through a sequential revenue decline is proving the cost reduction measures are doing their work. For the six months ended June 30, 2026, revenue was EUR48.5 million, down 6% from EUR51.6 million in the first half of 2025.

Adjusted EBITDA for the half year was EUR7.5 million, flat against EUR7.5 million in the same period last year. Moving to the balance sheet. As of June 30, 2026, Bragg had cash of EUR3.3 million. Three items since quarter end are relevant to our capital structure. First, we completed the acquisition of Drayton International on July 22 for $9 million, satisfied entirely in shares.

Second, all 751,445 subscription receipts issued at $1.73 converted into common shares and warrants on closing, releasing approximately EUR1.1 million to the company. I would like to note that our Chief Operating Officer, two of our directors, Thomas Winter and Matt Davey, and myself subscribed in that private placement. Third, we renewed our revolving credit facility with Bank of Montreal for a further year on terms consistent with the existing arrangement.

Turning to our outlook. As mentioned, we completed the acquisition of Drayton on July 22, 2026, and integration planning is underway. We previously disclosed fiscal 2026 revenue, adjusted EBITDA, and adjusted EBITDA margin guidance, which was prepared in respect of our company's operations on a standalone basis.

With the integration of Drayton into our operations being at the planning stage, we don't have a reasonable basis on which to forward forecast the combined business for the remainder of the fiscal year. We are therefore withdrawing our previously disclosed 2026 guidance. Prior to the withdrawal and on a standalone basis excluding Drayton, we were tracking below the low end of our revenue guidance range and at the low end of our adjusted EBITDA range.

However, we were tracking to the upper end of the implied adjusted EBITDA margin range provided. Our focus is on integrating and optimizing the combined business, including aligning the product and technology roadmap, realizing identified efficiencies, and establishing the go-forward operation model and cost base.

And with that, I will pass it back to Matevž.

Thank you, Robbie. A few commercial highlights from the quarter. We signed a definitive agreement with 711, a leading Dutch and Belgian operator, to power its new Belgian online sportsbook, integrating Kambi's sportsbook supported with our Fuze engagement toolset. We supported Superbet's entry into the regulated Greek market through its Superbet brand with RGS and Hub aggregation. The successful launch of our content with bet365 in the UK signals our effective penetration into key markets.

Additionally, when Alberta opened its regulated market, we launched on day one alongside an outstanding selection of leading operators, making more than 80 of our titles available to players throughout the province. Our strategic direction is unchanged. Proprietary games first, AI-driven model, fewer low-margin aggregation volumes, and a move from being a supplier of components to being the architect of the ecosystem our operators run on. Drayton advances that, and the point that matters most is reach.

It takes us into Advanced Deposit Wagering. Traditional iGaming is live in seven US states. ADW is available in over 30. It also adds equity interests in five game development studios and three wholly owned technology and distribution platforms.

On timing, integration work is underway across content and technology, and it remains at an early stage. Before we go to questions, I would like to announce a change to our board. Don Robertson has resigned from the board, effective today. I want to thank Don for his service and for his contribution to Bragg. Jordan Gnat will be joining the board in his place.

Jordan brings over 30 years of expertise, serving as both an investor and an operator, over 20 of those in gaming and sports media. He's a co-founder and managing partner of Boardwalk Capital. Before that, he founded and led Playmaker Capital, the digital sports media business he sold to Better Collective in 2024. He has also held senior roles at FOX Bet, The Stars Group, and Scientific Games. Jordan also participated in our recent private placement, so he's a shareholder as well as a director.

His background strengthens the board, and we're glad to have him. Robbie and I are now available to take any questions.

(Operator Instructions) Jordan Bender, Citizens JMP.

Hey, everyone. Good morning, and thank you for the question. Robbie, maybe to start with you, just on the guidance that was withdrawn, you mentioned revenue and EBITDA maybe trending below where it previously was. Can you just kind of talk about the old business, if we want to call it that, kind of where are you seeing that? I guess we know Netherlands, there was previously going to be headwinds.

I assume that was in the guidance, but just where are you seeing kind of some of the, maybe the weakness outside of that? And then maybe the second part of it, and acknowledging you're not providing guidance looking forward, but now that Drayton is part of the business, can you tell us a little bit, maybe just talk about more like directionally how the growth, either revenue or EBITDA, of that business currently stands as we kind of think about the two businesses now together? Thank you.

Sure. Thanks for the question, Jordan. On the first question, just to clarify, we're trending below the low end of the range for revenue, but we are trending within the range for EBITDA, but just at the low end of the range. So what we're seeing is more pressure on revenue. And with our cost-cutting measures, we've been able to keep our EBITDA margin within what we had thought the business would be performing at.

In terms of what is driving the top-line pressure, we are seeing one thing to note in Brazil. When the market opened in Brazil, there was a lot of suppliers who were not set up to supply the market, and we were able to be utilized as a vehicle for them to supply their content into the market. This has softened. A lot of these suppliers are now set up in a manner where they can go direct to operators rather than going through us. This is relatively low-margin revenue, so it's not really having too much of a profound impact on our bottom line, but these headwinds are decreasing what we're seeing in terms of growth in Brazil.

We've also seen some regulatory changes in different European jurisdictions, one being Croatia, which we have a good customer there, and we were foreseeing a good strong year. It has performed year over year, we're seeing good growth, but these regulatory changes that came in have proven to be much more impactful than previously thought. And these regulatory changes had to do with the way customers are acquired and advertising restrictions.

So those are two fairly sizable headwinds that are hitting us. We've also seen a little bit of decrease in what's put out in our Wild Streak studio.

So historically, we've had a relationship where we've developed content on behalf of other providers or other studios who've done the distribution. And that has softened slightly. So I point to those three things as being what has changed between us hitting within the guidance range and being slightly below that.

Okay. And then any color on just kind of directionally how Drayton is growing?

Yes, so we're really in early days to be putting any real color behind what we expect Drayton to do in the next six months and beyond. Integration work is happening now. We completed the acquisition in good pace. And we're really now focused on making sure that we can utilize the assets, integrate them as best we can, and have a very strong combined company. I'm not going to provide specific details where we think we'll be.

A big reason why we made the decision to withdraw guidance is because we're not quite there in terms of being comfortable of what that forecast could look like. One aspect of Drayton, which I think is a huge positive, but it is going to take us some time to get clear on direction in which way we'll go in the near term, is we have equity investments in five studios.

So each studio is in itself its own business with its own trajectory and its own outlook. So we want to be very comfortable with each of those management teams, understand what is going to be at play in the next six months, but also make sure that we can utilize the assets we have at Bragg to enhance those results and really drive great group results. So look forward to talking about it on future calls.

Great. If I may just add, Jordan, so Drayton obviously is an acquisition that's going to accelerate our growth through access and margin expansion and tech efficiency. And through its ADW technology and partnerships, it's going to increase our addressable reach.

Second, we added 100-plus proprietary game titles and five studios, and that is in line with our strategies that are shifting our revenue mix towards higher-margin in-house IP. And finally, obviously, tech assets like their AI module fit seamlessly into our AI-first framework or model, and it's reducing our unit cost of content creation and some other effects that that will have on our cost base.

Great. Thank you. And let me just follow up on this whole conversation. Just kind of in the quote, the pressure says we'll require real change.

Jordan, I can't hear you. I don't know if it's your mic. I can't.

Jack Vander Aarde, Maxim Group.

Okay, great. Good morning, guys. Congrats on the closing of the acquisition, and thanks for taking my questions. Robbie, kind of just to follow up on some of the past comments and questions on the withdrawn revenue guidance, the prior revenue guidance. This excluded Drayton, but are there any new markets, maybe if I can, are there any new markets you entered or new catalysts that happened subsequent to providing that guidance that didn't maybe factor in?

For example, you entered the Alberta market in mid-July. Anything you want to say about that and any other developments maybe that weren't included or maybe they were factored in? Are these incremental to that prior withdrawn guidance, or is that something you don't want to comment on? Thanks.

I mean, I'll comment on Alberta was always in our plans. That was a launch and a strategic, important milestone for us to hit. We haven't -- we didn't ascribe a lot of growth in that market as it's relatively new. We're quite excited what iGaming and iCasino especially is doing in North America across many jurisdictions.

So we did point out in our press release that our underlying US business, so this is the proprietary content we service both US and Ontario and now Alberta, that's growing at a very good tick where we're well over 40% growth from quarter to quarter, Q2 to Q2, 2026 to 2025. So we're seeing growth in the areas we want to see and in the areas we've invested in, but we're not necessarily jumping to new markets. We want to be very strategic in any territorial expansion.

So I wouldn't point to anything new that has come up, but what interests us the most is what's happening in the iCasino market in the US and Canada. It is just the continual growth of that market is extremely impressive. Just as a reminder, the projection on that market is $97 billion. This is just the US market at maturity.

It's only 12% regulated right now in terms of the whole US population. There's so much more upside. And with the Drayton acquisition, we've really strengthened ourselves to be able to capitalize on that and quite excited about what can be achieved in that market.

Okay, I appreciate the color there. And then maybe just a follow-up on, I guess the go-forward gross margin and operating expenses kind of on a quarterly basis and just how I interpret some of the language here. So obviously you're going to have incremental expenses, most likely from Drayton, but then you also made further, I think there was a July announcement where you made further restructuring, material restructuring that was going to, I think it was cash savings of EUR6 million or so, or 10, I'm sorry, EUR10.5 million now altogether. So I guess just you've done a good job obviously in the first half of this year. OpEx is down pretty big from last year.

Gross margin did tick down a little bit in the second quarter. Just I guess with all these puts and takes now, how does the back half of this year kind of compare to the back half of last year on a gross margin and OpEx basis?

Yes, no, I appreciate the question. I'm going to reserve comment just because we have withdrawn guidance, and we want to come back with a clear understanding of what our combined business can do. I do think, I mean, I can't say directionally, I think the trends that we've seen are indicative of our current run rate of the legacy business. The gross margin for Q2 2026, you'll see in our investor deck, there was a couple of one-off items that brought it down slightly.

But if you factor those out, we're actually at about a 55%, 55.7% gross margin, which is very much in line with where we've been and slightly better than prior quarters, which is showing the investment or the narrative that the more we move to proprietary content, the more is playing out.

We had a couple of one-off items that brought that down a bit, but if you look at our investor deck, it's illustrated to see what that gross margin percentage is, which is really indicative of our current business in terms of run rate.

Okay, great. I appreciate all the color there, Robbie. I think that's it for me for now. I'll get back in the queue.

Mike Hickey, StoneX.

Awesome. Thank you. Hey, guys. Good morning. Just maybe a clarification. I'm not sure if I heard this or not. A little perplexed on at least not giving guidance on the core, Robbie, just given that you just missed the quarter on revenue. But and I'm not sure you clarified how you think revenue is going to trend on your core, but I think you would have visibility on that. So anything incremental would be helpful.

And then when should we get -- maybe talk about the complexities of Bragg and Drayton together that doesn't allow you the ability to give guidance on the new combined company.

Sure. Thanks for the question, Mike. On your first question, just to clarify, so we did provide comments of where we're trending on the standalone business, and those comments are looking for the rest of this year. So that's indicative of where we see we were trending on a standalone basis. So we are giving a color as to where the business is currently trending against our original guidance.

And again, we're below our revenue range, but we're within the range from an EBITDA perspective. And actually, from an EBITDA margin perspective, we're trending to the upper end of the range, which was implied when we gave guidance.

So hopefully, that gives you some color as to where we are today from a legacy business point of view against our original guidance. In terms of the complexities, very good question. And I mentioned it a little bit when answering Jordan's call, but we effectively bought five different interests in five different studios, along with a wholly owned infrastructure as well that Drayton holds.

We need to get clear understandings from what we think we can do as a combined business as we work with each of those studios and combine our assets with theirs. We were able to move on Drayton at a fairly good pace, which was strategically important to us, but we want to be prudent with what we come back with in terms of expectations and felt like this is the best course of action at the time. We are excited and believe that there is quite good possibilities to see synergies, a little bit on the cost side, but on the revenue side in putting these assets together. So we want to make sure we have a clear, reasonable understanding to put out expectations.

On your annualized cost savings to EUR10.5 million, how much should we actually see here in '26 versus '27? What do you think needs to happen for Bragg to start to generate positive cash flow, free cash flow?

Yes, I mean, we've done the work and we've taken out the cost. We're by no means done in terms of optimizing and seeing where more costs can come out. The savings are really going to start kicking in Q4 onwards. We did this quarter, just to give some color, if you look at our gross compensation, so take out the one-time severance fees that we paid this quarter and disregard what's capitalized and what's not in terms of compensation. So if you look at our pure compensation, from Q2 this year to Q2 last year, our compensation expenses are down 14%.

So we are seeing the savings and there's lots more to go. We got to get through these one-time severance payments, which we're going to have coming through the next couple of months. And then into Q4 and into 2027, the savings should really be showing through our numbers.

The last question from us, just thinking about milestones here. In the next call it two or three quarters, what do you think sort of the biggest milestones that we should be looking at to sort of demonstrate that the restructuring and Drayton acquisition are starting to give you the benefits that you think they will or basically that they're working?

Very good question. Our focus 100% is on the integration of the Drayton assets, most importantly in the US, or I should say North American markets. That's where we're focused. That's where we see the value in Drayton coming together with our assets. And that's where we believe from a value point of view is most important for us to keep growing that business.

And again, as mentioned, we saw some good percentage growth, 44% Q2 to Q2 and even year to date. And sequentially quarter to quarter, we're seeing double-digit growth. So that's our focus. Those are the milestones. That's the market that we want to keep conquering.

And I really think we've taken the right steps here with bringing Drayton in, us being able to align those two businesses and maximize value. That's the biggest milestone we're focused on.

That's great. Thank you, guys. Good luck.

We have reached the end of the Q&A session. I will now turn the call back to Matevž Mazij, CEO, for closing remarks.

Thank you again, everyone, for joining our call today. We entered the second half of 2026 leaner, sharper, and with a clear games-first focus. Thank you for your interest and your continued support.

This concludes today's call. Thank you for attending. You may now disconnect.