Bragg Gaming Group Inc. (BRAG) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture. Strong revenue growth, especially in the U.S. and Brazil, and strategic partnerships are positives. However, regulatory challenges in the Netherlands, increased gaming taxes, and a decline in adjusted EBITDA pose risks. The Q&A session confirmed management's optimism but did not alleviate concerns about execution risks and financial uncertainties. Overall, the sentiment is neutral, as positives are balanced by significant challenges.
Key Financial Performance
Revenue $26.1 million, a 4.9% increase year-over-year. Excluding the Netherlands, revenue grew 21%. The growth was driven by strong performance in markets outside the Netherlands, despite regulatory changes in the Netherlands.
Gross Profit EUR 13.7 million, a 10.8% increase year-over-year. Gross profit margin increased by 280 basis points to 52.7%. The improvement was attributed to a focus on margin-accretive growth.
Adjusted EBITDA EUR 3.5 million, a decrease of 4.3% year-over-year. The decline was due to increased compensation spending in Q2 2025 compared to Q2 2024.
Proprietary Content Revenue EUR 3.9 million, a 44% year-over-year growth. This growth was driven by strong performance in the U.S. market, where proprietary content revenue grew by 270% year-over-year.
Revenue from Netherlands Down 17% year-over-year, compared to a 25% decline in the overall market. The decline was due to regulatory changes, higher taxes, and new deposit rules.
Revenue from Brazil 56% year-over-year pro forma revenue growth in Q2 2025. This growth was driven by the launch on the first day of the regulated market opening and strategic investment in a Brazilian specialist online studio.
Cash and Cash Equivalents EUR 4.2 million as of June 30, 2025. During the quarter, $5 million of the $7 million secured promissory note was repaid.
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Operating Highlights
Proprietary Content Revenue: Achieved 44% year-over-year growth, reaching EUR 3.9 million in 2025. 20% of this revenue came from titles released in 2024, and over 50% from titles launched before 2024, showcasing long-term value.
Dragon Power Brand: Continued growth in the U.S. market with successful launches like Triple Gold and Super Orbs. Three new titles are in development, including Dragon Power 10,000 Ways launching in Q3.
Game Roadmap: Expanded with new titles like Gold Party 2 and upcoming Fire Stamped titles. Exclusive game partners are launching new portfolios, with more games planned for 2025 and 2026.
AI-First Initiative: Launched a strategy to become an AI-first business by 2027, focusing on hyper-personalization, operational efficiency, and player engagement.
U.S. Market Expansion: Proprietary content revenue grew by 270% year-over-year. Launched online casino games in New Jersey, Pennsylvania, and Michigan with Fanatics Casino. U.S. market projected to grow from $10 billion in 2025 to $75 billion at maturity.
Brazil Market Entry: Launched on the first day of the regulated market opening, resulting in 56% year-over-year pro forma revenue growth. Strategic investment in Brazilian studio RapidPlay to strengthen exclusive content portfolio.
Netherlands Market: Despite a 25% market decline, Bragg outperformed with only a 17% revenue drop. Revenue dependency on the Netherlands is projected to decrease from 49% in 2022 to 32% in 2025.
Cost Synergies: Realized EUR 2 million in annualized cash savings, with further opportunities expected in the second half of 2025.
Adjusted EBITDA: EUR 3.5 million in Q2 2025, a 4.3% decrease year-over-year, attributed to increased compensation spending. Focus on margin and cash flow performance.
Revenue Diversification: Shifted focus from content aggregation to exclusive and proprietary content, which now accounts for 36% of revenue.
AI Strategy: Focused on embedding AI into products and operations by 2027, aiming for hyper-personalization, cost reduction, and enhanced player engagement.
Regional Diversification: Reduced reliance on the Netherlands market, with significant growth in the U.S. and Brazil.
Leadership Hires: Added Scott Milford as EVP, Group Content, and Luka Pataky as EVP of AI and Innovation to drive game innovation and AI strategy.
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Risk or Challenges
Regulatory Changes in the Netherlands: Regulatory changes, including higher taxes and new deposit rules, have significantly impacted the market, leading to a 25% market contraction. Bragg's revenue from the Netherlands has decreased by 17%, and the company is working to reduce its reliance on this market.
Increasing Gaming Taxes: Higher gaming taxes in key markets such as Brazil, the Netherlands, and Romania are pressuring margins and profitability, prompting the company to prioritize margin and cash flow performance over aggressive revenue expansion.
Dependence on the Netherlands Market: Despite efforts to diversify, the Netherlands still represents a significant portion of revenue, which poses a risk given the challenging regulatory environment and market contraction.
Economic and Market Pressures in Brazil: Broad market pressures and headwinds in Brazil, including regulatory challenges, have impacted growth. Although the market is growing, these factors could hinder Bragg's ability to fully capitalize on the opportunity.
Decline in Adjusted EBITDA: Adjusted EBITDA decreased by 4.3% year-over-year due to increased compensation spending, highlighting challenges in maintaining operational efficiency.
Delayed Working Capital Facility: The delay in securing a new working capital revolving debt facility from a Tier 1 Canadian bank has created uncertainty in financial planning and liquidity management.
Stagnation in Online Lottery: In states where both iGaming and iLottery are legal, increased competition from iGaming operators has led to stagnation in the online lottery segment, potentially impacting revenue diversification.
Strategic Shift Challenges: The shift towards exclusive and proprietary content, while beneficial for margins, requires significant investment and operational adjustments, posing execution risks.
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Guidance & Outlook
Revenue Expectations: The company has adjusted its full-year revenue guidance to EUR 106 million to EUR 108.5 million, reflecting higher gaming taxes, softer market conditions in the Netherlands, and other broad market pressures.
Adjusted EBITDA: The company expects adjusted EBITDA of EUR 16.5 million to EUR 18.5 million for 2025, with adjusted EBITDA margins projected to be higher in the second half of 2025 compared to the first half.
Market Trends and Growth Projections: The U.S. online casino market is projected to grow from $10 billion in GGR in 2025 to over $75 billion at maturity. Brazil's iGaming market is expected to grow from $3.9 billion in 2025 to $6.1 billion by 2030, with Brazil projected to account for up to 10% of the company's revenue in 2025.
Product and Market Expansion: The company plans to launch three new Dragon Power titles, expand its Connect and Collect mechanic, and roll out new games from exclusive partners. It is also expanding into the traditional stepper market in Canada and North America, supported by a customized interface. The game roadmap is set to expand significantly in 2025 and 2026.
AI-First Strategy: The company aims to become an AI-first business by 2027, embedding AI into product development and operations to enhance hyper-personalization, operational efficiency, and player engagement.
Regional Diversification: The company is reducing its reliance on the Netherlands market, with revenue from the Netherlands projected to decrease from 49% of total revenue in 2022 to 32% in 2025. It is focusing on high-growth markets like the U.S. and Brazil.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you help bridge the revenue contribution from Hard Rock and Caesars in Q1 to Q2, and provide an update on the guidance of 15% revenue contribution for the full year?
A:Management believes there is a path to achieve the 15% revenue contribution target for 2025. The Hard Rock deal is expected to add revenue in the second half of the year, and Caesars' performance is also factored into the revised guidance. The U.S. iCasino market is growing strongly, and the company is optimistic about gaining market share.
Q:Can you elaborate on the highly accretive growth opportunities mentioned in the press release?
A:Management sees highly accretive opportunities in proprietary content. They are increasing their capabilities in this area, including hiring Scott Milford from Aristocrat. They aim to leverage their strong positions in markets like the Netherlands, where they are outperforming despite a contracting market, to promote proprietary content and improve profitability.
Q:Was there any FX impact on the full-year guidance?
A:There was a slight impact due to the euro weakening against the U.S. dollar, but it is not significant.
Q:Review of Unclear Management Responses
A:None of the questions were avoided or lacked clarity. Management provided direct and detailed responses to all questions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
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Brazil market
CEO Bragg
EUR cash
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Power brand
ability building
ability term
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change Netherlands
compensation spending
content momentum
cost synergy
decline
efficiency
focus margin
game partner
hire
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laser focus
margin cash
margin laser
margin way
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midpoint margin
mix cash
product mix
realization
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title game
value Bragg
way ability
BRAG Transcript
Bragg Gaming Group Inc. (BRAG:CA) Q3 2025 Earnings Call Transcript
Positive11-13
The earnings call reflects a positive sentiment with strong growth in proprietary content, particularly in the U.S. and Brazil, leading to improved margins and profitability. Despite challenges in the Netherlands, the company's successful diversification strategy is evident with significant revenue growth outside this market. The Q&A session reinforced the positive outlook with expectations of continued margin improvement and operational efficiencies. However, potential risks in new markets and the upcoming BetCity migration pose challenges. Overall, the positive elements outweigh the negatives, suggesting a positive stock price movement.
Bragg Gaming Group Inc. (BRAG) Q2 2025 Earnings Call Transcript
Unknown8-14
The earnings call presents a mixed picture. Strong revenue growth, especially in the U.S. and Brazil, and strategic partnerships are positives. However, regulatory challenges in the Netherlands, increased gaming taxes, and a decline in adjusted EBITDA pose risks. The Q&A session confirmed management's optimism but did not alleviate concerns about execution risks and financial uncertainties. Overall, the sentiment is neutral, as positives are balanced by significant challenges.
Bragg Gaming Group Inc. (NASDAQ:BRAG) Q1 2025 Earnings Call Transcript
Positive5-16
The earnings call reveals a mixed yet overall positive outlook. Strong financial metrics, including a 7% revenue growth and a 19.7% increase in adjusted EBITDA, are complemented by optimistic future guidance. Despite regulatory and competitive pressures in the Netherlands, the company's strategic expansion in North America and Brazil, along with growth in proprietary content, are promising. The lack of a share repurchase program is a neutral factor. Overall, the positive financial performance and strategic initiatives outweigh the risks, suggesting a likely stock price increase of 2% to 8%.
Bragg Gaming Group Inc. (BRAG) Q1 2025 Earnings Call Transcript
Positive5-15
The earnings call summary reveals strong financial performance with revenue and EBITDA growth, alongside optimistic guidance for 2025. The company is expanding in new markets like Brazil and the U.S., which are expected to contribute significantly to future revenue. Management's focus on proprietary content with higher margins is positive. Despite some operational challenges and economic concerns, there are strategic partnerships and growth opportunities. The Q&A section supports these insights, with analysts showing interest in strategic investments and market expansion. Overall, the sentiment is positive, likely leading to a stock price increase.
BRAG Slides
BRAG Report
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