Bragg Gaming Group 3Q26 Earnings Conference Call - BRAGG GAMING GROUP INC

Explicit Guidance:

• No specific numerical financial guidance (revenue, EBITDA, margins, capex, etc.) is provided for the full year 2026 or 2027.
• Management explicitly states they will provide updates and thoughts on 2027 outlook and realistic guidance "in the new year" to ensure confidence in delivery.
• Cash Flow & Cost: No specific targets, but a commitment to bring investment spend and operating cash generation into a "better balance" over the next several quarters; cost savings from the July restructuring program (27% workforce reduction overall) are expected to fully land in Q4 2026 and 2027.
• Capital Support: No specific numbers disclosed, but key shareholders and the board have pledged "sufficient flexibility" and "firm commitment" to provide capital if needed; liquidity options include the existing €6M USD revolving credit facility with Bank of Montreal (€5.2M CAD currently drawn) and potential private placements.

Business-Segment Outlook:

• Proprietary & Exclusive Content: Identified as the priority for future investment and capacity allocation; these segments constitute a "materially larger share of gross profit" than revenue.
• North America (Canada/US): Proprietary content revenue grew 7% QoQ and 21% YTD for the nine months; management anticipates "significant opportunities" to gain share and drive growth starting "at the start of 2027 and beyond" by leveraging the Drayton acquisition and expanded studio network.
• Brazil: Revenue impact from the suspension of online gaming (effective Oct 6) is deemed "minimal on our bottom line"; however, the market is effectively paused until further notice.
• Drayton Studios: Expected to continue "paying their own way" post-acquisition (July 22); early results indicate alignment with underwriting assumptions (€0.7M revenue, €0.3M profit in first 71 days).

Market and Competitive Outlook:

• Competitive Positioning: Management intends to position Bragg as a "solid alternative" to larger peers (e.g., Light & Wonder) in North America, leveraging broad distribution infrastructure and access to multiple studios via Drayton.
• Content Mix Strategy: Continued shift away from low-margin third-party aggregated content (39% of revenue, down from 52% last year) toward higher-margin proprietary and exclusive content; willing to let low-margin volume decline if it does not contribute to gross profit.
• Pricing/Volume: No explicit price changes mentioned; focus is on optimizing the product mix to improve gross margins (already up 155 bps YoY to 56%) despite revenue decline.

Macro / Industry Outlook:

• Brazil Regulation: Acknowledged the suspension of licensed online gaming as a material disruption to revenue in that jurisdiction; operational conditions are expected to remain suspended until the government resolves the provisional measure.
• Technology/Regulatory Trends: Anticipates that "third-party providers moving to direct integration" with operators will continue to pressure lower-margin aggregated content models.
• FX: Reporting currency is EUR; no specific FX guidance provided other than noting USD equivalents are available in press releases.

Strategic Initiatives:

• AI Integration: AI expected to deliver "significant optimization opportunities" through increased developer output and accelerated game production cycles (including QA) well into 2027 and beyond; anticipated to lower resource requirements while maintaining or improving quality.
• Cost Restructuring: Two programs (Jan & July) reduced global workforce by ~27%; additional savings from the July program are phasing in through Q4 2026 and 2027.
• M&A/Expansion: Drayton acquisition fully consolidated; future strategy involves drawing from "multiple studios" and "new content providers" to enhance distribution capabilities in North America.
• Capital Structure: Board prepared to provide "sufficient flexibility" to support the balance sheet; management to evaluate capital raising options (debt increases via receivables, private placements) as the "most advantageous" for the company.
• Simplification: Commitment to become a "simpler, more focused business" by exiting markets or products that "do not earn their place."

Risks and Headwinds to Outlook:

• Brazil Market Closure: Continued uncertainty regarding the timeline for the reinstatement of licensed online gaming; potential for delayed revenue recovery in Q1-Q2 2027.
• Cash Generation Gap: Capitalized development spending currently exceeds operational cash generation; closing this gap is a "central priority" over the next several quarters.
• Investor Confidence: Current share price and market sentiment reflect frustration; rebuilding confidence is contingent on demonstrating "execution" and "cash generation" fundamentals in upcoming quarters.
• Execution Risk: Management notes that full impact of cost reductions has not yet filtered through; success depends on disciplined execution and delivery to operator partners.

Management Tone on the Future:

• Confidence Level: "Firm commitment" and "confidence" in the business's assets and future potential ("fantastic opportunity," "right to win"), but cautious regarding specific timing for future guidance.
• Approach: Shift from "transformative narrative" to "disciplined execution," "plain reporting," and "quarter-by-quarter" accountability; no specific guidance until Q1 2027 to ensure "realistic expectations."
• Stakeholder Alignment: Chair Matt Davely emphasizes alignment with shareholders ("my interests are aligned with yours") and readiness to back the business with personal and board capital.

Miscellaneous:

• Timing of Guidance: Management will assess 2027 execution plans and provide outlook updates "in the new year."
• Brazil Receivables: €2M of trade receivables were exposed; €0.5M collected post-quarter end, with confidence in collecting the remainder from partners with other jurisdictional relationships.
• Acquisition Financing: Drayton was paid entirely in shares with no cash outflow from Bragg; Drayton arrived with €1.5M in cash.