Bragg Gaming Group's Q3 2025 Earnings Call: Contradictions Emerge in Proprietary Content Margins, U.S. Market Strategy, and Regulatory Challenges in the Netherlands

Date of Call: None provided

Financials Results

• Revenue: EUR 26.8M, up 2% YOY (20% growth ex-Netherlands)
• Gross Margin: 54.7%, improved 115 bps YOY; sequential improvement vs Q2

Guidance:

• Full year 2025 revenue guidance: EUR 106.0M–108.5M.
• Full year 2025 adjusted EBITDA guidance: EUR 16.5M–18.5M.
• Management is maintaining full-year 2025 guidance.
• Expect continued operational leverage and margin improvement into Q4 and ongoing into 2026.
• BetCity migration expected in H1 next year with minimal bottom-line impact (net of mitigation).

Business Commentary:

* Revenue Growth in Focus Markets: - Bragg Gaming Group reported an 86% year-over-year revenue growth in the U.S. and 80% in Brazil during Q3. - This growth was driven by high demand for the company's proprietary content, especially in the U.S., and successful market entry in regulated markets like Brazil.

• Diversification and Margin Expansion:
• Revenue, excluding the Netherlands, grew by 20%, with North America and Brazil accounting for 22% of total revenue, up from 12% a year ago.

• The focus on proprietary content, which grew by 35%, supported the expansion of gross profit and adjusted EBITDA margins, contributing to operational leverage.

• Strategic Partnerships and Credit Facilities:

• Bragg secured a tier-one credit line with Bank of Montreal, enhancing liquidity and lowering borrowing costs.

• This facility supports continued investment in high-growth, margin-accretive initiatives, reflecting the company's strategic focus on expanding its footprint and optimizing its cost structure.

• Netherlands Market Challenges and Diversification Efforts:

• The Netherlands' regulatory changes led to a 22% year-over-year revenue decline, although it remains a key market for Bragg with 30% market share.

• Bragg's focus on geographic diversification is evident, with non-Netherlands revenue projected to reach 68% of total revenue in 2025, positioning the company for long-term growth.

• Proprietary Content as a Growth Driver:

• Proprietary content revenue increased by 35%, representing 16% of total revenue, with half of this revenue coming from the U.S.
• The U.S. market's strong growth potential, driven by increasing iCasino penetration and participation, is a significant driver for Bragg's proprietary content strategy.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted 35% YOY growth in proprietary content, 86% YOY U.S. revenue growth and 80% Brazil growth, reported revenue/gross profit/adjusted EBITDA in line with expectations, improved gross margin to 54.7%, and maintained full-year guidance while adding a lower-cost BMO credit facility.

Q&A:

• Question from Jordan Bender (Citizens): Without getting into next-year guidance, how should we think about proprietary content progressing and its impact on margins into next year? Also, SG&A has picked up YTD—anything to call out?
  Response: Management: Proprietary content will continue to be a key margin and cash-generation driver with cadence of title releases continuing into 2026; they initiated structure and process optimizations in Q2, will continue these efforts and expect operational leverage to improve margins.

• Question from Jordan Bender (Citizens): On BetCity rolling off—will that be a complete rolloff at once or over time, and is the earnings impact minimal gross or net of mitigation?
  Response: Management: The impact is expected to be net of mitigation; migration timing being finalized with Entain, likely in H1, and they plan to redeploy/optimize resources to minimize impact.

• Question from Gianluca Tucci (Awood Securities): Could you walk us through growth drivers in the U.S. and Brazil and how you’re thinking about these markets next year?
  Response: Management: Brazil growth driven by aggregation leading to distribution of proprietary/exclusive titles; aim to shift Brazilian mix toward more margin-accretive products. U.S. growth powered by proprietary content adoption amid a rapidly expanding iCasino market.

• Question from Gianluca Tucci (Awood Securities): On the balance sheet and the BMO facility—are you comfortable with the current position or are more optimizations coming?
  Response: Management: The BMO facility lowers borrowing costs and bolsters liquidity; they expect further cost-structure optimizations and improved liquidity driven by better margins and cash flow.

• Question from Michael Shelton (FRC): What’s keeping Bragg from earning a regular, consistent operating income, and what systems/strategies will you put in place? Also, what do you expect the stock price to be in three years?
  Response: Management: IFRS operating losses are driven by amortization/depreciation and purchase-price amortization; focus is on adjusted EBITDA less CapEx and improving cash conversion (targeting 30–50%); cannot comment on future stock price.

Contradiction Point 1

Proprietary Content Impact on Margins

It involves expectations regarding the impact of proprietary content on margins, which is crucial for assessing the company's financial performance and strategic direction.

How will proprietary content impact margins next year? Are there any changes in SG&A expenses? - [Jordan Bender](Citizens)

2025Q3: Expect continued growth in proprietary content, especially in the U.S., with opportunity for optimization in structures and processes. Immediately, we're focused on operational leverage through Q2 and Q3 learnings, with improvement expected in 2024. - [Robbie Bressler](CFO)

Can you discuss the highly accretive growth opportunities in the press release and your outlook for future business opportunities? - [Jordan Maxwell Bender](Citizens)

2025Q2: Our strategy to increase penetration of proprietary content in the United States is beginning to show results. In Q2, we achieved 27% share of proprietary content in the U.S. iCasino market, up from approximately 20% in Q1. - [Matevz Mazij](CEO)

Contradiction Point 2

U.S. Market Performance Expectations

It involves expectations regarding the U.S. market performance, which is a key growth area for the company and critical for investor expectations.

What are the growth drivers in the U.S. and Brazilian markets for 2026, and how are you assessing their potential? - [Gianluca Tucci](Awood Securities)

2025Q3: We expect it will be a major driver of growth in the coming years, and it remains a key strategic priority for us. We're going to drive that growth by expanding our proprietary content business. - [Robbie Bressler](CFO)

Can you explain the 50% revenue decline in the US for Hard Rock and Caesars in Q2 and outline expected future performance and current partnership outlook? - [Jordan Maxwell Bender](Citizens)

2025Q2: Bragg is optimistic about the U.S. market growth, and the Hard Rock deal will continue to add revenue through the second half of the year. The U.S. iCasino market is flourishing, with strong growth in regulated states. Bragg expects to reach its targeted 15% revenue contribution from these partnerships in 2025. - [Matevz Mazij](CEO)

Contradiction Point 3

U.S. Market Growth and Strategy

It involves changes in the company's growth strategy in the U.S. market, which can impact revenue projections and operational focus.

What are the growth drivers in the U.S. and Brazil for 2026, and how do you view these markets? - [Gianluca Tucci](Awood Securities)

2025Q3: In Brazil, market share through aggregation continually increases. Focus is on shifting revenue to higher-margin, proprietary products. U.S. growth driven by iCasino expansion and market penetration. - [Robbie Bressler](CFO)

Regarding the U.S., are there any changes in your approach compared to previous years? - [Gianluca Tucci](Haywood Securities)

2025Q1: We are strategically investing in rolling out a higher cadence of content titles in the U.S., and we've brought in more talent on both the commercial and development sides to accelerate this. This is one area that is working extremely well, and we see this continuing growth in the U.S. market. - [Robbie Bressler](Interim CFO)

Contradiction Point 4

U.S. Market Revenue Contribution Expectations

It involves different expectations for the contribution of the U.S. market to total revenue, which is crucial for revenue growth projections.

How will proprietary content impact margins next year? Are there any notable SG&A expenses to highlight? - [Jordan Bender](Citizens)

2025Q3: In terms of our growth in the U.S. for 2025, Caesars is definitely part of it, but a big chunk of our growth is going to be coming from exclusive and proprietary content. - [Matevz Mazij](CEO)

Can you confirm the expected 2025 U.S. revenue contribution and if the Caesar deal is the primary growth driver? - [David McFadgen](Cormark Securities)

2024Q4: The U.S. iGaming market is expected to account for 15% of total revenue in 2025. - [Matevz Mazij](CEO)

Contradiction Point 5

Impact of Regulatory Environment in the Netherlands

It involves differing viewpoints on the impact of regulatory changes in the Netherlands on Bragg's business, which could influence profitability and market expansion strategies.

What are the growth drivers in the U.S. and Brazilian markets for 2026, and how do you view these markets? - [Gianluca Tucci](Awood Securities)

2025Q3: Our business is primarily focused on the iCasino side, so any impact to sports betting advertising would probably not be too impactful to us. - [Matevz Mazij](CEO)

What’s the current regulatory environment in the Netherlands and its market impact? - [David McFadgen](Cormark Securities)

2024Q4: We do project in 2025 to see constant side. Sorry, we expect to see the market decrease in contract in 2025. - [Matevz Mazij](CEO)