Bragg expects to post first positive EBITDA result in 2019

Toronto-listed supplier Bragg Gaming Group expects full-year revenue to come in at the high end of market expectations, allowing it to post positive earnings before interest, tax, deprecation and amortisation (EBITDA) for the first time.

Revenue for 2019 is expected to be approximately €26.0m (£21.7m/$28.2m), which represents a pro-forma year-on-year increase of around 37%.

This growth was attributed to the strong performance Oryx Gaming slot studio, acquired in August 2018. In 2019 it signed up new high profile clients such as Kindred Group’s Unibet, Betsson, LeoVegas, Betclic Everest Group’s Betclic and the William Hill-owned Mr Green, among others.

After years of legal uncertainty, its Schleswig Holstein-licensed partners had their certifications renewed in the middle of the year, following the ratification of the third amended State Treaty on Gambling, allowing for stable and growing revenue from Germany. Bragg noted that growth from other regulated markets such as Colombia, Romania, Sweden and Croatia was “exceptional”.

Performance was also aided by Oryx’s core casino aggregator platform, Oryx Hub, which launched in July 2019. This was described as performing “extremely well” in sales processes.

This will ultimately allow the business to post its first positive EBITDA result, which is expected to come in around €1.4m for the year.

“I am very pleased with the immense progress we've made throughout 2019 and with our position looking into 2020,” Bragg Gaming Group chief executive Dominic Mansour commented.

“We are keen to capitalise on the strong growth in the gaming industry and are focused on continually improving our B2B operations by building new relationships with large operators across Europe, Latin America and the United States, as well as partnering with notable industry players who complement our offering.

“We have an exciting Q1 ahead with several important announcements in the pipeline, and I look forward to updating the investment community as we continue to execute on our strategy.”

Looking ahead, the supplier claimed that a potential breakthrough in ongoing regulatory discussions in Germany – which accounts for 40% of Bragg revenue – could provide opportunity for further growth.

“The group has not included any positive impact of these regulations into financial forecasts at this time whilst it awaits further developments,” Bragg said. “However, management believes the risk against German revenues to be materially reduced and hence a likely positive impact on overall business.”

This contributed to Bragg forecasting 2020 revenue in the range of €35-38m, an increase of up to 48%, with EBITDA expected to rise to €5.5m thanks to improvements in cost efficiency.

Going forward, it will be changing its reporting currency to the Euro, as opposed to Canadian Dollars, effective 1 January, 2020. Bragg explained that as the Euro is its main revenue generator and cost base, making it a more representative indicator of its performance.

The year ahead will also see an earn-out related contingent consideration to Oryx’s vendor, Kavo Holdings, become due. Bragg said that its management was engaged in “amicable discussions” with Kavo to restructure the original terms. This could see the entire earn-out accelerated, or the current payment terms amended.

Bragg is working with a third-party investment bank and financial partners as it evaluates its options.

“We have fostered a great relationship with the Oryx team throughout 2019 and will continue to work together to ensure the group continues along a path towards long-term growth,” Bragg chief executive Dominic Mansour explained.

“We are exceptionally well positioned in a lucrative industry and we believe that the current valuation does not reflect the potential of the group and are together working on finding a solution.”

Finally, the strategic review of Bragg’s online media division, including the GiveMeSport and GiveMeBet assets, looks set to conclude with a sale.

The review concluded in January this year, with the business currently in an exclusivity negotiating the sale of the assets to an unnamed partner. This transaction is expected to be finalised by the end of the first quarter, with further updates to be provided when possible.