Oryx expansion helps Bragg reduce 2019 loss
Bragg Gaming Group has reported strong growth in revenue for 2019, with the growth of its game development arm Oryx and diversification of the subsidiary’s customer base helping the business cut its net loss for the year.
Revenue soared from €767,000 (£679,401/$829,344) in 2018 to €26.6m, though the prior year did not include results from Oryx, which was acquired in August 2018. On a pro forma basis, including Oryx’s revenue in the 2018 figures, revenue would have been up 41% year-on-year.
This also helped the business post a positive earnings before interest, tax, depreciation and amortisation (EBITDA) result for the three months ended 31 December 2019, with full-year EBITDA coming in at $1.2m.
“2019 was Bragg's first full year of operations, and we've taken significant strides to establish ourselves as one of the fastest growing B2B providers in the gaming space,” Bragg chief executive Dominic Mansour said. “We experienced record revenue growth throughout 2019 and reached positive EBITDA in the fourth quarter.”
Growth could be attributed to four key factors, Mansour continued. He said a seamless integration process allowed Oryx to rapidly grow its operator base, with a number of high profile clients signed up over the year. This in turn helped the business grow revenue in regulated markets, something aided by localised content, supported by in-game features and player engagement tools offered through its Oryx Hub aggregation platform.
During the year Oryx signed up clients such as Kindred Group, Betsson, LeoVegas and Betclic Everest Group. It reduced its reliance on its top five clients during the year, with only 46% of total revenue coming through these partners by December 2019, down from 73% in December 2018.
Oryx’s geographic footprint expanded, with moves into regulated markets such as Colombia and the US, aided by a strategic partnership with sportsbook technology provider Kambi. This in turn led to a deal with New York’s Seneca Gaming Corporation.
Turning to costs, revenue-related outgoings amounted to €14.6m, leaving a gross profit of €12.0m. Selling, general and administrative expenses came in at €14.8m, while Bragg also incurred a €5.3m loss on the remeasurement of deferred and contingent considerations.
This resulted in an operating loss of €8.1m. After net interest expenses and financing charges, pre-tax loss climbed to €9.8m, and once income tax of €541,000, net loss from continuing operations came in at €10.4m.
The full-year loss rose to €11.9m once a loss from the discontinued GiveMeSport media business was factored in, and after adjustments Bragg’s comprehensive net loss for 2019 amounted to €12.1m, down 13.7% year-on-year.
In May it was announced that Bragg would divest its GiveMeSport (GMS) and GiveMeBet assets to Sn&ck Media, for a total consideration of €400,000. This will be split into a cash payment and a deferred consideration.
“With the completion of the GMS sale, we are now cash-flow positive and able to focus 100% of our resources and energy on enhancing the Oryx platform and expanding our presence worldwide,” Mansour said. “In 2020, our team is focused on leveraging existing relationships with complementary service providers, to offer enriched content and player account management system to operators and optimising the business to enter more regulated markets.”
Turning to the impact of novel coronavirus (Covid-19) on the business, Bragg said it had as yet seen no effect on its business. With online casino one of the few verticals not disrupted by the pandemic, it said there was currently no reason to revise its 2020 forecasts.
As such it expects revenue for 2020 to fall between €35m and €38m, representing a 43% rise from 2019. EBITDA for the year is expected to rise to €5.5m, thanks to improvements in cost efficiency as the business scales up.
In related news, Bragg has amended the earn-out agreement due to KAVO Holdings, the business from which it acquired Oryx. The earn-out, originally due on 30 June, has been pushed back to 30 September, with Bragg engaging Canaccord Genuity to advise as it works on raising funds to make the payment.
Finally, Bragg has announced that its chief financial officer Steven Prowse will step down from his role, effective immediately, due to personal reasons. Prowse joined the business in November 2019, replacing Ashkay Kumar in the role.
He will be replaced by Ronen Kannor, who most recently served as finance chief for Stride Gaming, where he oversaw the business’ initial public offering on the London Stock Exchange’s Alternative Investment Market. He was involved in numerous M&A transactions during his tenure, and was described as “instrumental” to the business’ eventual sale to Rank Group.
“I would like to thank Steven for his hard work and contributions to Bragg,” Mansour said. “Our team wishes him good health and success in the future.
“We welcome Ronen to the team, an industry veteran who will be vitally important as we execute on several exciting strategic initiatives over the next few months.”