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BRGGD: Bragg Gaming Starts 2021 With Strong Growth and a Game Changing Acquisition

·5 min read

By Lisa Thompson



On May 12th, Bragg (OTC:BRGGD) announced it would buy Spin Games LLC, based in Nevada, in a cash and stock transaction for a purchase price of approximately US$30 million comprised of US$10 million in cash and US$20 million of stock. US$5 million in stock will be issued on closing and the balance over the next three years. The transaction will close following final approval from gaming regulators and satisfaction of other customary conditions, which could be in late 2021. The company will produce a merger document with the financials, but we believe the company is EBITDA positive and this acquisition could add upwards of $7 million to revenues in 2022 as well as increase the overall gross margins of the company. The head of Spin, Kent Young will take over operations in North America for Bragg. Once the deal closes we will adjust our forecasts and valuation. Spin already operates in North America and is generating revenues in New Jersey. It is now adding Michigan and has Pennsylvania in the works.

Nearer term, Bragg will be adding operations in the Netherlands and will go live in early October and it hopes to be granted a UK license that is expected to start generating sales starting in Q4 2021. The company already works with all the major UK players and is integrated with them and hopes to turn on operations as soon as licensed. They expect it to take three to five months to complete the roll out and revenues will ramp throughout. All of these events could add significantly to our 2022 numbers should all work according to plan.

Q1 2021 Earnings

Bragg started out the year strongly with revenues exceeding even our high expectations. For the quarter ending March 31, 2021, Bragg generated €14.2 million versus €8.8 million in Q1 2020, growth of 62%. Gross profit margin was 46.8% versus 45.2% in Q1 2020 due to product mix toward higher margin content, which was 86% of total sales.

Operating expenses decreased to €7.1 million from €9.0 million a year ago. In last year’s quarter there was a €5.0 million loss on remeasurement of consideration for Oryx. Without that, expenses would have been €4.1 million. The biggest increase was in salaries, of which share based compensation was €1.3 million this year and only €51,000 last.

Transaction and acquisition costs were €37,000 in Q1 2020 compared to €563,000 in Q1 2021 and are considered non-recurring. Operating losses decreased from a loss of €5.1 million in Q1 2020 to a loss of €499,000 in Q1 2021. Without one-time expenses the company would have earned €64,000 this year compared to a loss of €75,000 last year.

Despite losing money pre-tax, the company paid €507,000 in taxes compared with paying €243,000 in Q1 2020. The company paid taxes as a percent of EBITDA at a rate of 22% compared to paying at a rate of 35% last year. We expect that to be the rate for the rest of 2021.

On a GAAP basis, the net loss from continuing operations was €1.1 million versus a loss of €5.4 million a year ago. GAAP EPS loss was €0.06 versus a loss of €0.67. On a continuing operations non-GAAP basis, taking out charges and stock-based compensation, Bragg earned €0.01 per share versus a loss of €0.05 in Q1 2020. In Q1 2021 the share count increased 144% to 18.1 million primary shares. Adjusted EBITDA in Q1 2021 was €2.3 million compared to €702,000 in Q1 2020. The company still expects to reach €4 million in EBITDA this year if the Spin acquisition does not close until 2022.

During the Quarter

The company added nine new B2C operators during the period: including PAF in Finland, iGaming platform Senator in Croatia, Swiss market leader Casino Luzern and Maxbet in Romania. It also launched 11 new casino games and signed an agreement to be the exclusive distributor of slots studio Sakuragate outside of Japan.

Balance Sheet

Bragg ended March 31, 2021 with €30.1 million in cash and no debt. Its working capital was €20.3 million and its quick ratio 2.0 times. It finished paying for the Oryx acquisition in cash and €11.5 million in deferred and contingent consideration was taken off the balance sheet and is now zero. On January 18, 2021, Bragg satisfied its earn out obligations to Oryx via a combination of cash and shares comprised of cash of €11.6m and 47 million shares. The shares are locked up until May 19, 2021.

On January 27th, the company uplisted to the Toronto Stock Exchange from the TSX Venture Exchange. On March 29th it announced it had has filed an application to list its common shares on NASDAQ which it expects could happen as soon as late May or early June.

On January13th, it completed a private placement of approximately 2.5 million shares priced at CN$12.10 per share (post split), for an aggregate gross proceeds of CN$3 million (€1.9 million.) Bragg employees and all its board members, including Chairman and CEO Richard Carter, Adam Arviv, and CFO Ronen Kanor, exclusively took up this offering.

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