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READ THE FULL BRGGF RESEARCH REPORT
Bragg (OTC:BRGGF) reported Q2 earnings and gave updated guidance and detailed information about every aspect of its business. Investors had been waiting for insight into the German market as regulations kicked in on July 1st. Now with a month and ten days of experience the company has much more to go on than early in the year. Since the company raised revenue guidance for the year, results to date must show that the German market has not yet been impacted any further than expectations. Management also provided its forecast for German revenues as a percent of total sales for the remaining months of the year as shown in the graph below. In our opinion, the cloud over the company has been what happens in Germany where the majority of its revenues had been generated. With each passing day we get more clarity and visibility into the future, and as a result the stock valuation should increase as the risk to overall business lessens.
Current company revenue guidance for 2021 has been raised to €49 million or US$57.8 million. This includes €2 million in revenues from its acquisition of Wild Streak and its planned Q4 acquisition of Spin as well as a revenue hit from regulations in Germany. This revenue is expected to generate adjusted EBITDA of €5.4 million or US$6.4 million. This increase in guidance was solely from an additional €1.4 million of EBITDA from Wild Streak.
Bragg expects to make up for the decline in Germany through a combination of adding new customers, growth of existing, new markets, new games, and its recent acquisitions. Specifically it expects the German regulatory impact to 2021 revenue to be €8.2 million. This is expected to be offset by €4 million from underlying market growth and €4 million from the launch of new clients and a €2 million contribution to 2021 revenue from Wild Streak.
Bragg initiated full year revenue guidance for 2022 of €54-€56 million or US$63.7-$66.1 million, showing midpoint growth of 12%.
During the June Quarter
On May 12th, Bragg announced it would buy Spin Games LLC, based in Reno, for the same amount as Wild Streak---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 is EBITDA positive and this acquisition could add another $5-7 million to revenues in 2022 as well as increase the overall gross margins of the company. The head of Spin will take over operations in North America for Bragg. Spin already operates in North America and is generating revenues in New Jersey and Michigan and has Pennsylvania in the works. While awaiting regulatory approval, the two companies have already completed the technical integration between Spin Games and the Oryx Hub distribution platform.
On June 2nd Bragg acquired Wild Streak Gaming based in Las Vegas for US$30 million comprised of an immediate payment of US$10 million in cash and $20 million in shares to be paid over three years starting 12 months from its closing. It is a content creation studio with 40 premium casino slot titles, including Dragon Power, used online as well as in casinos. It plans to launch six new games through the end of 2021 and 12 new games next year.
During the quarter Bragg launched eleven new exclusive games via its Oryx remote games server in partnership with third-party studios, and two new proprietary games from its in-house Oryx Gaming studio. In addition, Wild Streak launched two new games during the quarter. Bragg added five B2C operators including Casumo and Logrand in Spain and Mexico.
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Posted In: BRGGF
