Bragg Gaming Group Q3 2026 Earnings Call - Revenue Falls 23% as Brazil Suspension Bites, but Gross Margin Climbs to 56%

Moderator/Operator, Bragg Gaming Group: financial information. A full explanation of these risk factors is available on the second slide of our third quarter 2026 earnings presentation titled Forward-Looking Statements, as well as in the press release issued this morning and our other public disclosure. Bragg disclaims any obligation, except as required by law, to update or revise any Forward-Looking Statements, whether because of new information, future events, or otherwise. Any Forward-Looking Statements made on this call speak only as of the date of this call. On this call, Bragg’s Chair of the Board, Matt Davey, Interim Chief Executive Officer Morten Tonnesen, and Chief Financial Officer Robbie Bressler will discuss the company’s third quarter performance and provide a business update. We will follow that up with a question and answer session. I would now like to turn the call over to Matt.

Matt Davey, Chair of the Board, Bragg Gaming Group: Good morning. I am Matt Davey, Chair of Bragg. I will be brief, and I will not be taking questions today. That is for Morten and Robbie. I joined the board this year as a significant investor, and I want to speak directly to our shareholders, many of whom are rightly frustrated with how the company and its share price have performed. Last week, the board made a strategic leadership change. We thank Mats for what he’s built. We are pleased he continues as strategic advisor to the company. We’ve asked Morten to lead the business as Interim Chief Executive Officer because he knows our business, our customers, and our team, and because he’s built, scaled, and sold businesses in this industry before. He has the board’s full confidence. The board’s priorities are clear, disciplined execution, operating cash flow, and a simpler, more focused business.

We will report against them plainly, quarter by quarter, including when the news is not good. In addition, I know the balance sheet is front of mind for many of you. It is for the board as well, and I want it to be clear. The board and key shareholders are prepared to provide sufficient flexibility to the company so that Bragg has the balance sheet and headroom it needs to execute the plan the board has asked management to deliver. That sits alongside a range of operational and financial options the board and management are working through. As a significant investor, my interests are aligned with yours, and I intend to back this business. With that, I’ll hand over to Morten.

Morten Tonnesen, Interim Chief Executive Officer, Bragg Gaming Group: Thank you, Matt, and good morning, everyone. Before I turn to the quarter, let me say why I took this role. The quality of what is already here is what makes this a fantastic opportunity. Strong technology, growing proprietary content, and a licensed footprint across more than 30 regulated markets. I have been Chief Operating Officer since March, so I know the business, the team, and the customers, and I’m not starting from a standing start. My focus is execution, delivery for our operating partners, and running a simpler and more focused business. Turning to the quarter. Third quarter revenue was EUR 20.6 million, down 23% year-over-year. Adjusted EBITDA was EUR 3 million, at a margin of 15%. That is a step down, and I want to be clear about what sits behind it.

The majority of the decline is the anticipated roll-off of legacy platform contracts in the Netherlands, which we’ve been signaling for several quarters. The remaining reflects lower revenue in certain other markets on regulatory and customer-specific factors. Gross margin moved the other way, improving to 56% from 55% year-over-year, and from 52% in the second quarter, and that’s deliberate. We have been willing to let low-margin aggregated volume go where it does not contribute. On costs, the restructuring programs announced in January and July are now visible, with salaries and subcontractors down 30% on an underlying basis in the quarter. Two other items to cover. First, Brazil. On September 25th, the president signed a provisional measure suspending licensed online and casino gaming, and operators were required to stop on the 6th of October. We ceased supplying our Brazilian customers in line with that timeline.

Brazil was EUR 2 million of revenue in the third quarter, down 37% year-over-year, even before the suspension, as third-party providers moved to direct integration with operators. It is predominantly low-margin aggregated content, so its contribution to the gross profit and to cash flow is materially smaller than its contribution to revenue. In the first month after we stopped supplying, our gross profit margin improved, which partly offset the revenue we have given up. Second, Drayton, which we completed on July 22nd and have consolidated since. The studios paid their own way from day one. In the 71 days we have owned them, they provided EUR 0.7 million of revenue and EUR 0.3 million of profit before tax. We paid for all of it in shares, no cash left the business, and it arrived with EUR 1.5 million of cash of its own.

It is early, and it is a lot of work ahead, but on evidence of this first part of the quarter, it is behaving the way we underwrote it. With that, I will hand over to Robbie for the financial details.

Robbie Bressler, Chief Financial Officer, Bragg Gaming Group: Thank you, Morten, and good morning, everyone. All of the numbers I refer to have been rounded, so they are approximate. Our reporting currency is euro, and I will stay in euros on the call. For the benefit of North American investors, we have provided a U.S. dollar equivalent conversion in our press release this morning. Third quarter revenue was EUR 20.6 million, a decrease of 23% from the third quarter of 2025. That figure includes EUR 0.7 million contributed by Drayton from the July 22nd acquisition date. Excluding BetCity, which completed its migration off of our platform in May, and excluding Drayton, normalized revenue was EUR 20 million, down 12% year-over-year. Gross profit was EUR 11.6 million against EUR 14.7 million in the third quarter of 2025, a decrease of 21%.

Gross margin improved by 155 basis points to 56% from 55%, and by approximately 450 basis points from 52% in the second quarter of 2026. Adjusted EBITDA was EUR 3 million against EUR 4.4 million in the third quarter of 2025. The gross profit decline of EUR 3.1 million outweighed approximately EUR 1.6 million of operating cost savings delivered in the quarter. On those savings, compensation decreased 30% on an underlying basis. On a reported basis, there was EUR 5.7 million against EUR 6.8 million, and that reported figure carried EUR 1.1 million of restructuring-related termination costs, which are treated as exceptionals and sit outside of Adjusted EBITDA. Taken together, the January and July programs have reduced the global workforce by approximately 27% since the start of the year. The July program is still phasing in, so more of that benefit lands in the fourth quarter and into 2027.

I am going to speak to our product mix, as it explains the positive movement in our margin. Lower-margin third-party content was 39% of revenue in the quarter, down from 52% a year ago. Proprietary content was 19%, up from 16%, and exclusive content was 23%, up from 14%. That matters because third-party content is the line that carries almost most of our content costs. Third-party revenue fell EUR 6.1 million year-over-year, but because of its margin profile, that gross profit impact was a fraction of that. Put simply, the revenue we have lost is concentrated in our lowest value product line, and that is why gross margin expanded while revenue declined. Within proprietary content, revenue from titles deployed in Canada and the United States grew 7% year-over-year and 21% for the nine months.

Proprietary content and our platform and turnkey businesses are together about one-third of revenue and a materially larger share of gross profit. Those are the lines we are protecting and investing behind. Turning to the balance sheet, cash at September 30th was EUR 2.5 million. Our $6 million revolving credit facility with Bank of Montreal remains in place with CAD 5.2 million drawn on it to date. One related point on Brazil, at September 30th, we had EUR 2 million of trade-related receivables due from Brazilian customers, about 11% of the total. We have collected half a million euro of that since quarter end. Remaining balances are with customers who we have relationships with in other jurisdictions, and we are confident that these will be collected. Final point on Brazil, as Morten mentioned, the impact of this market shutdown is minimal on our bottom line.

Finally, I will be direct about our cash position. Capitalized development spend has been running ahead of our operational cash generation, and that is the gap we have to close. It is a central priority and is a measure that I would hold us to over the next several quarters. Moving to our outlook, as mentioned, suspension of licensed online gaming in Brazil took effect after the end of the third quarter. We are not currently aware of any significant changes in the operational conditions that applied during the quarter, other than as described in this morning’s press release. Our near-term focus is disciplined execution, improved balance sheet strength, and operating cash flow, and the development and deployment of our technology, content, and services with the objective of driving growth and delivering shareholder value.

Morten will take you through what that means in practice, so I will pass it back to him. Thank you.

Morten Tonnesen, Interim Chief Executive Officer, Bragg Gaming Group: Thank you, Robbie. Let me close with where we are pointing the business, four things. First, cash. We will bring investment spend and operating cash generation into a better balance, and we will be more selective about what we build. Second, proprietary content. It is our most profitable product, and it is where we have the clearest right to win. More of our capacity goes there, and the Drayton Studios add to that capacity. Third, focus. We are a simpler business than we were 12 months ago, and we will get simpler. Where a product or a market does not earn its place, we will say so. Fourth, delivering for our operator partners. We are asking our customers to take more of our own content, and that only works if it is good and if it lands on schedule. That is the commitment.

I have been in the business for eight months and in this seat for a matter of days, so I am not going to stand here and give you a transformative narrative today. What I will do is come back to you with a clear view, and in the meantime, run the company with discipline. Robbie and I are now available to take any questions. Thank you.

Moderator/Operator, Bragg Gaming Group: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the QA roster. Your first question comes from the line of Mike Hickey with StoneX. Your line is open, Mike. Please go ahead.

Mike Hickey, Analyst, StoneX: Yeah, thanks. Hey, guys. Good morning, Matt, Morten, Robbie. Just curious, I guess, first topic on the North American content growth. Just curious if you could give more color here on the slowdown in proprietary content growth to 7% this quarter, and where you see the biggest opportunity today, I guess, to gain share in North America.

Morten Tonnesen, Interim Chief Executive Officer, Bragg Gaming Group: Thank you for the question. Overall, we see and have a very good relationship with all the top operators in North America, and we keep building out our relationship. With the added on of new studios and new content providers that we have taken in from Drayton and a few other opportunities, we see significant opportunities in growing in the start of 2027 and beyond. I do not know, Robbie, if you want to add some comments as well.

Robbie Bressler, Chief Financial Officer, Bragg Gaming Group: Yeah. Thanks for the question, Mike. We do, with the acquisition of Drayton, and our ability to draw from multiple studios and continually looking to really take good value in the distribution that we have in North America, that is something we have invested a lot in. We have good infrastructure to be able to get content delivered to all top operators. Being able to draw from multiple studios, which we have that ability with Drayton, and also looking for good other studios who can really capitalize on our distribution, that is something that is a huge plus for us, and we believe that we have a huge opportunity to take that further and use that distribution.

We have the same breadth of ability to distribute in the U.S. as a company like Light & Wonder, and there is no reason why we cannot be a solid alternative to do that, and I really think that that is going to be something we make inroads in as we move into 2027 and beyond.

Mike Hickey, Analyst, StoneX: Thank you. Next topic would be guidance and investor confidence. I guess, what needs to be done still before you think you can provide guidance again, and how do you go about rebuilding investor confidence in your growth opportunity?

Morten Tonnesen, Interim Chief Executive Officer, Bragg Gaming Group: Thank you for the question. Maybe I give a few comments first, Robbie, and hand back to you.

Robbie Bressler, Chief Financial Officer, Bragg Gaming Group: Sounds good.

Morten Tonnesen, Interim Chief Executive Officer, Bragg Gaming Group: Right now, building the confidence is, to a large extent, about our ability to execute. First and foremost, we anticipate an improved cash flow profile driven by acceleration in revenue growth and our operating discipline, as number one. As Robbie mentioned, some of the cost reductions that were effectuated in July has not filtered fully through and will impact further in Q4 and 2027. I think it is important that also what we have is our major shareholders on board are providing full capital support to secure that we keep being able to do the things we need to do.

Robbie Bressler, Chief Financial Officer, Bragg Gaming Group: Just to add-

Morten Tonnesen, Interim Chief Executive Officer, Bragg Gaming Group: Robbie.

Robbie Bressler, Chief Financial Officer, Bragg Gaming Group: Yeah. I actually see those two points very very connected. To bring back confidence in our story, we need to deliver on the fundamentals that are most important, which is cash generation and showing that we can move the business on a like-for-like basis in a positive direction. In terms of us getting to where we need to get to issue guidance, we will provide updates on that and thoughts on that in the new year. We want to make sure that we are putting realistic expectations and that we are confident in our ability to deliver. With Morten Tonnesen aboard, I guess, less than a week, we’ve already been doing a ton of work to look at what 2027 is going to look like, what is our execution plan, how do we get this business to perform to the level that we believe it can perform.

When we will come back with our thoughts on that. But with Morten Tonnesen fresh in the position, we’re going to give it a little bit more time before we start talking about 2027 and beyond.

Mike Hickey, Analyst, StoneX: Last topic from us, guys, would be artificial intelligence. If you could just speak to where AI is, I guess, saving you time and money today, and how you think AI could change the way that you create games moving forward.

Morten Tonnesen, Interim Chief Executive Officer, Bragg Gaming Group: Sure. Let me pick that up. I think it is fair to say that AI has been and will be transformative on all levels, from how I personally work through to most of the teams, from our legal team and operational teams through to the actual development teams. We are seeing either significantly more output with the same or in terms of being able to deliver the same with a lot less in some areas, which is one of the reasons why we have been able to implement all of the cost reductions and still ensure that we have been able to deliver to our customers and will be able to deliver to our customers in the future. We anticipate that that will continue and accelerate, and we will be able to still deliver significant optimization opportunities well into 2027 and beyond. That is a key parameter for us to be successful.

The second question was specifically in relation to games. It goes without saying that we are looking deeply into how AI can help us in the production of games, and we are confident that almost all aspects of game development will be able to be accelerated significantly all the way through to the ability to do QA in a manner that ensures higher or even better quality of games being pushed out. We see that in the coming months as we progress with these changes in our way of delivering games, that that will impact and improve our throughput of the number of games and/or the amount of resources that we need in order to produce the games. Anything to add from your side, Rory?

Robbie Bressler, Chief Financial Officer, Bragg Gaming Group: No, agreed.

Mike Hickey, Analyst, StoneX: All right. Good luck, guys. Appreciate it.

Morten Tonnesen, Interim Chief Executive Officer, Bragg Gaming Group: Thank you.

Robbie Bressler, Chief Financial Officer, Bragg Gaming Group: Thanks, Mike.

Moderator/Operator, Bragg Gaming Group: Your next question comes from the line of David McFadgen with ATB. Your line is open, David. Please go ahead.

David McFadgen, Analyst, ATB: Oh, great. Yeah, a couple of questions. I am just wondering what sources of capital the company could draw on, should the company need it. I know Matt doesn’t want to answer any questions, but I was just wondering, is there a certain maximum dollar value that Matt or other big shareholders would be willing to step up and support the company?

Morten Tonnesen, Interim Chief Executive Officer, Bragg Gaming Group: Thank you for the question, David. Do you want to answer that, Rory?

Robbie Bressler, Chief Financial Officer, Bragg Gaming Group: Sure. David, similar to how we have raised capital in the past recently, we would look to what options make the most sense. We do have a loan facility. We do have a very good facility with BMO. What drives increases in that is increases in our receivable balances. We do work with them to see if there is more liquidity there. But we would look to do what is most advantageous for us to bring capital in. I do not want to get ahead in terms of saying exactly what would be most advantageous for us to do, but the message is that there is options out there, similar to the private placement we did recently, that had both board members and members of management participating in that.

There is a firm commitment and belief that Bragg is cash-wise, we wish we had more liquidity to us, but where we are moving operationally, Morten Tonnesen stepping in as our interim CEO, and the assets that we brought on from Drayton, we are confident that there is a lot of good here. Share price might not reflect that now, and I understand that, but we are confident, and we will do what is most advantageous for us when it comes to bringing in more capital.

David McFadgen, Analyst, ATB: Okay. All right. Thank you.

Robbie Bressler, Chief Financial Officer, Bragg Gaming Group: Thank you.

Moderator/Operator, Bragg Gaming Group: We have reached the end of the QA session. I will now turn the call back to Morten Tonnesen for closing remarks.

Morten Tonnesen, Interim Chief Executive Officer, Bragg Gaming Group: Thank you. Thank you, everyone, for joining our call today. This was a quarter of change, and there is more work ahead. The business has real assets and a licensed footprint across more than 30 regulated markets, and a cost base that is materially lighter than it was a year ago. Our job is now execution. Thank you for your interest and your continued support.

Moderator/Operator, Bragg Gaming Group: This concludes today’s call. Thank you for attending. You may now disconnect.