Prepared remarks
Thank you. Hello, everyone. Thank you for joining us and welcome to Bragg Gaming Group's Second Quarter 2026 Earnings Conference Call. I will now hand the conference over to Robbie Bressler, CFO. Please go ahead.
Good morning, everyone, and thank you for joining us for Bragg Gaming Group's Second Quarter 2026 Earnings Call. If you are connected to our online webcast today, you should see our second quarter earnings presentation on your screen. And you should have control to flip through the slides yourself as you listen to the call. If you are joining by telephone, please note that you can find our earnings presentation as well as the financial results press release on our website at investors.bragg.group. Please note that certain statements on this call may constitute forward-looking information or future-oriented financial information. The full explanation of these risk factors is available on the second slide of the second quarter 2026 earnings presentation titled Forward-Looking Statements, as well as in the press release issued this morning and our public disclosures. 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. Bragg Gaming Group CEO, Matevž Mazij, and myself, the CFO of Bragg Gaming Group, Robbie Bressler, will discuss the company's second quarter performance and provide a business update. We will follow that with a question-and-answer session. I would now like to turn the call over to Matevž.
Thank you, and good morning, everyone. Thank you for joining us for Bragg Gaming Group's Second Quarter 2026 Earnings Call. In the second quarter, we prioritized margin and cash flow performance over aggressive revenue expansion, which underpins our renewed group-wide strategy. Revenue was EUR 22.9 million, down 12% year over year. Adjusted EBITDA was held static at EUR 3.5 million, and our adjusted EBITDA margin expanded to 15% from 13% in the same quarter last year. On July 9, 2026, we announced a further reduction of approximately 19% of our global workforce, expected to deliver approximately EUR 6 million in incremental annualized cash savings, and bringing total expected annualized savings to approximately EUR 10.5 million, together with the restructuring announced on January 8, 2026. Combined with the acceleration of our AI-first transformation, it leaves a leaner organization concentrated on our core technology, content, and platform products, and it accelerates our path to cash profitability and adjusted EBITDA growth. Furthermore, I would like to highlight our content performance across North America, especially in Canada and the United States. Our proprietary content being deployed by U.S. and Canadian operators is building very positive traction. This content revenue grew 44% compared to Q2 last year, driven by distribution, quantity, and quality of content. Proprietary content is our most profitable product, and the U.S. is the most important market for us. So this level of growth is exciting, and it underlines the growth strength of the content we build. Against that, the Netherlands declined 14% year over year, reflecting the anticipated roll-off of legacy turnkey contracts following customer migration away from our PAM. Brazil was static as certain operators moved to direct supply integrations, which moderated growth but improved the quality of the revenue we retained. Some other European markets were lower due to customer-specific factors and tightening local regulatory dynamics. Since quarter end, we have also closed the acquisition of Drayton International, and Matt Davey has joined us as Non-Executive Chairman. I will come back to both of those after Robbie takes you through the financials. Robbie, over to you.
Thank you, Matevž, 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 this call. For the benefit of North American investors, we've provided a U.S. dollar equivalent conversion in our press release this morning. Second quarter revenue was EUR 22.9 million, a decrease of 12% from EUR 26.1 million in the second quarter of 2025. Gross profit was EUR 11.8 million against EUR 13.7 million in Q2 2025, with a gross margin of 51.7% compared to 52.7%. Adjusted EBITDA was EUR 3.5 million, static against EUR 3.5 million in the second quarter of 2025, with the adjusted EBITDA margin expanding 212 basis points to 15.4% from 13.3% in the second quarter of 2025. We absorbed a EUR 3.2 million reduction in revenue and delivered the same absolute adjusted EBITDA. As Matevž mentioned, we have completed several restructuring programs and are starting to see the results of these measures. In the second quarter, there was a 14% reduction in gross compensation costs prior to capitalization compared to Q2 2025. Sequentially, revenue came down from EUR 25.7 million in the first quarter of this year to EUR 22.9 million in the second quarter of this year. Adjusted EBITDA margin was held broadly flat over the same period at 15.4% against 15.7%. Holding margin through a sequential revenue decline is proving the cost reduction measures are doing their work. For the 6 months ended June 30, 2026, revenue was EUR 48.5 million, down 6% from EUR 51.6 million in the first half of 2025. Adjusted EBITDA for the half year was EUR 7.5 million, flat against EUR 7.5 million in the same period last year. Moving to the balance sheet. As of June 30, 2026, Bragg had cash of EUR 3.3 million. Three items since quarter end are relevant to our capital structure. First, we completed the acquisition of Drayton International on July 22 for USD 9 million, satisfied entirely in shares. Second, all 751,445 subscription receipts issued at USD 1.73 converted into common shares and warrants on closing, releasing approximately EUR 1.1 million to the company. I would like to note that our Chief Operating Officer, two of our directors, Thomas Winter and Matt Davey, and myself subscribed in that private placement. Third, we renewed our revolving credit facility with Bank of Montreal for a further year on terms consistent with the existing arrangement. Turning to our outlook, as mentioned, we completed the acquisition of Drayton on July 22, 2026, and integration planning is underway. We previously disclosed fiscal 2026 revenue, adjusted EBITDA, and adjusted EBITDA margin guidance, which was prepared in respect of our company's operations on a standalone basis. With the integration of Drayton into our operations being at the planning stage, we don't have a reasonable basis on which to forecast the combined business for the remainder of the fiscal year. We are therefore withdrawing our previously disclosed 2026 guidance. Prior to the withdrawal and on a standalone basis excluding Drayton, we were tracking below the low end of our revenue guidance range and at the low end of our adjusted EBITDA range. However, we were tracking to the upper end of the implied adjusted EBITDA margin range provided. Our focus is on integrating and optimizing the combined business, including aligning the product and technology roadmap, realizing identified efficiencies, and establishing the go-forward operation model and cost base. And with that, I will pass it back to Matevž.
Thank you, Robbie. A few commercial highlights from the quarter. We signed a definitive agreement with 711, a leading Dutch and Belgian operator, to power its new Belgian online sportsbook, integrating Kambi's sportsbook supported with our Fuze engagement toolset. We supported Super Technologies' entry into the regulated Greek market through its Superbet brand with RGS and Hub aggregation. The successful launch of our content with bet365 in the U.K. signals our effective penetration into key markets. Additionally, when Alberta opened its regulated market, we launched on day 1 alongside an outstanding selection of leading operators, making more than 80 of our titles available to players throughout the province. Our strategic direction is unchanged. Proprietary games first, AI-driven model, fewer low-margin aggregation volumes, and a move from being a supplier of components to being the architect of the ecosystem our operators run on. Drayton advances that, and the point that matters most is reach. It takes us into Advanced Deposit Wagering. Traditional iGaming is live in 7 U.S. states. ADW is available in over 30. It also adds equity interests in 5 game development studios and 3 wholly owned technology and distribution platforms. On timing, integration work is underway across content and technology, and it remains at an early stage. Before we go to questions, I would like to announce a change to our board. Don Robertson has resigned from the board, effective today. I want to thank Don for his service and for his contribution to Bragg. Jordan Gnat will be joining the board in his place. Jordan brings over 30 years of expertise, serving as both an investor and an operator, over 20 of those in gaming and sports media. He's a co-founder and Managing Partner of Boardwalk Capital. Before that, he founded and led Playmaker Capital, the digital sports media business he sold to Better Collective in 2024. He has also held senior roles at FOX Bet, The Stars Group, and Scientific Games. Jordan also participated in our recent private placement, so he's a shareholder as well as a director. His background strengthens the board, and we're glad to have him. Robbie and I are now available to take any questions.
Questions and answers
Your first question comes from the line of Jordan Bender with Citizens JMP.
Robbie, maybe to start with you, just on the guidance that was withdrawn, you mentioned revenue and EBITDA maybe trending below where it previously was. Can you talk about the old business — where are you seeing that pressure? I guess we know Netherlands, there was previously going to be headwinds. I assume that was in the guidance, but where are you seeing some of the weakness outside of that? And then acknowledging you're not providing guidance looking forward, now that Drayton is part of the business, can you talk directionally about how the growth, either revenue or EBITDA, of that business currently stands as we think about the two businesses together? Thank you.
Sure. Thanks for the question, Jordan. On the first question, just to clarify, we're trending below the low end of the range for revenue, but we are trending within the range for EBITDA, at the low end of that range. So what we're seeing is more pressure on revenue. With our cost-cutting measures, we've been able to keep our EBITDA margin within what we had thought the business would be performing at. In terms of what is driving the top-line pressure, one thing to note is Brazil. When the market opened in Brazil, there were many suppliers who were not set up to supply the market, and we were able to be utilized as a vehicle for them to supply their content into the market. This has softened. A lot of these suppliers are now set up to go direct to operators rather than going through us. This is relatively low-margin revenue, so it's not having a profound impact on our bottom line, but these headwinds are decreasing what we're seeing in terms of growth in Brazil. We've also seen some regulatory changes in different European jurisdictions, one being Croatia, where we have a good customer and were foreseeing a strong year. It has performed year over year, and we're seeing good growth, but these regulatory changes have proven to be more impactful than previously thought. These regulatory changes relate to how customers are acquired and advertising restrictions. Those are two fairly sizable headwinds that are affecting us. We've also seen a slight decrease in activity from our Wild Streak studio. Historically, we've had a relationship where we've developed content on behalf of other providers or studios who did the distribution. That has softened slightly. I point to those three things as what changed between us hitting within the guidance range and being slightly below it.
Okay. And then any color on directionally how Drayton is growing?
Yes. We're really in early days to be putting any real color behind what we expect Drayton to do in the next six months and beyond. Integration work is happening now. We completed the acquisition in good pace, and we're now focused on making sure that we can utilize the assets, integrate them as best we can, and have a very strong combined company. I'm not going to provide specific details on where we think we'll be. A big reason we withdrew guidance is that we're not yet comfortable with a forecast for the combined business. One aspect of Drayton, which I think is a huge positive but will take time to get clear direction on, is that we have equity investments in five studios. Each studio is its own business with its own trajectory and outlook. We want to be very comfortable with each of those management teams, understand what will be at play in the next six months, and ensure we can utilize Bragg's assets to enhance those results and drive strong group results. We look forward to talking about it on future calls, but we're not putting anything out yet.
If I may just add, Jordan, Drayton will accelerate our growth through market access, margin expansion, and technology efficiency. Through its ADW technology and partnerships, it increases our addressable reach. Second, we added 100-plus proprietary game titles and five studios, which aligns with our strategy to shift revenue mix toward higher-margin in-house IP. Finally, tech assets like their AI module fit into our AI-first model and reduce our unit cost of content creation, which will affect our cost base.
Great. And let me just follow up on this whole conversation. You know, just following up on this pressure that implies a need for real change.
I can't hear you. I don't know if it's your mic. I can't.
Jordan is breaking up.
Why don't we go to the next and rejoin him in the queue.
Your next question comes from the line of Jack Vander Aarde with Maxim Group.
Congrats on the closing of the acquisition. Robbie, to follow up on the withdrawn revenue guidance — this excluded Drayton, but are there any new markets you entered or catalysts that happened after providing that guidance that didn't factor in? For example, you entered the Alberta market in mid-July. Any other developments that weren't included or that were factored in? Are these incremental to the prior withdrawn guidance, or is that something you don't want to comment on?
I'll comment on Alberta — that was always in our plans. That launch was a strategic milestone for us to hit. We didn't ascribe a lot of growth in that market because it's relatively new. We're quite excited about what iGaming and iCasino are doing in North America across many jurisdictions. We pointed out in our press release that our underlying U.S. business — the proprietary content we service in both the U.S. and Ontario and now Alberta — is growing at a very good rate, over 40% growth quarter to quarter, Q2 2026 to Q2 2025. We're seeing growth in the areas we invested in, but we're not necessarily jumping into new markets; we want to be strategic in territorial expansion. I wouldn't point to anything new that has come up, but what interests us most is what's happening in the iCasino market in the U.S. and Canada. The continual growth of that market is extremely impressive. As a reminder, the projection for that market is $97 billion at maturity in the U.S. It's only 12% regulated right now relative to the whole U.S. population, so there's much more upside. With the Drayton acquisition, we've strengthened our position to capitalize on that and are excited about the potential.
Okay, I appreciate the color there. A follow-up on go-forward gross margin and operating expenses on a quarterly basis — with Drayton adding incremental expenses and the July restructuring delivering material savings of approximately EUR 6 million incremental, EUR 10.5 million total expected annualized savings, you've reduced OpEx a lot in the first half. With all these puts and takes, how does the back half of this year compare to the back half of last year on a gross margin and OpEx basis?
I appreciate the question. I'm going to reserve detailed comment because we have withdrawn guidance and want to come back with a clear understanding of the combined business. Directionally, I think the trends we've seen are indicative of our current run rate for the legacy business. The gross margin for Q2 2026 had a couple of one-off items that brought it down slightly, but if you factor those out, we're at about a 55% gross margin, approximately 55.7%, which is in line with where we've been and slightly better than prior quarters. This shows that as we move to proprietary content, our margins improve. We did have a couple of one-offs that brought it down, but our investor deck illustrates the adjusted gross margin percentage that is more indicative of our run rate.
Your next question comes from the line of Mike Hickey with StoneX.
Just maybe a clarification. I'm a little perplexed at least on not giving guidance on the core business, Robbie, given that you just missed the quarter on revenue. You did provide some comments on trending for the legacy business, but I think you would have visibility on that. Anything incremental would be helpful. And can you talk about the complexities of Bragg and Drayton together that prevents giving guidance on the combined company?
Sure. Thanks, Mike. To clarify, we did provide comments on where we're trending on the standalone business for the rest of this year. Those comments indicate that standalone we're trending below the low end of the revenue range, but within the EBITDA range. From an EBITDA margin perspective, we're trending to the upper end of the implied range we provided when guidance was given. Regarding complexities, we effectively bought interests in five different studios, along with wholly owned infrastructure that Drayton holds. We need clear understanding of what we can do as a combined business when working with each of those studios and combining our assets with theirs. We moved on Drayton at a good pace, which was strategically important, but we want to be prudent with expectations and felt withdrawing guidance was the best course at the time. We're excited about possible synergies on cost and revenue, but want to ensure we have a clear, reasonable understanding before publishing expectations.
On your annualized cost savings to EUR 10.5 million, how much should we actually see in 2026 versus 2027? What needs to happen for Bragg to start generating positive free cash flow?
We've done the work and taken out the cost; we're not done optimizing yet. The savings are going to start kicking in in Q4 onwards. This quarter, for color, if you look at our gross compensation — excluding one-time severance fees and disregarding what's capitalized and what's not — our pure compensation number from Q2 this year to Q2 last year is down 14%. So we are seeing the savings, and there's more to come. We need to get through the one-time severance payments, which will come through in the next couple of months. Then into Q4 and 2027, the savings should be more evident in our numbers.
In the next two or three quarters, what are the biggest milestones we should look at that demonstrate the restructuring and Drayton acquisition are delivering the expected benefits?
Very good question. Our focus is on the integration of the Drayton assets, most importantly in North American markets. That's where we're focused and where we see the value in combining Drayton with our assets. That's where we believe the value is most important to keep growing the business. As mentioned, we saw good percentage growth, 44% Q2 to Q2 and even year to date. Sequentially quarter to quarter, we're seeing double-digit growth. Those are the milestones — continued growth in North America and successful integration of Drayton's assets into our platforms and content distribution.
We have reached the end of the Q&A session. I will now turn the call back to Matevž Mazij, CEO, for closing remarks.
Thank you again, everyone, for joining our call today. We entered the second half of 2026 leaner, sharper, and with a clear games-first focus. Thank you for your interest and your continued support.
This concludes today's call. Thank you for attending. You may now disconnect.