Bragg Gaming Group Inc

TSX:BRAG

Earnings Call Transcript 2023-Q1

[Operator]

Thank you for standing by. My name is [Indiscernible], and I will be your conference operator today. At this time, I would like to welcome everyone to the Bragg Gaming Group First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. [Operator Instructions].

I would now like to turn the call over to Chief Strategy Officer, Yaniv Spielberg. You may begin.

[Yaniv Spielberg, Chief Strategy Officer]

Thank you, operator. Good morning everyone, and thank you for joining our first quarter of 2023 earnings conference call. I’m Yaniv Spielberg, Chief Strategy Officer for Bragg Gaming Group. I’ll be hosting today’s call alongside my colleagues, Chief Executive Officer, Yaniv Sherman, who will comment on our first quarter's performance, and Ronen Kannor, our CFO, who will review and discuss our first quarter results.

If you have not already done so, you can follow our earnings call presentation from our website at investors.bragg.group in the section called Latest Presentations. On this call, we will review Bragg’s financial and operating results for the first quarter of 2023. Following our prepared remarks, we’ll open the conference call to a question-and-answer period.

I'll start the call with some brief cautionary remarks regarding certain statements that may be made on this call. Certain statements made on this conference call and our responses to various questions may constitute forward-looking information or future-oriented financial information within the meaning of applicable securities laws.

Statements about expected growth, prospective results, strategic outlook, and financial and operational expectations, opportunities and projections rely on a number of assumptions concerning future events, including market and economic conditions, business prospects or opportunities, future plans and strategies, technological developments and anticipated events, trends and regulatory changes that may affect the corporation and its subsidiaries and their respective customers and industries.

While we believe these assumptions to be reasonable, they are subject to a number of risks, uncertainties and other factors, many of which are outside the company’s control and which could cause the actual results, performance or achievements of the company to be materially different.

There can be no assurances that these assumptions or estimates are accurate or that any of these expectations will prove accurate. For a complete discussion of these factors, please refer to our recently filed press release and other publicly available disclosures.

With that behind us, I’d like to turn the call now to our CEO, Yaniv Sherman. Yaniv?

[Yaniv Sherman, Chief Executive Officer]

Thank you Yaniv. Good morning. I am Yaniv Sherman, Bragg CEO. And I'm very happy to welcome you all to our first quarter presentation. Our first quarter of the year had marked another successful step in our digital quest.

We continue to execute against our mission and strategic plan, complementing our award winning iGaming proposition. With a growing number of premium Bragg developed game titles offered to players around the world who are operating partners.

Our execution is driving persistent top line and cash flow growth. Consistent with our previously presented game plan, we continue to expand in new markets with new customers. So far, this year has been no exception, because we are excited to welcome new partners in Mexico, Belgium, Switzerland, Italy, Spain and the UK.

Our U.S. rollout is progressing well, and we've recently marked another key milestone with the launch of our newest tech stack and games launch in Pennsylvania; our fourth U.S. state to-date. I'll share more business and operational details shortly. But first, I'd like Ronen to elaborate about our recent financial key performance indicators. Ronen?

[Ronen Kannor, Chief Financial Officer]

Thank you, Yaniv and good morning, everyone. I'll begin my comments on slide six. As Yaniv indicated earlier, the first quarter of 2023 was another successful step in our digital journey.

We continue to execute against our mission and strategic plan and we can see that in our financial and operational results. In the first quarter total revenue were up by 18.1% year-over-year to €22.9 million.

The growth was mainly derived organically through our existing customer base launch in financial year 2021 and 2022, which performed better than expected on the content segment.

The new onboarded customers in various jurisdictions, in particular the Netherlands, with three new PAM customers turnkey solutions and content offering and the solid revenue performance from the Wild Streak Gaming studio, and Spin Games existing U.S. customers.

From an operational KPI perspective, total wagering generated by the games and content offered by the group during the quarter was up by 35.7% from the same period in the previous year, to €5.2 billion.

As you can see from the wagering chart on the right hand side, Bragg saw positive momentum since the effect of the inception of the German regulator restrictions on gameplay in the first quarter of 2021, which demonstrates our ability to transform and diversify our operations.

In addition, the total number of unique players using our games and content in the period, which is excluding Wild Streak and Spin went up by 42.8% from the same period in the previous year to 2.8 million unique players. The increase is associated with the significant improvements to our core content offering, including recent technical developments, giving us a powerful competitive advantage.

Gross profits for the quarter increased by 22% to €12.2 million with gross profit margins increasing by 170 basis points to 53.5%. The margin increase is a direct effect of a change in the composition of revenue derived from PAM, managed services and proprietary game studios, which have no cost of sale compared to third-party games and content which have associated third-party costs.

Adjusted EBITDA for the quarter was up by 28.1% to €3.9 million with adjusted EBITDA margin reaching 17%, an improvement of 130 basis points from the same period in the previous year.

The change in margin was mainly as a result of scale, a change in the product mix and higher profitability, that come with alongside with higher salaries costs as part of the group strategy to expand the software development and product portfolio, all with the focus to margin control.

Operating profits for the quarter amounted to €0.5 million, an improvement of €0.6 million from the previous year, operating loss of 0.1 million, and as a result of improved underlying performance and more efficient cost control.

We are pleased that since the start of the second quarter, we have seen a strong trading in line with our expectations. As a result, we are reiterating our 2023 guidance of revenue in the range of €93 million to €97 million with the midpoint of €95 million implying 12% growth from 2022 levels, and adjusted EBITDA of €14.5 million to €16.5 million with a midpoint of €15.5 million implying 28% growth and adjusted EBITDA from 2022 levels.

As you can see on slide seven, the gross profit margins and growing trajectories in the third quarter of 2021 due to the shift in Bragg's product mix. We continue to execute against our mission and strategic plan. We're scaling up our business in line with both our revenue growth and the continued movement in product mix, as indicated in the right hand side of the slide.

Product mix has changed noticeably since last year third quarter, while the revenue scaling, it is also training towards proprietary content, PAM and turnkey solutions by leading to improvement in gross profit margins and overall profitability.

Gross profits increased by 22% to €12.2 million in the first quarter of 2023 with margin improving by 170 basis points to 53.5%. The first quarter of 2023 revenue performance was driven mainly from the content, which is aggregated third-party, exclusive content and proprietary content, while PAM and turnkey solution was slightly lower proportion.

In the first quarter of 2023 the total games and content revenue segments amounted to €17.6 million and represented 76.8% of total revenue, compared to €13.9 million and 71.6% last year.

Proprietary content deployment is positively progressing both in the U.S. and EU markets by increasing both distribution in game performance. And as the Yaniv indicated, we have recently marked another key milestone with the launch of the newest tech stack launch in Pennsylvania, our fourth U.S. states to-date.

As we indicated in the previous quarters, we are targeting gross profit margin improvement to reach 60% with full years of 2024 mainly by increasing the proportion of revenue which comes from proprietary content, PAM and turnkey solutions.

Moving to slide eight. Adjusted EBITDA amounted to €3.9 million against an operating profit of €0.5 million. The gap was driven by the following non-cash and exception items,

Depreciation and amortization, the increase of intangible amortization, part of the Wild Streak and Spin acquisition in June 2021 and June 2022 respectively, and increase with capitalized software development cost, share-based payment and reduction in the charge for awards granted to senior management during the period composed of the DSUs and RSUs and share options.

Exceptional cost, costs mainly associated with the discontinued contractor relationship of several employees. And gain of remeasurement of the Fed consideration, this is cost mainly associated with the acquisition of Spin in June 2022 on the total outstanding deferred liability.

As you'll see on slide nine, we ended the quarter with a cash balance of €15.1 million, compared to €11.3 million as of December 31, 2022 with outstanding liability of $8.5 million in convertible debt.

As of May 2023, the total outstanding liability is $7.5 million after several conversions and a cash repayments of $0.5 million in April 2023. Our net working capital at the end of March 2023 is approximately €7.7 million excluding deferred consideration. This is compared to €6.6 million at the beginning of the year.

From a cash flow perspective a total of €6.4 million generated from the operating activities with underlying performance reaching to €3.4 million and the movement in working capital and income taxes of €3 million. A total of €1.9 million investment in intangible assets related to the capitalization of software development costs in the period.

Looking forward management are projecting a positive free cash flow from operations where there is no CapEx or technology debt required in the business. In addition, management is confident that there are no immediate refinancing of further debt requirements needs for business.

And with that, I will turn the call back to Yaniv.

[Yaniv Sherman, Chief Executive Officer]

Thanks Ronen. I wanted to use this opportunity and spend a few minutes talking about the general state of the markets. In the big picture, 2022 was one of the most volatile and challenging years in recent memory from a macro and financial perspectives.

In 2023, at least to-date while some markets and sectors seem to be turning a corner, it remains to be seen whether we are at the end of this cycle. High interest rates and general uncertainty means companies must operate prudently with a clear focus on their business's fundamentals.

Specifically in our sector the global growth of online gaming continues with digital surpassing physical gaming in many territories. However, increased regulation, as we've recently seen with the publication of the white paper in the UK and different restrictions in Holland, and Italy, just to name a few requires a different playbook one where we need to be nimble.

I'm pleased that we have established a foundation of Bragg with this exact state of mind and we are better positioned than ever to compete in a marketplace of regulated gaming. Diversification, prudence and capital deployment and operational excellence are no longer the proverbial extra mustard. There are preconditions for navigating in these stormy waters and to continue to grow as we have, and expect to continue doing so in the near and long-term.

Moving to slide 12, we've been busy ramping up our Bragg studios and powered by Bragg outputs, and we're starting to see the results. As I've stated in the past, building Bragg into a must have game provider is a marathon.

We're already considered a partner of choice for turnkey and game aggregation offerings, but at scale game production requires building and honing additional capabilities such as game design, creative and math development, just to name a few.

I'm very pleased about the progress we've made in a relatively short amount of time. This is an incredibly competitive and exciting landscape, and we aim to create a healthy balance between quality and quantity.

Bragg studios are now working under the guidance of our new Las Vegas Content Hub added by industry leading talents. We expect our production and rollout cadence to increase through 2023 as we continue to develop market specific titles, with additional features and functions built into our tech stack.

In slide 13, we can see the manifestation of the growing number of exclusive and proprietary titles in our partner network through their share in gross profit. The continued expansion of our share of wallet and gross gaming revenues across different markets underpins the business rationale behind this effort and gets us closer to our long-term margin and profitability targets.

Moving on to the next slide, game production is built on a robust product and technology based, developed by our amazing Braggers across Europe and India. We continue to show growth on our turnkey vertical and our ability to partner with proven operating partners in power their digital growth in regulated markets makes Bragg more than a one trick pony.

Diversification and scale are two critical aspects we continue to drive towards their fundamental components in our resilience and something Bragg's management are extremely focused on.

And in my last slide, just to cap things off. We're marking another strong revenue and adjusted EBITDA quarter. Game production is firing on all cylinders, complementing our expansion with new and existing partners across several key markets including the U.S. and Western Europe. We remain focused on long-term value creation, credibly exciting and dynamic sector powered by our amazing team members around the world.

Thanks again for joining and listening in. We're happy to take your questions now.

[Operator]

[Operator Instructions]. Our first question comes from the line of Gianluca Tucci with Haywood Securities. Your line is open.

[Gianluca Tucci, Haywood Securities]

Good morning, guys. Congrats on a nice quarter. Could you provide an updated rollout timeline for the U.S., the company just underpinned Pennsylvania. So just wondering what your near-term expectations are for the U.S. market?

[Yaniv Sherman, Chief Executive Officer]

Hi, Gianluca. Good morning. Yes, we've just launched our newest tech stack in Pennsylvania. Just to clarify, we are live in all four states with through the Spin and in Ontario through the Spin acquisition and the legacy tech stack and games, relaunch is specifically introducing our latest Bragg RGS into those states of Pennsylvania marking the fourth one. So, we essentially are now, we have our new foot in every state that we were looking to do so. And now we are basically ramping up in both additional operators and additional games with each other.

The game plan right now is to have a few more operators live this quarter and next in Pennsylvania, as well as in New Jersey and Michigan. And we're working down that list. But the idea is to have at least the first and second set of Bragg developed games in each one of these states with the top five to eight operators by year's end. And we're working towards that, and we're making good progress. But that is the idea. We are modernizing and including new content as we roll forward.

[Gianluca Tucci, Haywood Securities]

That's great color. Thanks, Yaniv. And on your cash flow generation, impressive in the quarter there. How do you plan to kind of deploy the excess cash flow that you guys internally are generating now? Are there any M&A opportunities out there or perhaps buying back stock at these depressed valuations? If you can comment on that?

[Yaniv Sherman, Chief Executive Officer]

Yes. Good question. Right now. And then we're happy to make progress there. Naturally this is sort of the base or the foundation, everything that we do at this point. We have -- we're quite proactive in mapping out the options, what's the best value creation opportunities in terms of redeploying that cash right now, it is deploying it back into the business to make sure we further accelerate and bolster our content and tech development capabilities, as well as sales and account management. So basically redeploying the business so far. And in the near-term, I believe that will bring the best return on investment. Looking into the second half of the year into next, naturally, there are some interesting acquisition opportunities out there mainly around content that we're constantly evaluating.

But I'd like to personally see the business sort of consistently generate cash at this cadence. And then we can address both potential buybacks refinancing or M&A further downfield, but want to make sure that this is consistent and that we deliver against our expectations.

[Gianluca Tucci, Haywood Securities]

Perfect. Thanks, Yaniv. And just lastly, in terms of seasonality, how should we be thinking about that for the balance of the year given that the company is in an onboarding phase right now? So does that mean that traditional seasonality is to be thrown out the window for this year?

[Yaniv Sherman, Chief Executive Officer]

Well, we do live on the shoulders or at the stream of our partners. So activity is always a function of the B2C operators performance. This year, I think that we can expect more seasonality. As we remember last year was 2021 and 2022 are sort of odd years, because of the post COVID effect, and then the World Cup into fourth quarter. This year, I think we can expect a bit more seasonality, especially around travel season changes in activity performance, but I hope to be able to sort of curtail that with more content deployment that may compensate, but I think it will be a more traditional year with no major global sports events on the calendar.

[Gianluca Tucci, Haywood Securities]

Okay, thanks, Yaniv, and congrats on the quarter guys.

[Yaniv Sherman, Chief Executive Officer]

Thanks Gianluca.

[Operator]

And the next question comes from the line of Matthew Lee with Canaccord Genuity. Your line is open.

[Unidentified Analyst]

Hi guys, this is Betty Young [ph] for Matt Lee. Congrats on a good quarter. So my first question is that, yes, you had a great quarter with 18% revenue growth, which looks like it's driven by resegment of the business. But your unchanged guidance sort of suggests is sold out throughout the year. Can you talk to where it's impacting on that front? Or what could cause revenue growth to stall a little bit throughout the year?

[Yaniv Sherman, Chief Executive Officer]

Thanks Betty. I think that again, when we provide guidance, sort of two trenches, like the last year into this one, we felt that was reflected sufficient growth. We did take into account that a big portion, at least in the first half of the year, would be dedicated to distribution and deployment. We're happy to see the other segments of the business and the diversity is performing well and helping us exceed those expectations. At this point I wanted to began, because of some seasonality and relatively short amount of time since we reported last, we wanted to get a bit more runway under our feet for this year before we revisited guidance, especially between now and summer to see how the business performs, but the trend is very encouraging.

[Unidentified Analyst]

Awesome. Thanks for the additional color. And then, margin looks very strong this quarter. Is that entirely due to the shift to proprietary [ph] or are there other factors driving that probability gain?

[Yaniv Sherman, Chief Executive Officer]

Actually from a proprietary perspective, the proprietary segment, because we're focused on deployment, technical deployment, mostly in game development through the first and second quarter has grown, but the other segments are growing even faster. So on margin perspective, it's a combination of propriety, but also some cost control measures that we started to implement with regards to our commitment to shareholders that margin will continue to expand. So we want to make sure that progress is consistent. So this is on both ends of the spectrum, both the revenue mixture, is trending in the right direction and also margin protection or cost control is also starting to be deal with science [ph] and we're continuing to focus on that to be as cost efficient as possible without naturally jeopardizing growth.

[Unidentified Analyst]

Awesome. And then last question is on Mexico. What are you expecting in terms of contribution from Mexico? And which appears to be massive potential market for you?

[Yaniv Sherman, Chief Executive Officer]

I just make sure I understand the question here correctly. Mexico contribution expected from Mexico?

[Unidentified Analyst]

Yes.

[Yaniv Sherman, Chief Executive Officer]

I think Mexico will be an interesting additive, contribution firm for our overall business. I think the market has grown consistently. So, we're definitely we've launched with the market leader and we're looking to launch with additional operators. I think it will be definitely additive. And from the Latin American markets, right now, Mexico is by far the biggest regulated market. So I think it will definitely be additive. I don't think it will be take over or become bigger than the U.S. states or any of our major European countries. But this is a good example of small and we're working on a very low base in Mexico. So I think anything we will be able to generate with our content and operators, there will be additive, both to revenues and contribution there. So we're very excited about the prospect there. And its also an very effective gateway to Latin America regulated gaming with the larger economies. They're poised for regulation hopefully in the near term. So again, both on a P&L and strategic aspects, Mexico has been an important deployment for me.

[Unidentified Analyst]

Awesome. That's very helpful. Thanks. I'll pass the line.

[Yaniv Sherman, Chief Executive Officer]

Thanks Betty.

[Operator]

And our next question comes from the line of Edward Engel with Roth MKM. Your line is open.

[Edward Engel, Roth MKM]

Hi. Thanks for taking my question. I've seen the presentation. It looks like you're targeting 15 game launches by Bragg Studio in the first half of 2023. And then, in the press release, you talked about ramping that further in the second half. I know quality over quantity, but like any idea of how many titles you're hoping to launch in the second half of the year, and I guess, to that point, I guess, what's kind of the target number of proprietary titles you would like hope to lodge on a kind of normalized basis?

[Yaniv Sherman, Chief Executive Officer]

Hi, good morning. So, broadly speaking, and again, this is -- don't want go into many details, but the way we count title on a unique basis and then titled based on territory, mostly because in some cases, the title, we are adjusting them per market almost. But for unique titles, we're looking at total numbers of the year around 50 to 55 titles. We're comfortable with that pace with an even balance between proprietary and exclusive. We're making good progress at this point. So we're pretty comfortable being able to produce that amount of titles. Having said that, the balance between proprietary and inclusive may change during the course of the year because when exclusives are concerned, we're also dependent on our partners working with us on specific games and titles. But we've been very focused on ramping up the development, the production and development capabilities out of Las Vegas, India and Europe. And right now, I think that the machine is in a much better shape to meet those numbers, and hopefully exceed them. We understand the balance between quantity and quality. We need to get to critical mass with all of our operating partners.

[Edward Engel, Roth MKM]

Got it. That's helpful. And then, you talked about or you announced a bunch of interesting I guess content deals throughout I guess this year so far in a couple different markets. Just curious, I guess to what studios have you kind of found are a bit, have more traction with some of that international markets? Is Wild Streak still working kind of a project [ph], but more so -- most of that content coming from your studios in Europe?

[Yaniv Sherman, Chief Executive Officer]

No. I mean, Wild Streak, and as far as we are bringing Wild Streak its comes far better then in Indigo Magic. Indigo Magic was build and ramping up in Europe as a European focus content production. Well, Atomic Slot Lab is North American focus. And those two -- that doesn't want to talk about bolstering up is making sure that each one of these studios has enough resources to self sustain and produce its own content. Having said that, we've already seen some very interesting cross pollination between the two using each other's titles, adjusting math, developing different themes with derivatives. So it's definitely been cross section.

But generally speaking content specifically developed for the U.S. or North America does better there than in Europe and vice versa. But some titles, I mean, we recently launched one of our partners Bluberi Devils Lock in the title that is a very well known game in the US. It's been doing well in Europe. It was launched in New York first. It's now being rolled out in the U.S. So that's a good example of a title that enjoys headline awareness, but also very good game production and performance. And we hope to get more of those out the door from both ends on both sides of the Atlantic.

[Edward Engel, Roth MKM]

Helpful. Thank you.

[Yaniv Sherman, Chief Executive Officer]

Thanks Ed.

[Operator]

And the next question comes from the line of Jack Vander Aarde with Maxim Group. Your line is open.

[Jack Vander Aarde, Maxim Group]

Okay, great. Good morning, guys. Nice. quarter. Thanks for the update. I think its a question on the PAM side of the business. Can you just provide an update on recent PAM customer growth? I think I heard something about three new PAM customers added in the prepared remarks. Can you just talk about where other markets are adding new PAM customers and then just for the outlook of the year, how you expect that to ramp? Thanks.

[Yaniv Sherman, Chief Executive Officer]

Sure. Thanks. PAM has been naturally an important vertical in the business. We've added new PAM customers in Europe, Central Europe, mostly around Holland and additional territory. We are now looking at expanding that into additional markets. I'm saying we're considering each one very carefully, because from a new market perspective, as we all know, PAM requires a different setup and deployment. So we're very selective in our approach. That has been -- having said that, as you can see from the numbers, PAM has been a very effective, both from a revenue, but also from a content delivery perspective.

So that has been an important pillar of the business, helping us sort of underpin growth for the other areas of the business. But as we stated in the past, the overall strategy is contents lead. So we are looking to deploy our PAM into additional European with existing markets. We've launched it in Holland and Czech Republic last to market that we've deployed it and we're looking to expand in those. And also new territories is gearing rapidly starting the second half of the year. But then again, we'll be on a more selective basis with strategic partners to allow us to put enough focus behind them because of the PAM and turnkey in general requires a different set of resources and focus for the business. So we are very much focused on allowing our partners the best tools to succeed.

[Jack Vander Aarde, Maxim Group]

Okay, great. And then just one follow up separately. I think you've touched on the German market, briefly in the prepared remarks. Can you just provide an update there. I didn't quite catch that. And just remind us again, if it's a de minimis contributor to your current guidance for the year and if there's upside to that number from the German market? Thanks.

[Yaniv Sherman, Chief Executive Officer]

Sure. I mean, that's a fair analysis of where we are. I mean, it is a de minimis contribution, and it's pure upside. Having said that, I think we've been following the market carefully. There's a new regulating body is now looking to deploy or to issue more licenses in the marketplace. And we see more operators, local operators applying for those. Having said that, I think one of the major challenges right now for operators in the market is still the tax structure and the contribution that it brings with a turnover tax and additional restrictions. Both the casino and sports that makes it very challenging with the current state of affairs to operate a profitable business in the marketplace.

So that -- I think that once this is revisited both from lender or state, and then the federal perspective, I think we'll see much better chances and seeing tangible and consistent growth there. We are keeping our product up to speed. The content suite that we offer, still, I think is second to none in terms of its central European and German compatibility. We want to make sure that we don't drop the ball on that. And when growth is more material, we'll be able to monetize that. But right now, for regulated perspective, we haven't seen the inflection point. Hopefully we will see it later this year and next. But I have little visibility at this point about the operators ability to change the current circumstances. But I know they're very much focused on it. So, this is a moving target, and we're very much involved.

[Jack Vander Aarde, Maxim Group]

Okay, great. Again, nice quarter. Thanks for the update.

[Yaniv Sherman, Chief Executive Officer]

Thanks Jack.

[Operator]

And the next question comes from the line of David McFadgen with Cormark. Your line is open.

[David McFadgen, Cormark]

Hi, guys. Just a couple of questions. Anything you can give us an update on how the new games have performed. I'll imagine there's probably one or two that have performed a lot better than the other one. But could you just kind of give us an update and maybe call out what those games are? And then secondly, on the intangible assets spend as shown in the cash flow statement into the investing section, I was wondering if you could give us your outlook on how much you think you'd be spending this year? Thanks.

[Yaniv Sherman, Chief Executive Officer]

Sure, I'll take the first one. And then let Ronen answer the second one. In terms of the game performance, as we've seen, we've been very focused on game development and deployment and the games that we have deployed last year -- late last year, this year, we've seen a couple of outstanding performers mostly in the U.S. market pertains to Michigan, which a couple of the new games have performed well. I don't want to get too specific, because we haven't provided that breakdown. But the title of Michigan has performed well over time.

In Europe, few of the newer titles that we deployed in both the UK and Holland, talking about both Atomic Slot Lab and Indigo Magic Games have shown some very good initial results. And again, we're measuring those over time. So one of the key parameters outside of initial performance both on wagers and rounds play is also how fast they churn. Because we know games in general can be quickly, the games have been holding up quite nicely. So far, so we're very encouraged by not all games performed that way naturally of all the games that we've deployed. But generally speaking, we see more hits than misses at this point. And we are looking now. We're very focused on further distributing. So we can get these games and the new ones effectively distributed.

Our goal, as we've outlined in the past is to have a constant predictable cadence of games that will go to the widest possible network at any given moment. And we still have some work to do to make that happen. Right now, the deployment is still a bit staggered. And that's where the financial effect is not as dramatic as we want it to be. But that is one of our major focus points for the remainder of the year to get the games out faster, and more streamlined. That's on the performance and deployment. And I'll let Ronen to take the second question.

[Ronen Kannor, Chief Financial Officer]

Hi David, good morning. So, we always indicated that investment, especially on the cash flow side is predominantly software development costs. As we know, we are capitalizing the cost of our desk [ph] team, especially on areas which are revenue enhancing a new product, new games especially, the design now goes from new games and new design of games, which is very, very I would say, revenue enhancing. And it's very few that to just give an information about that. In this quarter, it was €1.9 million and we're targeting over the year between 9 to 10. It's also developed to how many developers we have. What type of project we're working. But that's our roughly estimation as part of the year end guidance. On top of that, we just need to remember there's also certification of games, which as Yaniv mentioned, we have 55 different games to launch over the year. So we're talking about certification cost in which jurisdiction, location have different certification cost, which also would capitalizing it. And we also registered our IPs as our trademarks. So roughly that is what I think is the best way or the best way to estimate where we're going to be in by the end of the year.

[David McFadgen, Cormark]

Okay. All right. Thanks a lot guys.

[Ronen Kannor, Chief Financial Officer]

Thanks.

[Operator]

And I will now turn the call back over to Yaniv Sherman.

[Yaniv Sherman, Chief Executive Officer]

Thanks, operator, and thank you all for attending first quarter presentation and questions. Encourage everyone to further review the materials on our investor website. And looking forward to seeing you over the upcoming yearly call for 2023. Thank you and have a great day.

[Operator]

This concludes today's conference call. You may now disconnect.