Inspired enters 2023 with ‘confidence’ thanks to business model

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Inspired Entertainment has reported revenue growth across most of its segments in the fourth quarter and across the full year in its latest financial results.

Executive Chair Lorne Weil stated the results are a reflection of Inspired’s continued execution of its strategy, resulting in a “record year” where “double-digit, year-over-year top and bottom-line growth” was achieved.

Weil added that the company is entering 2023 with “confidence” thanks to the “stability and resiliency” of its business model.

Inspired Q4 revenue growth

Publishing its results, Inspired declared a Q4 revenue of $78.6m, a 17 per cent increase YoY (2021: $67m), reflecting “the continued growth in the digital business and stability in the gaming and leisure segments, aided by strong gaming machines sales”.

Per segment, in Q4, gaming revenue improved by 42 per cent YoY to $38m (2021: $26.8m) following a strong UK betting shop performance, non-betting shop UK gaming machine instals and a Dominican Republic lottery systems contract.

Virtual sports achieved its “sixth record-setting revenue quarter”, growing by 36 per cent to $14.9m (2021: $11m) after online virtuals improved by 83 per cent YoY following “growth from existing customers with new channels, geographies and content”.

Interactive improved by 9 per cent to $6.3m (2021: $5.7m) with growth in the US and Canada, and leisure fell by 17 per cent to $19.4m (2021: $23.5m) as the number of operated pieces was reduced.

Operating income for the quarter rose by 93 per cent to $12.4m (2021: $6.4m), net income improved to $3.1m (2021: $1.2m loss), while adjusted EBITDA increased by 17 per cent to $25.6m (2021: $22m) with a margin of 33 per cent.

Weil stated: “Results reflect the continued execution of our strategy. Our fourth quarter results ended a record year for Inspired, in which we achieved double-digit, year-over-year top and bottom-line growth and reached a record annual revenue and a milestone $100m in adjusted EBITDA, even in the face of significant adverse currency movements. 

“Our results are evidence of our ability to drive high double-digit growth in our high-margin, capital-efficient digital businesses, while managing our land-based businesses for modest growth, decreased capital intensity and growing cash flow.”

Gains across all segments in 2022

For the full year, Inspired’s revenue rose by 37 per cent to $285.4m (2021: $208.9m). All business segments saw gains, but the biggest growth occurred in virtual sports, which improved by 53 per cent YoY to $55.1m (2021: $36m).

Elsewhere, gaming revenue rose by 37 per cent to $111.7m (2021: $81.4m), leisure grew by 39 per cent to $95.5m (2021: $68.7m), and interactive made a slight 1 per cent gain to $23.1m (2021: $22.8m).

Operating income for the year ended at $48.9m (2021: $600,000 loss), net income concluded at $22.3m (2021: $36.7m loss), while adjusted EBITDA finished at $99.6m, a 56 per cent improvement YoY (2021: $64m) with a margin of 35 per cent. 

Stewart Baker, EVP and CFO, commented: “We are pleased with our fourth quarter results and thrilled to reach $100m in annual adjusted EBITDA, despite the currency impacts in the year.

“Our underlying business remains strong and produces substantial free cash flow. Related to our cash flow, during the fourth quarter there was a large working capital outflow, particularly in accounts receivable and inventory. We expect this change to reverse during 2023. 

“It is a testimony to the strong financial position that we can invest heavily in temporary working capital increases to significantly reduce the risk of supply chain challenges. We continue to focus on improving efficiencies in our business and are confident in our strategy and our ability to deliver consistent results in the current economic environment to enhance shareholder value.”

Confidence entering 2023

Weil noted that as Inspired looks ahead to 2023 and beyond, it is confident in its long-term outlook thanks to the “stability and resiliency” of its business model which allows them to focus on future growth.

The Executive Chair noted: “As we look ahead to 2023 and beyond, the stability and resiliency of our business model allows us to focus on significant growth opportunities in the future, which we intend to capture by using our best-in-class differentiated content to grow our presence in core markets, expand into new markets and extend into additional verticals.  

“The underlying momentum that has been building throughout 2022 and the strong demand that exists for our products across each of our business lines further supports our confidence in the long-term outlook for the company.”