Inspired completes financial restatement & reports Q3 growth

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Inspired Entertainment has completed its financial restatement process, reporting revenue growth in the third quarter of 2023 thanks to interactive and low margin gaming hardware sales.

The company’s Q3 results were supposed to be published last year, but the group asked for a publication extension to review its financials following an audit from KPMG that identified accounting errors with US GAAP within the results.

However, with the publication of its financials, Inspired has completed its restatement to the Nasdaq Stock Market, with Executive Chair Lorne Weil noting that “all amended filings are complete”.

In addition, Weil stated that Inspired’s digital performance – virtual sports and interactive – in Q3 reinforces its strategic focus shift to higher margin, scalable digital business and premium content creation investment.

Inspired publishes Q3 results

Publishing its financials, Inspired declared a Q3 revenue of $97.5m, up 31 per cent year-over-year (Q3 2022: $74.2m) thanks to the aforementioned gains in interactive and low margin gaming hardware sales.

Net income for the quarter fell by 63 per cent YoY to $3.4m (Q3 2022: $9.2m, while adjusted EBITDA stood at $26.7m, down two per cent YoY (Q3 2022: $27.3m), with a margin of 27 per cent (Q3 2022: 37 per cent).

Weil claimed that Q3 adjusted EBITDA was impacted by “the timing of several one-time sales moving into the fourth quarter. Excluding one-time product sales, adjusted EBITDA grew four per cent YoY”.

Inspired’s cash at the end of the period, as of September 30, 2023, was $26.4m (Q3 2022: $37.4m).

The Executive Chair commented: “We have completed the financial restatement process and as of today, all amended filings are complete. 

“For the first half of 2023, the net impact to Adjusted EBITDA from the restatement was effectively zero, with a $1m decrease in previously reported results in Q1 offset by a $1m increase in Q2. 

“The impact to our adjusted EBITDA for the full year 2022, was a decrease of $0.6m, from $99.6m to $99m, or less than one per cent. Adjusted EBITDA margin for the third quarter was 27 per cent, but excluding low margin gaming hardware sales, the margin was 36 per cent, compared to 37 per cent in the prior year quarter.”

Interactive sees significant gains

Per segment, Inspired’s gaming (excluding low margin gaming hardware sales) and virtual sports both declined by seven per cent YoY to $22.4m (Q3 2022: $24m) and $13.4m (Q3 2022: $14.4m), respectively.

Weil noted that declines in virtual sports were due to “a major customer’s optimising of their customer base, with a partial offset due to increased retail revenue”.

However, the company believes it is “heading into another strong growth phase” thanks to partnerships with the NFL and NBA, alongside growth opportunities in North America and Latin America.

Across all segments, Interactive saw the most growth compared to the previous year, rising by 38 per cent YoY to $7.3m (Q3 2022: $5.3m), which is also a quarterly record for the company.

Weil remarked that Interactive continues to benefit from “an increased footprint through new customer launches, the consistent deployment of new content and increased promotional activity through exclusive deals with tier-one customers as well as revenue growth from existing customers”. 

During the quarter, Inspired also launched its Hybrid Dealer RNG-generated table and gameshow igaming product with BetMGM.

“With all of this recent progress, we are more convinced than ever that we are in the early stages of an expanding global opportunity with our digital business that will continue to exhibit a high margin and low capital intensity profile,” stated the Executive Chair.

Inspired’s leisure revenue rose by four per cent YoY during Q3 to $31.7m (Q3 2022: $30.5m), while low margin gaming hardware sales amounted to $22.7m following the deployment of its Vantage cabinet with two of its largest licensed betting shop customers.

Weil continued: “We continue to see approximately 11 per cent YoY revenue per machine increases with these new terminal deployments. In our pubs business, we’ve deployed ‘Vantage’ across approximately 20 per cent of our customer estate and have experienced approximately 20 per cent YoY growth in revenue per machine. 

“This gives us confidence that we are seeing a reacceleration across our land-based businesses.”

2024 outlook

Looking ahead, Inspired expects Q4 revenue and adjusted EBITDA “to be in line with current consensus estimates”, with Weil adding that Q4 adjusted EBITDA “would have been nearly $2m higher” if not for a ransomware attack on its IT systems impacting results.

The Executive Chair concluded: “Fundamentally, our business remains very strong, which was reflected in our repurchase of $1.5m of our stock during the third quarter. 

“We are optimistic about the compelling digital growth dynamics of the business, as a wider audience engages with online betting and gaming while new jurisdictions continue to launch. 

“Combined with a resilient land-based business, our diversification and expansion ability reinforce our omni-channel strategy combining our high-margin, capital-efficient digital businesses with our steady land-based businesses.”