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Inspired Reports First Quarter 2020 Results

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  • First Quarter Revenue Increased 55.4% Year-Over-Year, to $52.3 Million, Despite Disruption from the Ongoing COVID-19 Global Pandemic That Has Impacted the Company’s Land-Based Business
  • First Quarter Adjusted EBITDA1 of $10.1 Million Declined Year-Over-Year Primarily Due to the Abrupt Nature of the Customer Closures Related to COVID-19 and the Delay in Realizing Effects from Associated Expense Reductions
  • 161 Valor Terminals Sold in North America During the First Quarter
  • Strong Demand in Interactive Business with April Recurring Revenues from Interactive Increasing 30% and 100% over March and February, Respectively
  • Virtuals in Greek Retail Shops Re-Launched May 11th

Inspired Entertainment, Inc. today reported financial results for the first quarter ended March 31, 2020.

Financial results comparison for the first quarter 2020 versus first quarter 2019 on a reported basis:2

Total Revenue increased to $52.3 million, from $33.7 million during the first quarter of 2019, primarily driven by $27.4 million in revenue from the recently acquired Novomatic Gaming Technology Group (“Acquired Businesses”).  However, this increase was significantly offset by the lag in sales and temporary suspension of the Company’s land-based business due to the ongoing COVID-19 global pandemic (“COVID-19 Closures”) and the decrease in revenue in the UK Licensed Betting Office (“LBO”) market primarily caused by the reduction in maximum B2 stakes to £2 implemented on April 1, 2019 (the “Triennial Implementation”).

Adjusted EBITDA1 decreased to $10.1 million, from $13.7 million during the first quarter of 2019. First quarter 2020 results included $2.8 million from the Acquired Businesses (in its seasonally weakest quarter as leisure parks are closed in the winter months throughout the UK estate).  The impact of the COVID-19 global pandemic was greater on Adjusted EBITDA than it was on Revenue due to the abrupt nature of the closures, which caused the Company to incur significant costs which had no associated revenues.

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“The year got off to a strong start, building on the momentum from outstanding organic growth, increased profitability across our businesses and better-than-expected initial results from our transformative acquisition which we realized in the fourth quarter of 2019,” said Lorne Weil, Executive Chairman of Inspired.  “However, the COVID-19 global pandemic resulted in the temporary closure of the land-based retail businesses of our customers with continuation of many of the associated expenses, which had a material negative impact on our first quarter results.”

Summary of Consolidated First Quarter 2020 Financial Results
(unaudited)

Functional

Quarter Ended

Currency

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Currency

March 31

Change

Movement

Growth

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2020

2019

(%)

2020

(%)

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(In $ millions, except per share figures)

GAAP Measures:

Revenue

$     52.3

$     33.7

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55.4%

$      (0.8)

57.8%

Net operating (loss) income

$      (7.2)

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$      (0.7)

NM2

$       0.2

NM2

Net (loss)

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$    (17.4)

$      (5.0)

NM2

$       0.6

NM2

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Net (loss) per diluted share

$    (0.78)

$    (0.24)

NM2

Non-GAAP Financial Measures1:

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Adjusted EBITDA

$     10.1

$     13.7

(26.4)%

$       (0.2)

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(25.2)%

1Reconciliation to GAAP shown below.

2Percentage change is not meaningful.

Management Commentary Regarding COVID-19

The ongoing COVID-19 global pandemic has had an impact on our business with our different businesses and geographies affected to varying degrees.  Revenue from our land-based retail customers declined, ultimately to near zero, as their respective physical locations closed during the last two-thirds of March as follows, Italy on or about March 10thGreece on or about March 14th and the UK on or about March 20th.  Interactive revenues have performed well with April recurring revenues across our interactive channels increasing approximately 30% and 100% over March and February, respectively.

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Weil continued, “We are pleased that our interactive business has shown not only resilience, but also strength during these unprecedented times with sales from our interactive channels helping to compensate for declines in revenue from our land-based retail business.  Our Virtual Sports content has helped to provide content given the lack of live sports content that currently exists and has, in some cases, taken center stage, as witnessed by the successes of the high-profile ‘The Kentucky Derby: Triple Crown Showdown’ and ‘Virtual Grand National’.  These products have helped to drive demand for additional channels from existing customers and an influx of potential new customers.  We have a pipeline of customers ready to launch the new V-Play Plug & Play, our complete end-to-end online virtual sportsbook product that allows 14 channels of Virtuals with minimal integration effort.  We are encouraged by this strong momentum, particularly in North America, as we look to build upon these opportunities to drive results in the future.”

Management has taken an aggressive range of actions which lead us to believe we are well positioned to weather the impacts of COVID-19. The Company has implemented cost-saving measures across its workforce and delayed non-essential capital expenditures.  Additionally, management agreed to an indefinite delay in the payment of accrued executive bonuses payments for 2019.  In an elective decision to preserve cash and provide for additional flexibility, the Company agreed with its lenders to extend the grace period for the interest payment that was due April 1, 2020 to 75 days.  In addition, we have applied to access certain UK Government-sponsored lending programs, which have the stated goal of buffering the liquidity position of companies such as Inspired as these companies “reopen” their businesses in the future.

“During these unprecedented times, we are confident we have taken the necessary actions to reduce our expenditures and optimize our cash position,” said Stewart Baker, Executive Vice President and Chief Financial Officer of Inspired. “As of May 15, 2020, we had GBP£39.6 million, or $48.4 million3, in cash on the balance sheet and we were able to generate positive Adjusted EBITDA in April based upon our preliminary view of results for the month.  Given our efforts to preserve liquidity, we believe we will be able to manage through this crisis and create stockholder value by executing on our key strategic initiatives and increasing returns on investment through disciplined capital allocation.”

The Company is well prepared for our customers’ properties to reopen and the associated process of restarting their respective normalized operations.  We believe our geographically diversified portfolio of customers that focus on their respective generally locally-based end users will play an important role in our recovery.  We have started to see restrictions being lifted in certain jurisdictions in which we operate.  For example, on May 11, 2020, the Greek government reopened OPAP shops, with both live and virtual sports betting, and we have seen what we believe to be promising results to date.

“We have benefited from both our product diversity and the aggressive actions our management team has taken.  We will be prepared to relaunch land-based retail operations in each of our markets as soon as conditions permit. We are confident we will emerge from this crisis in a strong position and we remain excited about our long-term growth prospects, where we continue to see upside from North American penetration, accelerated UK Pub and Leisure digitization, additional customers coming onboard in Virtual Sports and Interactive, as well as the benefits of the integration of our recent acquisition,” concluded Weil.

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Recent Highlights (through May 15, 2020)

Server Based Gaming (“SBG”)

  • 161 Valor Terminals Sold in Illinois in the first quarter – Prior to the shutdown, in the venues where data has been supplied, Inspired had the top performing terminal on the key metric of “Funds In” across the Illinois route market and had sold 277 machines in total.

Virtual Sports

  • High-Profile Virtual Sports Events
    • “The Kentucky Derby: Triple Crown Showdown” – On May 2, 2020, 1.7 million viewers watched Inspired’s virtual Kentucky Derby featuring the 13 Triple Crown winners from the past century as part of Churchill Downs’ nationwide Kentucky Derby at Home Party featured on NBC.
    • Virtual Grand National – Inspired’s Virtual Grand National took center stage on national television when the Aintree Grand National was cancelled. With substantial media coverage and a primetime broadcast slot on April 4, 2020, 4.8 million viewers tuned in. Bookmakers united and raised £2.6 million for the National Health Services in the UK.
  • New Virtual Sports Contracts
    • Oregon Lottery –  After the end of the quarter, Inspired signed an agreement to provide the Oregon Lottery with Virtual Sports delivered via SBTech’s sportsbook platform and then subsequently migrating to Inspired’s V-Play Plug & Play interactive RGS solution.
    • DraftKings – After the end of the quarter, Inspired signed a contract to provide its new V-Play Plug & Play solution to DraftKing’s New Jersey customers.
    • FanDuel – Subsequent to the end of the quarter, the Company signed a multi-year contract with FanDuel to provide its Virtual Plug & Play to FanDuel customers in New Jersey.
    • BetMGM, Borgata and PartyPoker – In May 2020, Inspired signed a contract to provide its V-Play Plug & Play to the three New Jersey online brands associated with Roar Digital, GVC’s joint venture with MGM Resorts International.
    • Stoiximan – After the end of the first quarter, Inspired signed a contract to provide its full spectrum of RGS content, including slots, table games, Virtuals on demand and Virtual Plug & Play, to the largest Greek online operator. This creates an opportunity for Inspired in Greece, where its content is already popular as a leading provider of gaming machines and Virtuals.
    • Ladbrokes – On April 21st, Ladbrokes launched Inspired’s online Virtuals in Belgium, which is a strong retail Virtuals market.
  • New Virtual Sports Channels
    • Bet365 Launched New Channels – During the period, Bet365 launched with two streams of V-Play Basketball and an additional stream of V-Play Cricket, which have proven to be successful.
    • V-Play Soccer 3.0 – This Spring OPAP is set to launch V-Play Soccer 3.0, the latest addition to our most popular series of games and the first product to feature bets for individual goal scorers in the match.

Interactive (Results Included within Virtual Sports)

  • Launched Four New Customers – During the quarter, Inspired interactive content went live with 888, British Columbia Lottery Corporation, Resorts Casino New Jersey and Sky Vegas.
  • Expanded Portfolio of Interactive RGS Aggregators – In addition to previous contracts with Playtech and Scientific Games, Inspired has signed distribution deals with several aggregators to provide its interactive online slots, Virtuals and table games, including Microgaming, Relax Gaming, iForium and Pariplay (during the first quarter) and SBTech and GAN (subsequent to the end of the quarter).
  • New Game Launches – Stacked Fire 7’s, Chocolate Cashpots were launched during the quarter and contributed significantly to the strong performance in the quarter.
  • Collaboration with Gaming Realms to Launch Slingo Centurion to its distribution partners in February and it became their second-best game ever.

Acquired Businesses

  • Digital Conversions Tracking Positively Pre-COVID 19  Digital conversion increased to 68.2% of the Pub estate on March 31, 2020 from 66.2% on December 31, 2019.
  • Secured Contract Extension with Top Pub Supplier – Signed a long-term extension with top pub supplier in terms of volume.
  • Contract Renewal with Everards – Inspired to continue to supply 60% of the Everards estate.

Overview of First Quarter Results Versus Prior Year First Quarter

SBG Service Revenue declined by $7.5 million, or 35.8%, in the first quarter, of which approximately $4.4 million of the decline is estimated to have resulted from the Triennial Implementation and approximately $2.1 million is estimated to have resulted from COVID-19 Closures. The estimated impact of the decrease related to COVID-19 Closures by market was approximately $1.1 million in the UK, approximately $0.6 million in Greece, and approximately $0.3 million in Italy.  Additionally, revenue in Italy decreased by $0.9 million, primarily due to the introduction of player cards and increased taxes.  Revenue in Greece increased by $0.8 million as a result of the continued rollout of contracted VLTs.  UK LBO Customer Gross Win per unit per day declined approximately 32.3% year-over-year divided between the approximate 23.0% adverse impact from the Triennial Implementation and the approximate 9.3% adverse impact for COVID-19 Closures.

SBG Hardware Revenue increased by $0.5 million, or 16.4%, driven by our Valor cabinet sales in North America of $2.3 million.  This was partly offset by “Sabre Hydra” sales in the UK Electronic Table Games market of $1.7 million in the prior year quarter that did not recur.

Virtual Sports Revenue decreased by $1.0 million, or 10.1%, primarily driven by a $1.0 million decline in retail recurring revenue due to COVID-19 Closures.  A $0.5 million increase in recurring revenue from scheduled online Virtuals and a $0.4 million increase in recurring revenue from Interactive were mostly offset by a $0.7 million one-time adjustment for a payment of historically under-reported revenue share in the prior year.

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Acquired Businesses Service Revenue was $21.4 million in the first quarter, of which approximately $9.7 million was generated from Pub customers for gaming machines and other rental products.  The Company’s average installed base within the Pub business included 8,483 Category C gaming machines. Digital gaming machines accounted for 68.2% of the total Category C gaming machines as of March 31, 2020, which was an increase from 52.4% at the end of the comparable period in 2019, reflecting the continued conversion of Category C gaming machines from analog to digital in the UK Pub estate.

Leisure parks contributed approximately $1.9 million in revenue, which is typically its weakest quarter given leisure parks are generally closed in the winter months throughout the UK estate.  Revenue from Motorway Service Areas and Adult Gaming Centers was $5.8 million in the quarter and included 5,042 machines on a rental basis.  Software license fee revenue was $1.4 million in the quarter.

Acquired Businesses Hardware Revenue was $6.0 million and includes the sale of 930 machines as well as spare parts and repairs.

SG&A expenses increased by $14.4 million, or 97.5%, to $29.1 million. Incremental SG&A expenses from the Acquired Businesses amounted to $16.9 million, which was partially offset by a $2.0 million decrease in SG&A for the Legacy Inspired Business.

Adjusted EBITDA was $10.1 million, a year-over-year decrease of 26.4%.  The Acquired Businesses contributed $2.8 million in Adjusted EBITDA (in its seasonally weakest quarter, as leisure parks are closed in the winter months throughout the UK estate). The Legacy Inspired Business Adjusted EBITDA decreased $6.4 million which includes the negative impact of the COVID-19 Closures and the adverse results from the Triennial Implementation.

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Net Cash Provided by Operating Activities Less Cash from Investing Activities during the quarter decreased to an inflow of $0.1 million from an inflow of $3.1 million in the prior year period. This is primarily due to an increase in capital expenditures related to the Acquired Businesses, such funds used for the continuing digitization of the UK pub estate and to prepare for peak season for the leisure estate.

Non-GAAP Financial Measures

We use certain non-GAAP financial measures, including Adjusted EBITDA, to analyze our operating performance. We use these financial measures to manage our business on a day-to-day basis. We believe that these measures are also commonly used in our industry to measure performance. For these reasons, we believe that these non-GAAP financial measures provide expanded insight into our business, in addition to standard U.S. GAAP financial measures. There are no specific rules or regulations for defining and using non-GAAP financial measures, and as a result the measures we use may not be comparable to measures used by other companies, even if they have similar labels. The presentation of non-GAAP financial information should not be considered in isolation from, or as a substitute for, or superior to, financial information prepared and presented in accordance with U.S. GAAP. You should consider our non-GAAP financial measures in conjunction with our U.S. GAAP financial measures.

We define our non-GAAP financial measures as follows:

Adjusted EBITDA is defined as net loss excluding depreciation and amortization, interest expense, interest income and income tax expense, and other additional specified exclusions and adjustments. Such additional excluded amounts include stock-based compensation, U.S. GAAP charges where the associated liability is expected to be settled in stock, and changes in the value of earnout liabilities and income and expenditure in relation to legacy portions of the business (being those portions where trading no longer occurs) including closed defined benefit pension schemes. Additional adjustments are made for items considered outside the normal course of business, including (1) restructuring costs, which include charges attributable to employee severance, management changes, restructuring, dual running costs, costs related to facility closures and integration costs (2) merger and acquisition costs and (3) gains or losses not in the ordinary course of business. This does not include any losses related to COVID-19.

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We believe Adjusted EBITDA, when considered along with other performance measures, is a particularly useful performance measure, because it focuses on certain operating drivers of the business, including sales growth, operating costs, selling and administrative expense and other operating income and expense. We believe Adjusted EBITDA can provide a more complete understanding of our operating results and the trends to which we are subject, and an enhanced overall understanding of our financial performance and prospects for the future. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income or loss, because it does not take into account certain aspects of our operating performance (for example, it excludes non-recurring gains and losses which are not deemed to be a normal part of underlying business activities). Our use of Adjusted EBITDA may not be comparable to the use by other companies of similarly termed measures. Management compensates for these limitations by using Adjusted EBITDA as only one of several measures for evaluating our operating performance. In addition, capital expenditures, which affect depreciation and amortization, interest expense, and income tax benefit (expense), are evaluated separately by management.

Functional Currency at Constant rate. Currency impacts shown have been calculated as the current-period average GBP: USD rate less the equivalent average rate in the prior period, multiplied by the current period amount in our functional currency (GBP). The remaining difference, referred to as functional currency at constant rate, is calculated as the difference in our functional currency, multiplied by the prior-period average GBP: USD rate, as a proxy for functional currency at constant rate movement.

Currency Movement represents the difference between the results in our reporting currency (USD) and the results on a functional currency at constant rate basis.

Reconciliations from net loss, as shown in our Consolidated Statements of Operations and Comprehensive Loss included elsewhere in this release, to Adjusted EBITDA are shown below.  The 2018/2019 EBITDA comparison does not include the Acquired Businesses in the 2019 numbers.

Conference Call and Webcast

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Inspired management will host a conference call and simultaneous webcast at 10:00 a.m. ET / 3:00 p.m. UK on Monday, May 18, 2020 to discuss the financial results and general business trends.

Telephone: The dial-in number to access the call live is 1-844-746-0725 (US) or 1-412-317-5264 (International). Participants should ask to be joined into the Inspired Entertainment call.

Webcast: A live audio-only webcast of the call can be accessed through the “Events and Presentations” page of the Company’s website at www.inseinc.com under the Investors link. Please follow the registration prompts.

Replay of the call: A telephone replay of the call will be available one hour after the conclusion of the call until May 25, 2020 by dialing 1-877-344-7529 (US) or 1-412-317-0088 (International), via replay access code 10143795. A replay of the webcast will also be available on the Company’s website at www.inseinc.com.

About Inspired Entertainment, Inc.

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Inspired offers an expanding portfolio of content, technology, hardware and services for regulated gaming, betting, lottery, and leisure operators across retail and mobile channels around the world. The Company’s gaming, virtual sports, interactive and leisure products appeal to a wide variety of players, creating new opportunities for operators to grow their revenue. The Company operates in approximately 35 jurisdictions worldwide, supplying gaming systems with associated terminals and content for more than 50,000 gaming machines located in betting shops, pubs, gaming halls and other route operations; virtual sports products through more than 44,000 retail channels; digital games for 100+ websites; and a variety of amusement entertainment solutions with a total installed base of more than 19,000 devices.  Additional information can be found at www.inseinc.com.

 

SOURCE Inspired Entertainment, Inc.

 

 

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Industry News

Real Dealer Studios: Offering a fresh spin on classic roulette

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Shane Cotter at Real Dealer Studios walks us through the groundbreaking new release, Volcano Roulette, and discusses whether classic table games need a makeover for today’s online audience.

Roulette is probably the most timeless casino game out there. Here’s what happened when we gave it a couple more balls. And a volcano.

The game we’re now launching is Volcano Roulette, and it’s fair to say that it’s a huge departure from what the industry is used to. The first thing players will see is the sleek, steampunk environment and a roulette wheel with that smoking volcano right in the middle. The game’s visuals, compared with typical RNG games, are several steps ahead thanks to the Cinematic RNG technology that Real Dealer invented. Essentially, this means the game was built on video that was produced the same way Hollywood films are made.

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As cool as this game looks, it’s really the mechanics that set it apart. In every round, once the spin starts, one or two glowing lava balls can randomly shoot out of the volcano to become part of the action. These extra balls increase the chance of hitting a straight-up bet. If the player does land any straight-up bet, a special sequence starts where the numbers on the wheel shift, steampunk style, into multipliers. Then another lava ball erupts out to pick the multiplier for the straight-up bet win. These multipliers can be as much as 333x and apply to all straight up bets that land in the round. That means the player could win up to 999x their bet.

An eruption of innovation

What sparked this game’s theme is once again related to Cinematic RNG. We’ve got this amazing technology that gives us a huge amount of flexibility. It lets us make hyper-realistic looking games with any kind of action and put them in any setting we choose.

So one of our designers got the idea to have a roulette wheel where the numbers could drop down, shift, flip over and pop back up with different numbers, all of which would happen in an old-fashioned, mechanical looking way.

We were also having ongoing discussions about how to revamp the process of releasing the ball onto the table. And after a few sessions at the drawing board, we had the great idea of including a volcano.

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Between the steaming volcano and the mechanical action of the changing numbers, the steampunk theme basically chose itself. Our 3D designers then set to work creating all the mechanical lightbulbs, cogs turning and all these different dials that give the game its character.

A degree of familiarity

Volcano Roulette is obviously a huge departure from what long-time players are used to. The challenge with revamping a classic is ensuring that when you innovate, you retain those elements of the game that the players love. That’s a balance that I believe Real Dealer Studios has managed to achieve.

That brings us to the question of whether online roulette needs a makeover. And the answer is both yes and no. As you can imagine, different players are after different experiences from the games that they play. Some prefer the classics while others want something completely new.

When this table game first moved into the digital space, it started off as a computer animation. It later improved, but still has that animated RNG feel. Later live games came in and have gained their own following. But for existing table game players used to that classic bricks-and-mortar casino feel or just looking for something higher quality, there was nothing out there.

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Seeing this, we developed cinematic RNG to deliver a much better online experience, with enhanced audio-visual quality and heightened gameplay compared to other table games you find online. I wouldn’t call this a makeover – it’s getting back to what this game is all about and doing a better job of it in the online environment.

Of course, there are other players who are expecting new twists to the game. The key to catering to these different demands from players is to have an extensive portfolio that spans multiple themes and includes a range of features. Some might be done in classic style and include a dealer, others might be automatic and have multipliers.

Attracting new audiences

Where a full-fledged makeover becomes useful is when you’re trying to cross-sell table games to the larger pools of players coming from sportsbook and slots. The challenge here, however, is that each of these two demographics requires a completely unique approach.

To reach sports bettors, for example, we have created games that tie into real-world sporting events. Just last year, we had Hockey Fever Roulette which was launched for the Ice Hockey World Championship in May. The game was set in a man cave loaded with fan memorabilia and had rock music playing in the background. It was everything you would want in a hockey-themed game.

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That was then followed by Rugby Fever Roulette, which was launched ahead of the Rugby World Cup. We wanted to make this game more personalised for each player, so we built a feature where players could choose between dealers and switch the visuals and thematics to match their favourite team.

Obviously, attracting new audiences was a major focus for these two games. But creating sports-themed titles also provided our operator partners with an opportunity to work our games into their event promotions. So, it had marketing benefits too.

Engaging with slots players is a completely different ballgame, however. Traditionally, there isn’t much cross-over between slots and table games. We therefore had to find a common ground between the two verticals. This is where slots-type features like multipliers, collect features and unique designs came into play. Cinematic RNG has really helped us here, letting us create some fantastic mechanics and immersive designs catering to the slots crowd.

Recently we took an even bolder step into the slots realm by partnering with the producers of an enormously popular slots title, 9 Masks of Fire. Our roulette version of the legendary game became an instant hit.

As 2024 progresses, we have plenty more titles in the pipeline which we are confident will offer a new spin on the classics and continue to drive engagement with players. Stay tuned!

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Industry News

Cheltenham and Grand National 2025 start now

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The madness of Cheltenham and Grand National has been and gone. Congratulations on surviving; you’ve made it through and live to fight another day. So, what’s top of the agenda for today? Preparation for the 2025 edition’s of the Cheltenham Festival and the Grand National, of course!

Here are the six key planning and strategy points to consider in order to give yourself the best possible chance of success next spring.

The work begins now

Yes, Cheltenham 2025 is a long time away. But everything is fresh in your mind as of this moment. Many of the changes you may end up acting on could take a long time to execute, and there’s undoubtedly going to be countless foreseen and unforeseen priorities between now and the end of the year. Start now whilst 2024 performance is fresh in your mind and fresh within the wider business psyche. Keep the festival mindset running for as long as possible to maintain momentum and get flying out the stalls.

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Involve all parts of the business

This is not just an exercise for the IT department. Every relevant stakeholder from around the business should be represented. What were customers saying to Customer Services? How did Trading cope when their bet tickers slowed down? What offers and promotions did Marketing take note of that they would like to offer next time? Bring in stakeholders from all business arms to create a holistic view of where the opportunities lie and what challenges need to be overcome.

Look at the data

Get hold of all of your performance metrics from every component of your systems and take the time to do a deep-dive analysis on those numbers. If you haven’t got all the metrics that you’d like to have to hand? Well, there’s your starting point for the list of ‘things to fix immediately’.

Be honest with yourselves

Getting business involvement, analysing all the data, and prompt planning is all well and good. But if you’re not going to be brutally honest with yourselves as an organisation, it may be all for nothing. Yes, it’s important to acknowledge everyone’s hard work and remember all the things that you did right. But you also have to be your own harshest critics about what didn’t go so well and what could be improved on. There’s really no point in doing all this if you’re not going to seriously challenge yourselves to do better.

Next year won’t be the same as this year

You’re going to be delivering a various new features and functionalities, as well as making many changes to your internal systems over the next twelve months. So the technical landscape that 2025’s Cheltenham Festival and Grand National inhabited will be very different to the one just gone. How will that fancy new bet builder widget in development hold up under the unique stresses of Grand National day? What will your new AI recommendations engine do when everyone’s betting on just one event? You don’t need to answer these questions right now, and it’s highly likely that you won’t be able to answer all of these questions now. But you need to bake in consideration of Cheltenham and Grand National to your non-functional requirements for every change you make in the coming months.

Get a high-level plan diarised

You need to start now but you can’t finish now. This is something you’re going to need to come back to periodically until those Cheltenham gates open. It’s a simple but powerful scheduling task: put the key staging posts in relevant team’s diaries now. You don’t want wake up in a cold sweat one morning in January realising that you’re two months out from the Greatest Show on Turf and haven’t made notable progress on the fixes required from this year’s festivals.

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By: Graham Cassell, Partner at Circle Squared

The post Cheltenham and Grand National 2025 start now appeared first on European Gaming Industry News.

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Compliance Updates

Bet on Compliance: Navigating the Stakes with the UK’s Affordability Checks

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By Isabelle Zanzer, Senior Regulatory Compliance Specialist at ComplianceOne Group

Feeling like the deck is stacked against you with all these talks of financial checks in gambling? Wondering if this new game plan will leave your privacy on a losing streak? If so, no need to bet on uncertainty anymore. We’re here to deal you in on the UK’s latest gamble towards responsible betting. Let’s shuffle through the details and lay our cards on the table, as we make sure you’re holding a winning hand in understanding what’s in play. Ready to roll the dice and dive in? Follow me.

On July 26, 2023, the UK Gambling Commission launched consultations on proposed reforms in the Gambling White Paper, focusing on areas like direct marketing, age verification, game design, and financial risk checks. This article delves into the latter, highlighting new financial vulnerability and risk assessments to safeguard customers.

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The UK’s consultation introduces two checks for gambling: light-touch financial vulnerability checks and detailed financial risk assessments. The first tier of checks is designed to identify financial vulnerabilities such as bankruptcy orders or significant debts, using publicly available data. The second tier involves enhanced financial risk assessments triggered by significant losses, requiring more comprehensive scrutiny of a customer’s financial situation.

Thus, in simple terms, what is going to happen at the heart of the UKGC’s new measures are two-tiered affordability checks designed to assess the financial vulnerability and risk of consumers engaging in online gambling. The first tier involves unintrusive checks that will be triggered when a customer reaches a specified net loss within a rolling period, using publicly available data to identify potential financial vulnerabilities. To dive a little deeper, this check will be conducted if a customer either has net losses of £125 in a rolling 30 days or £500 within a rolling 365 days. It would need to include “at a minimum a customer-specific public record information check for significant indicators of potential financial vulnerability”, including whether the customer is subject to things such as a bankruptcy order, county court judgment, or individual voluntary arrangement. Net loss would be defined as loss of deposited monies with an operator, not counting restacked winnings or bonus funds.

The second tier represents a more detailed assessment of financial risk, which is activated at higher loss thresholds. A comprehensive financial review is required for gamblers with significant losses, examining their financial data including credit status and spending. If third-party data is unavailable, operators may directly seek customer consent for access, ensuring a thorough understanding of financial health.

The gambling industry’s reception of these checks has been cautiously optimistic, particularly regarding the initial, less invasive tier. However, the prospect of more detailed financial assessments has sparked debate, not only among operators but also among consumers wary of privacy infringement.

As the UK gambling sector adapts to these new regulations, the challenge will be to strike an optimal balance between safeguarding consumers and maintaining the operational viability of gambling platforms. The pilot study represents a critical step in this process, offering valuable insights into the practical implications of affordability checks and the potential need for adjustments in response to industry feedback and consumer concerns.

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The outcome of the pilot study and subsequent parliamentary debates are pivotal in shaping the future of affordability checks in the UK gambling sector. As operators, regulators, and consumers navigate these changes, the overarching goal remains clear: to foster a safer, more responsible gambling environment that protects consumers from financial harm while ensuring the industry’s sustainable growth.

Striking the right balance in the new UK gambling regulations is like walking a tightrope. With the introduction of light-touch and in-depth financial risk assessments, operators may face the challenge of protecting players without overstepping into their privacy. These two-tiered checks aim to shield those at risk, using both public data and deeper financial insights.

The key here for operators will be to navigate these waters carefully, ensuring player safety while keeping the game fair and enjoyable. Now, when trying to find a balancing act, we need to consider the following:

  1. Regulatory Compliance Risk: Reviewing the existing practices against the UKGC’s affordability check guidelines, identifying discrepancies, and recommending changes to align with the new regulations.
  2. Data Privacy and Security Risk: Evaluating the ability to handle and protect sensitive financial data in line with GDPR and other data protection laws.
  3. Operational Risk: Assessing the impact of the new checks on daily operations and customer interactions.
  4. Financial Risk: Analysing the potential financial implications of the affordability checks on revenue and customer base.
  5. Reputational Risk: Considering the public and customer perception of the affordability checks, especially regarding privacy concerns, the key here, like in all relationships, is communication. For example, it is estimated that just the very highest spending 3 percent of accounts would undergo financial risk assessments. Most financial risk assessments – at least 80 percent – would be carried out through credit reference agencies. The checks are expected to be frictionless and not interrupt the customer journey unless concerns are raised. It is estimated that a further 10 percent of risk assessments will be done through limited data-sharing through third-party open-source banking, which is similarly straightforward from a customer perspective.

Finding this balance involves a tailored approach as one offered by ComplianceOne group, whereby operators can personalize checks based on individual player profiles, ensuring those at higher risk receive the attention they need while others continue to enjoy their play with minimal interruption. It’s about creating a safety net that catches those in need without trapping everyone else in unnecessary checks. The key to a winning strategy is the execute this balance, and understanding what is at stake: Reputation, Sustainability and Trust.

The post Bet on Compliance: Navigating the Stakes with the UK’s Affordability Checks appeared first on European Gaming Industry News.

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