Industry News
Inspired Reports First Quarter 2020 Results
- 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
- 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.
“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.”
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Summary of Consolidated First Quarter 2020 Financial Results |
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Functional |
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Quarter Ended |
Currency |
Currency |
||||
|
March 31 |
Change |
Movement |
Growth |
|||
|
2020 |
2019 |
(%) |
2020 |
(%) |
||
|
(In $ millions, except per share figures) |
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|
GAAP Measures: |
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|
Revenue |
$ 52.3 |
$ 33.7 |
55.4% |
$ (0.8) |
57.8% |
|
|
Net operating (loss) income |
$ (7.2) |
$ (0.7) |
NM2 |
$ 0.2 |
NM2 |
|
|
Net (loss) |
$ (17.4) |
$ (5.0) |
NM2 |
$ 0.6 |
NM2 |
|
|
Net (loss) per diluted share |
$ (0.78) |
$ (0.24) |
NM2 |
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|
Non-GAAP Financial Measures1: |
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|
Adjusted EBITDA |
$ 10.1 |
$ 13.7 |
(26.4)% |
$ (0.2) |
(25.2)% |
|
|
1Reconciliation to GAAP shown below. 2Percentage change is not meaningful. |
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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 10th, Greece 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.
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 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. Recent Highlights (through May 15, 2020)
Server Based Gaming (“SBG”)
Virtual Sports
Interactive (Results Included within Virtual Sports)
Acquired Businesses
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 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. 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. 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. 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 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. 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.
International Game Technology PLC announced that it has achieved an environmental, social and governance (ESG) Score of 4.3 out of 5.0 from FTSE Russell, positioning IGT in the 97th percentile within the Travel and Leisure sector of FTSE Russell’s ESG Scores. This was an improvement from IGT’s previous ESG Score of 4.2 out of 5.0 in 2023, demonstrating its ongoing commitment to enhancing ESG performance.
“As a company committed to continually elevating our sustainability practices and leadership, IGT is proud to once again achieve an improved ESG score from FTSE Russell. Through our global Sustainable Play program, we execute sustainable practices and policies throughout our company and this improved score validates our ongoing efforts,” Wendy Montgomery, SVP of Marketing, Communications and Sustainability at IGT, said.
FTSE Russell’s ESG Scores and data model allows investors to understand a company’s exposure to, and management of, ESG issues in multiple dimensions. The ESG Scores are comprises an overall rating that breaks down into underlying pillar and theme exposures. Scores built on over 300 individual indicator assessments are applied to each company’s unique circumstances. The ESG Scores align with the UN Sustainable Development Goals (SDGs), all of which are reflected in FTSE Russell’s ESG framework.
The post IGT Achieves Improved ESG Score from FTSE Russell appeared first on European Gaming Industry News.
Super Group has appointed Merrick Wolman to its Board of Directors, effective from February 18, 2025.
Mr. Wolman is the Chief Executive Officer of a global finance company and has worked closely with the Super Group executive team for over two decades.
Neal Menashe, Chief Executive Officer of Super Group, said: “We are very pleased to welcome Merrick to the board. His deep understanding of the gaming industry, alongside his wide range of experience in executive roles, will be of great value as we continue to pursue our global growth strategy and build on our successes to date.”
This appointment brings the total directors on Super Group’s board to nine, including five independent directors.
The post Super Group Appoints Merrick Wolman to its Board of Directors appeared first on European Gaming Industry News.
Kindred Group has reported decline in its share of revenue from high-risk players for the fourth quarter 2024 at 2.7% (Q3 2024 3.2%). The percentage of detected customers who exhibited improved behaviour after interventions showed an improvement at 92.2% (compared to 87.3% in Q3 2024). This positive trend is mainly the result of stricter measures across key markets, improved internal processes, as well as the exit from non-locally licensed markets as part of to the acquisition by La Française des Jeux (FDJ) in October 2024. This shift reflects Kindred’s broader commitment to maintaining high regulatory standards and fostering safer gambling practices.
“It is pleasing to see the decline in high-risk revenue during the fourth quarter of last year. We know that the share fluctuates between quarters, but the long-term trend is showing a steady decline. We remain dedicated and focused on improving our systems and processes to ensure we offer our customers a safe and fun experience,” Esther Scheepers, Head of Responsible Gambling at Kindred Group, said.
“The increased focus on responsible gambling by regulators and the industry is welcomed. From our end, we see that by combining our expertise with emerging technologies, we can further enhance detection capabilities. We are currently working on our existing detection system in combination with an additional system that will enable us to integrate more robust compliance features and optimize our overall approach to safer gambling. Furthermore, we are exploring opportunities to expand our research efforts, aiming to support data-driven discussions and looking at emerging trends in consumer protection. All these aspects are important to protect the integrity of the licence model and maintain a level playing field,” Esther Scheepers added.
The post Kindred Reports Decline in Revenue from High-risk Players for Q4 2024 appeared first on European Gaming Industry News.
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