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Inspired sees revenues up 72% to $71.3M, driven by record numbers in online virtual sports

Gaming provider Inspired Entertainment announced Wednesday its results for the second quarter of 2022. For the period ended June 30, the company generated total revenue of $71.3 million, a 72% increase from the $41.5 million delivered in the same period last year, driven by growth in the company's aggregate online business, which includes the Virtual Sports and Interactive segments, and ongoing strength in the Gaming and Leisure segments.

The business further posted an Adjusted EBITDA of $26.1 million, a 227% increase from the $8 million the prior year, with an Adjusted EBITDA margin of 37%, up against an Adjusted EBITDA margin of 19% in Q1 2021. Additionally, Inspired Entertainment’s net income during the period was $7.5 million, compared to a net loss of $43.8 million in the prior year period.

On a per-share basis, the New York-based company said it had a net income of 26 cents.

The results exceeded Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for earnings of 18 cents per share.Lorne Weil, Executive Chairman of Inspired, said: "This quarter's underlying performance is a testament to the resiliency of our diversified business model as well as what we perceive to be the continued strength in consumer spending across our segments – notwithstanding ongoing macro trends".

Gaming Service Revenue increased by $6.8 million year-over-year due to Inspired's retail recurring revenues exceeding pre-COVID-19 performance levels in Q2 2022, and the addition of the newly acquired lottery systems contract in the Dominican Republic ($1.3 million). Gaming Product Revenue increased by $2.5 million driven by higher sales in the UK from the sale of Flex and Sabre Hydra. Gaming Segment Operating Income increased to $4.8 million from a loss of $2.7 million in the prior year. Gaming Adjusted EBITDA increased to $9.5 million from $3.5 million in the prior year.

Virtual Sports Revenue increased to a record $14.0 million from $8.2 million in the prior-year period, primarily due to Online Virtuals revenue doubling year-over-year, driven by growth from existing customers, and an increase in Retail Virtuals of $1.0 million, due to retail venues being open for the whole of the period compared to the prior-year period. Virtual Sports Segment Operating Income was $11.1 million, which compares favorably to $4.2 million in Q1 2021. Virtual Sports Adjusted EBITDA increased to $12.0 million from $6.4 million in Q1 2021.

Interactive Revenue of $5.8 million was flat year-over-year and grew 12% in functional currency, driven by growth in North America and Greece. Interactive Segment Operating Income was $2.2 million, a 13% decrease year-over-year primarily due to the increase in the cost of sales and third-party platform provider costs as well as an increase in SG&A expenses driven by the investment in the segment to help drive revenues and staff returning from furlough. Interactive Adjusted EBITDA was $3.1 million, a 12% year-over-year decrease on a reported basis but flat in functional currency, from a record $3.6 million in the prior-year period.

"Virtual Sports was, once again, the standout in the quarter, producing its fourth record-setting Revenue and Adjusted EBITDA quarter in a row, with online Virtual Sports doubling year-over-year versus strong comparatives, speaking to our strong product development and increased market penetration. Interactive revenue increased year-over-year on a functional currency basis as we increased our footprint through numerous integrations. In our land-based business, we're delighted to see that customer gross win per unit in betting shops and holiday parks was ahead of pre-COVID levels as consumers continue to frequent betting shops and pubs and are staying local for holidays," Weil added.

Other highlights of the quarter include Inspired Entertainment’s increased expansion, as the company went live with seven operators in Ontario and Rush Street in Pennsylvania, with several additional launches in these new jurisdictions expected this year.

Additionally, major UK contracts and extensions were signed with William Hill, Greene King, and Mitchells & Butlers, thus strengthening the Gaming and Leisure businesses. Subsequent to the end of the quarter, DC Lottery became the second North American lottery to launch Inspired's Virtual Sports, both in retail and online.

Stewart Baker, Executive Vice President, and Chief Financial Officer, stated: "We are particularly pleased with our second quarter results, given the prevailing perception of headwinds from the macro-economic environment as well as the impact from foreign exchange rates".

"We will continue to be disciplined in our approach to capital deployment, while also focused on executing on our strategic plan to deliver profitable growth, increase cash flows and maximize shareholder value," he concluded.


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