Inspired Entertainment Inc
For the period ended Sep 30, 2024. Filed Nov 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 7, 2024
INSE$3.70+5.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001493152-24-030805
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0001493152-24-044040
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 216 previous paragraphs and 215 current paragraphs.
149 unchanged; 46 reworded; 20 added; 21 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 25 previous and 25 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (20)
Current report
Key Events for the Quarter
Current report
During the three-month period ended September 30, 2024 in the Gaming segment, OPAP in Greece ordered 4,000 new VLT’s, expected delivery in country is for 2,400 in H1 2025, with the final balance of 1,600 in Q4 2025.
Current report
During the three-month period ended September 30, 2024 we joined the Scientific Games Content Hub Partner Program, the global lottery industry’s premier content delivery platform, enabling Inspired to distribute to Scientific Games iLottery customers around the world.
Current report
Key agreements made in the three-month period ended September 30, 2024 include a contract with Mecca Bingo for the provision of gaming machines, including the installation of 150 terminals with expected deployment in the fourth quarter of 2024 and a five-year machine supply agreement with Carlton Bingo, both in the Leisure segment.
Current report
For the three-month period ended September 30, 2024, Gaming revenue declined by $22.4 million predominantly due to a decrease in product sales of $22.8 million, of which $22.7 million were Low Margin sales. Gaming service revenue grew by $0.4 million predominately due to growth in North America and a customer bonus included the UK. Virtual Sports revenue declined by $2.5 million, with $2.2 million of the reduction from Online. Interactive revenue grew by $2.7 million with growth driven in the UK and North American markets. Leisure revenue grew by $0.7 million, predominately driven by growth in the Holiday Parks and Motorway Service Area sectors.
Current report
For the nine-month period ended September 30, 2024, Gaming revenue declined by $30.6 million predominantly due to a decrease in product sales of $26.5 million, of which $27.1 million were Low Margin sales. Gaming service revenue declined by $4.1 million, predominately due to declines in the UK, mainland Europe and Greece. Virtual Sports declined by $9.0 million, with $8.7 million of the reduction coming from Online. Interactive revenue grew by $7.2 million, which was driven by growth in the UK, mainland Europe and North America. Leisure grew by $2.2 million, predominantly driven by growth in the Holiday Parks and Pubs sectors.
Current report
The increase during the three-month period ended September 30, 2024 was driven primarily by an increase in exceptional items of $4.0 million predominantly due to the costs of the restatement of our prior financial statements and the costs of group restructuring, along with increases in IT costs of $0.7 million and storage and distribution costs of $0.5 million
Current report
The increase during the nine-month period ended September 30, 2024 was driven primarily by the $10.6 million costs of the restatement of our prior financial statements, an increase in non-staff costs of $4.6 million, predominantly driven by increases in storage and distribution, IT and facility costs
Current report
Depreciation and amortization for the three-month period ended September 30, 2024 increased by $0.7 million driven mainly by an increase in Virtual Sports of $0.5 million for increased software development
Current report
During the three and nine-month period ended September 30,2024, net operating income was $11.9 million and $19.9 million, respectively, representing declines of $0.4 million and $11.1 million, respectively, compared to the prior year periods. For the three-month period ended September 30, 2024, the decrease was primarily driven by the increase in SG&A and depreciation and amortization, partially offset by increase in gross margin and reduction in stock-based compensation. For the nine-month period ended September 30, 2024, the decrease was primarily driven by the increase in SG&A and expenses partially offset by the increase in gross margin and reduction in stock-based compensation.
Current report
For the three-month period ended September 30, 2024, the increase was primarily driven by the decrease in income tax expense, partially offset by the decrease in net operating income and increase in interest expense.
Current report
For the nine-month period ended September 30, 2024, the decrease was primarily driven by the decrease in net operating income, partially offset by decreases in interest expense and income tax expense.
Current report
For the three-month period ended September 30, 2024 the increase in Gaming Service revenue was driven by higher revenue from North America of $0.7 million due to increased game pack subscriptions and UK LBO of $0.5 million as the current year period included a customer bonus not included in the prior year period.
Current report
Net income for the three and nine-month periods ended September 30, 2024 increased by $1.6 million and decreased by $0.8 million respectively.
Current report
The three-month ended September 30, 2024 increase was primarily due to higher gross margin (as the $22.4 million revenue decrease was offset by a $24.9 million decrease in total cost of sales mainly driven by the decrease in Low Margin sales in the current period).
Current report
The decrease during the nine-months ended September 30, 2024 was primarily due to a decrease in depreciation and amortization of $1.8 million due to unwind of machine assets and stock-based compensation of $0.6 million, offset by an increase in SG&A costs of $3.5 million driven by increased staff cost, reduced overhead recoveries along with the cost of group restructuring not incurred in the prior year period.
Current report
Operating income for the three and nine-month periods ended September 30, 2024 increased by $1.7 million and $4.3 million, respectively. This increase was primarily driven by the increase in gross margin, partially offset by increases in SG&A expenses, driven by increased IT costs, lower labor capitalization and higher depreciation and amortization.
Current report
All amounts included herein relating to the prior year have been rounded except where otherwise stated. As prior-year figures are rounded, numbers presented as such throughout this document may not add up precisely to the totals we provide.
Current report
Nine Months ended September 30, 2024, compared to Nine Months ended September 30, 2023
Current report
All amounts included herein relating to the prior year have been rounded except where otherwise stated. As prior-year figures are rounded, numbers presented as such throughout this document may not add up precisely to the totals we provide.
Removed paragraphs (21)
Previous report
Key Events – Current Quarter
Previous report
During the three-month period ended June 30, 2024 in the Gaming segment, Alberta Gaming, Liquor and Cannabis (“AGLC”) in Canada ordered 150 new Valor terminals which were deployed during the quarter following a successful six-month trial. In addition, William Hill has committed to lease 5,000 new Vantage® terminals. Deployment of the new terminals will begin in the fourth quarter of 2024, with expected completion in the first half of 2025.
Previous report
During the three-month period ended June 30, 2024 we partnered with the NBA to provide a Virtual Sports offering, which went live in the Greek market during the period.
Previous report
Inspired also announced an engagement with Tunley Environmental to conduct a thorough business carbon assessment, with the goal of reducing the company’s carbon footprint aligning with the Company’s commitment to reduce its environmental footprint.
Previous report
Key agreements made in the ordinary course of business in the three-month period ended June 30, 2024 include a contract with Meadow Bay Villages to run the family entertainment center at Billing Aquadrome, Northampton UK resulting in installations in May and July 2024.
Previous report
For the three-month period ended June 30, 2024, Gaming revenue declined by $4.3 million. Gaming product sales declined $2.1 million due to a decrease in the UK market, partially offset by growth in North America, Gaming service revenue declined $2.2 million, due to a decrease in the UK and mainland European markets. Virtual Sports declined by $3.5 million due to reduced Online revenue. Interactive grew by $2.7 million, driven by revenue growth in the UK, North America and mainland Europe: and Leisure grew by $0.7 million predominately driven by the increased revenues in Holiday Parks due to the addition of a new site as well as growth in existing sites.
Previous report
For the six-month period ended June 30, 2024, Gaming revenue declined by $8.2 million. Gaming product sales declined $3.7 million due to a decrease in the UK market for low margin sales in the prior year period not repeated in the current year, partially offset by growth in North America, Gaming service revenue decreased by $4.5 million predominately due to revenue decline in the UK and mainland European markets. Virtual Sports decreased by $6.4 million due to a decrease in Online revenue; Interactive grew by $4.6 million, driven by revenue growth in the UK, mainland Europe and Latin America; and Leisure revenue increased by $1.4 million due to increases in Holiday Parks and Pubs.
Previous report
The increase in the three-month period ended June 30, 2024, was primarily driven by an increase of $2.8 million due to cost of the restatement of our prior financial statements (excluded from adjusted EBITDA), $0.7 million due to cost of restructuring (excluded from adjusted EBITDA) and $0.9 million due to non-staff costs mainly for increased facility, travel, storage and distribution costs.
Previous report
The increase in the six-month period ended June 30, 2024, was driven primarily by the $7.8 million costs of the restatement of our prior financial statements (removed from Adjusted EBITDA), an increase in non-staff costs of $2.9 million, of which the largest proportion was driven by increased facility, travel, external labor, IT, storage and distribution costs as well as an increase in staff cost of $0.5 million driven by support staff costs and an increase in national living wage and salary increases. This was partially offset by a reduction in the cost of group restructure of $2.1 million (removed from Adjusted EBITDA).
Previous report
Depreciation and amortization for the three-month period ended June 30, 2024, increased by $0.3 million. This increase was driven by increases in Virtual Sports of $1.6 million and Interactive of $0.2 million, partially offset by a reduction in Gaming of $1.2 million, due to assets being fully depreciated.
Previous report
During the three and six-month periods ended June 30, 2024, net operating income was $9.4 million and $8.0 million, respectively, representing declines of $4.8 million and $10.6 million, respectively, compared to the prior year periods. The decreases were primarily due to the increases in SG&A expenses, (including the cost of restating our prior financial statements in the three and six-month periods).
Previous report
For the three-month period ended June 30, 2024 the $3.8 million decline compared to the prior year period, was primarily due to the increase in SG&A expenses of $5.4 million. This was partially offset by a reduction in stock-based compensation of $1.3 million.
Previous report
For the six-month period ended June 30. 2024 the $7.6 million decline compared to the prior year period, was primarily due to the increase in SG&A expenses of $9.6 million, primarily driven by the cost of the restatement of prior financial statements of $7.8 million. This was partially offset by a reduction in stock-based compensation of $2.1 million and in income tax expense of $2.2 million.
Previous report
For the six-month period ended June 30, 2024, the decrease in Gaming Service revenue was driven by decreases of $2.8 million from the UK markets, inclusive of UK LBO shop closures, $0.7 million from North America, $0.8 million from Italy and $0.2 million from Greece, driven by the reduction in Gross Win per day and expiry of historical amortized license revenues.
Previous report
Operating income was flat for the three-month period ended June 30, 2024, and decreased by $2.0 million for the six-month period ended June 30, 2024.
Previous report
For the three-month period ended June 30, 2024, gross margin decreased by $0.1 million and SG&A expenses increased $1.3 million driven by increased in facility costs and decreased labor capitalization along with exceptional items not incurred in the prior year period. This was offset by decreases in depreciation and amortization and stock-based compensation of $1.2 million and $0.2 million, respectively.
Previous report
The decrease in the six-month period ended June 30, 2024 was primarily driven by a reduction in gross margin of $2.0 million. SG&A expenses increased $1.9 million driven by reduced labor and overhead consumption, which was offset by a decrease in depreciation and amortization and stock-based compensation of $1.6 million and $0.3 million, respectively.
Previous report
Operating income for the three and six-month periods ended June 30, 2024, increased by $2.5 million and $2.9 million, respectively. For the three-month period ended June 30, 2024, this increase was driven by the increase in gross margin, partially offset by increases in depreciation and amortization of $0.2 million and $0.7 million, respectively. For the six-month period, this increase was driven by the increase in gross margin, offset by a $0.5 million increase in SG&A driven by increased staff and IT costs and a $0.7 million increase in depreciation and amortization.
Previous report
Six Months ended June 30, 2024, compared to Six Months ended June 30, 2023
Previous report
Contract cost additions increased by $0.5 million to $5.7 million for the six months ended June 30,2024 compared to the six months ended June 30, 2023.
Previous report
For a discussion of other recently issued accounting standards, and assessments as to their impacts on the Company, see Note 1 “Nature of Operations, Management’s Plans and Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 15, 2024
Reworded paragraphs (46)
Previous wording
For the three and six months ended June 30, 2024, we derived approximately 75% (in both periods) of our revenue from the UK (including customers headquartered in the UK but whose revenue is generated globally), respectively, 6% and 8% from Greece, respectively, and the remaining 19% and 17% across the rest of the world. During the three and six months ended June 30, 2023, we derived approximately 78% and 77% from the UK, 7% and 8% from Greece and 15% (in both periods) for the rest of world.
Current wording
For the three and nine-months ended September 30, 2024, we derived approximately 77% and 76% of our revenue from the UK (including customers headquartered in the UK but whose revenue is generated globally), respectively, 7% (in both periods) from Greece, and the remaining 16% and 17% respectively across the rest of the world. For the three and nine-months ended September 30, 2023, we derived approximately 82% and 79% of our revenue from the UK (including customers headquartered in the UK but whose revenue is generated globally), respectively, 5% and 7% from Greece, respectively, and the remaining 13% and 14% respectively across the rest of the world. The UK percentage was impacted by specific Hardware sales, which generally result in a lower margin (“Low Margin sales”), which contributed UK revenues for the three-month period by 39% and for the nine-month period by 16%.
Previous wording
As of June 30, 2024, our non-current assets (excluding goodwill) were attributable as follows: 70% to the UK, 10% to Greece and 20% across the rest of the world. As of June 30, 2023, our non-current assets (excluding goodwill) were attributable as follows: 77% to the UK, 4% to Greece and 19% across the rest of the world.
Current wording
As of September 30, 2024, our non-current assets (excluding goodwill) were attributable as follows: 74% to the UK, 9% to Greece and 17% across the rest of the world. As of September 30, 2023, our non-current assets (excluding goodwill) were attributable as follows: 71% to the UK, 11% to Greece and 18% across the rest of the world.
Previous wording
During the three and six months ended June 30, 2024, we derived approximately 25% (in both periods) of our revenue from sales to customers outside the UK (see caveat above), compared to 22% and 23% during the three and six months ended June 30, 2023, respectively.
Current wording
During the three and nine-months ended September 30, 2024, we derived approximately 23% and 24% of our revenue from sales to customers outside the UK, respectively (see caveat above), compared to 18% and 21% during the three and six months ended September 30, 2023, respectively.
Previous wording
Our results are affected by changes in foreign currency exchange rates, primarily between our functional currency (GBP) and our reporting currency (USD). During the three month periods ended June 30, 2024 and June 30, 2023, the average GBP:USD rates were 1.26 and 1.25, respectively, and for the six-month period were 1.27 and 1.24, respectively.
Current wording
Our results are affected by changes in foreign currency exchange rates, primarily between our functional currency (GBP) and our reporting currency (USD). During the periods ended September 30, 2024 and September 30, 2023, the average GBP:USD rates for the three-month period were 1.30 and 1.27, respectively, and for the nine-month period were 1.28 and 1.25, respectively.
Previous wording
During the three-month period ended June 30, 2024 the Interactive segment went live with fourteen new operators. The total number of customers at the end of the period increased by nine due to changes with several smaller-scale customers. In addition, Inspired licensed its remote gaming server (“RGS”) to an operator customer, allowing the customer to host its own instance of the most recent version of our RGS.
Current wording
During the three-month period ended September 30, 2024 the Interactive segment went live with seventeen new operators. The total number of customers at the end of the period increased by twelve overall due to the closure of several smaller-scale customers.
Previous wording
Three and Six Months ended June 30, 2024, compared to Three and Six Months ended June 30, 2023
Current wording
Three and Nine-Months ended September 30, 2024, compared to Three and Nine-Months ended September 30, 2023
Previous wording
Revenue (for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023)
Current wording
Revenue (for the three and nine-months ended September 30, 2024, compared to the three and nine-months ended September 30, 2023)
Previous wording
For the three and six months ended June 30, 2024, revenue on a functional currency (at constant rate) basis decreased by $4.6 million and $9.0 million, respectively, or 6% (in both periods)
Current wording
For the three and nine-months ended September 30, 2024, revenue on a functional currency (at constant rate) basis decreased by $21.5 million and $30.2 million compared to the same period in 2023.
Previous wording
Cost of sales, excluding depreciation and amortization, for the three and six months ended June 30, 2024, decreased by $4.2 million and $6.4 million, or 15% and 13%, respectively. The decreases were driven by a $1.6 million and $1.3 million decrease in cost of service, respectively, predominately driven by the decrease in service revenues and by a $2.6 million and $5.1 million decrease in cost of product, predominantly driven by the decrease in product revenues, respectively.
Current wording
Cost of sales, excluding depreciation and amortization, for the three and nine-months ended September 30, 2024, decreased by $25.7 million and $31.6 million, respectively, or 53% and 32% respectively. The decreases were driven by $24.2 million and $28.9 million decreases in cost of product, respectively, predominately driven by the decrease in low margin product sales.
Previous wording
Selling, general and administrative (“SG&A”) expenses for the three and six months ended June 30, 2024 increased by $5.4 million and $9.6 million, or 23% and 19%, respectively.
Current wording
Selling, general and administrative (“SG&A”) expenses for the three and nine-months ended September 30, 2024 increased by $5.5 million and $15.1 million, respectively, or 23% and 21%, respectively.
Previous wording
During the three and six-month periods ended June 30, 2024, the Company recorded stock based compensation expenses of $1.6 million and $3.9 million, respectively, compared to stock based compensation expenses of $3.1 million and $6.0 million for the three and six months ended June 30, 2023. All expenses related to outstanding awards but the three and six months ended June 30, 2023, included $0.4 million related to award units that were fully vested on the date of grant and therefore were expensed immediately. The six months ended June 30, 2023 also included $0.7 million related to the group restructure.
Current wording
During the three and nine-months ended September 30, 2024, the Company recorded expenses of $1.8 million and $5.7 million, respectively, compared to expenses of $3.3 million and $9.3 million for the three and nine-months ended September 30, 2023. All expenses were related to outstanding awards but the nine-months ended September 30, 2023, included $0.4 million related to award units that were fully vested on the date of grant and therefore were expensed immediately and also included $0.7 million related to the costs of the restatement of our prior financial statements.
Previous wording
Depreciation and amortization for the six-month period ended June 30, 2024, increased by $0.5 million. This increase was driven by increases in Virtual Sports of $1.7 million and Interactive of $0.7 million, partially offset by a reduction in Gaming of $1.6 million and Leisure of $0.3 million due to assets being fully depreciated.
Current wording
Depreciation and amortization for the nine-month period ended September 30, 2024 increased by $1.2 million driven by increases in Virtuals of $2.2 million and Interactive of $1.4 million for increased software development and intangible assets, offset by reductions in Gaming of $1.8 million and Leisure of $0.2 million as machine assets unwind.
Previous wording
For the three and six-months ended June 30, 2024 net income / (loss) was $2.0 million and net loss was $3.7 million, respectively, compared to a net income of $5.6 million and $4.2 million, respectively, in the prior periods.
Current wording
For the three and nine-months ended September 30, 2024, net income / (loss) was $3.4 million and $(0.3) million, respectively, compared to net income of $3.4 million and $7.6 million, respectively, in the prior year periods.
Previous wording
Segment Results (for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023)
Current wording
Segment Results (for the three and nine-months ended September 30, 2024, compared to the three and nine-months ended September 30, 2023)
Previous wording
“End of Period Installed Base” is equal to the number of deployed Gaming terminals at the end of each period that have been placed on a participation or fixed rental basis. Gaming participation revenue, which comprises the majority of Gaming Service revenue, is directly related to the participation terminal installed base. This is the medium by which our customers generate revenue and distribute a revenue share to the Company. To the extent all other key performance indicators (“KPIs”) and certain other factors remain constant, the larger the installed base, the higher the Company’s revenue would be for a given period. Management gives careful consideration to this KPI in terms of driving growth across the segment. This does not include Service Only terminals.
Current wording
“End of Period Installed Base” is equal to the number of deployed Gaming terminals at the end of each period that have been placed on a participation or fixed rental basis. Gaming participation revenue, which comprises the majority of Gaming Service revenue, is directly related to the participation terminal installed base. This is the medium by which our customers generate revenue and distribute a revenue share to the Company. To the extent all other KPIs and certain other factors remain constant, the larger the installed base, the higher the Company’s revenue would be for a given period. Management gives careful consideration to this KPI in terms of driving growth across the segment. This does not include Service Only terminals.
Previous wording
Set forth below is a breakdown of our Gaming recurring revenue. Gaming recurring revenue principally consist of Gaming participation revenue and fixed rental revenue.
Current wording
Set forth below is a breakdown of our Gaming recurring revenue. Gaming recurring revenue principally consists of Gaming participation revenue and fixed rental revenue.
Previous wording
“Gaming Long term license amortization” – see the set forth provided above.
Current wording
“Gaming Long term license amortization” – see the definition provided above.
Previous wording
During the three and six-month periods ended June 30, 2024, Gaming revenue decreased by $4.3 million and $8.2 million, or 14% in both periods. This was driven by decreases in Service revenue of $2.2 million and $4.5 million, respectively, and decreases in Product revenue of $2.1 million and $3.7 million, respectively.
Current wording
During the three and nine-month periods ended September 30, 2024, Gaming revenue decreased by $22.4 million and $30.6 million, respectively. This was driven by decreases in Product revenue of $22.8 million and $26.5 million, respectively. Gaming service revenue increased by $0.4 million and decreased by $4.1 million, respectively.
Previous wording
For the three-month period ended June 30, 2024, the decrease in Gaming Service revenue was driven by decreases of $1.0 million in the UK market inclusive of shop closures in UK LBO and $0.4 million in the Greek market primarily due to the reduction in Gross Win per day and expiry of historical amortized license revenues.
Current wording
For the nine-month period ended September 30, 2024 the decrease in Gaming Service revenue was driven by decreases of $2.1 million in the UK market inclusive of shop closures in UK LBO and $ 1.1 million in the Greek market, primarily due to the reduction in Gross Win per day and expiry of historical amortized license revenues.
Previous wording
For the three-month period ended June 30, 2024, the $2.1 million decrease in Gaming Product revenue was primarily driven by lower UK Product sales of $5.6 million, partially offset by increases of $2.7million in North America.
Current wording
For the three-month period ended September 30, 2024 the decrease in Gaming Product revenue was primarily driven by lower UK Product sales of $22.8 million, of which $22.7 million were Low Margin sales.
Previous wording
For the six-month period ended June 30, 2024, the $3.7 million decrease in Gaming Product revenue was primarily driven by lower UK Product sales of $6.3 million as the prior year period included $4.4 million of Low Margin sales, partially offset by increases of $2.4 million in North America.
Current wording
For the nine-month period ended September 30, 2024 the decrease in Gaming Product revenue was primarily driven by lower UK Product sales of $26.5 million, of which $27.1 million were Low Margin sales.
Previous wording
During the three and six-month periods ended June 30, 2024, revenue decreased by $3.5 million and $6.3 million, or 23% and 21%, respectively. These decreases were driven by $3.6 million and $6.4 million decreases in Online Virtuals, respectively, primarily driven by driven by a major customer optimizing their customer base.
Current wording
During the three and nine-month periods ended September 30, 2024 revenue decreased by $2.5 million and $8.9 million, or 19% and 21%, respectively. These decreases were driven by $2.2 million and $8.7 million declines in Online Virtuals, respectively, primarily driven by a major customer optimizing their customer base.
Previous wording
During the three and six-month periods ended June 30, 2024, operating income decreased by $5.3 million and $7.8 million, primarily due to the decreases in revenues and increases in depreciation of $1.6 million and $1.7 million, respectively.
Current wording
During the three and nine-month periods ended September 30, 2024 net operating income decreased by $3.4 million and $11.2 million, respectively. These decreases were driven by the declines in revenue and increases in depreciation and amortization of $0.5 million and $ 2.2 million, respectively.
Previous wording
During three and six-month periods ended June 30, 2024, revenue increased by $2.7 million and $4.5 million, or 40% and 36%, respectively, primarily driven by revenue growth in the UK, North America and mainland Europe due to new customer launches, the consistent launch of new content across the estate and increased promotional activity through exclusive deals with tier-one customers.
Current wording
During the three and nine-month periods ended September 30, 2024, revenue increased by $2.7 million and $7.2 million, or 37% and 36%, respectively, primarily driven by revenue growth in the UK, North America and mainland Europe due to new customer launches, the consistent launch of new content across the estate and increased promotional activity through exclusive deals with tier-one customers.
Previous wording
For the three and six-month periods ended June 30, 2024, revenue increased by $0.7 million and $1.4 million, respectively. These increases were primarily due to increased service revenue of $0.7 million and $1.3 million, respectively, predominately due to the increase in Holiday Parks of $0.7 million and $1.0 million driven by the increased revenues in Holiday Parks due to the addition of a new site as well as growth in existing sites.
Current wording
For the three and nine-month periods ended September 30, 2024 revenue increased by $0.7 million and $2.2 million or 2% and 3%, respectively. These increases were primarily due to increased service revenue of $ 0.6 million and $2.0 million, respectively, predominately due to the increase in Holiday Parks of $0.2 million and $1.3 million driven by the addition of a new site as well as growth in existing sites, along with growth in MSA of $0.3 million and $0.3 million, respectively.
Previous wording
Operating income for the three-month period ended June 30, 2024, was flat and six-month period ended June 30, 2024, increased by $1.0 million. This was primarily due to the increases in gross margin partially offset by increases in SG&A expenses of $0.8 million and $1.2 million for the three and six-month periods, respectively, driven by the increase in seasonal staff, the increase in national living wage and salary increases, along with reduced technology labor capitalization.
Current wording
Operating income for the three and nine-month periods ended September 30, 2024 increased by $1.4 million and $2.4 million, respectively. This was primarily due to the increases in gross margin, partially offset by increases in SG&A expenses of $0.4 million and $1.5 million, respectively, driven by the increase in seasonal staff, the increase in national living wage and salary increases, along with increases in facility costs.
Previous wording
Reconciliation to Adjusted EBITDA by segment for the Three and Six Months ended June 30, 2024
Current wording
Reconciliation to Adjusted EBITDA by segment for the Three and Nine-Months ended September 30, 2024
Previous wording
Reconciliation to Adjusted EBITDA by segment for the Three and Six Months ended June 30, 2023
Current wording
Reconciliation to Adjusted EBITDA by segment for the Three and Nine-Months ended September 30, 2023
Previous wording
For the six months ended June 30, 2024, net cash provided by operating activities was a $2.1 million outflow, compared to a $32.5 million inflow for the six months ended June 30, 2023, representing a $34.6 million decrease in cash generation from operating activities. This decrease was driven primarily through the previous year benefiting from favorable receipts due to the timing of invoicing for Vantage terminal rollout for several key customers.
Current wording
For the nine months ended September 30, 2024, net cash inflow provided by operating activities was $24.8 million, compared to a $43.0 million inflow for the nine months ended September 30, 2023, representing a $18.2 million decrease in cash generation from operating activities. The decrease was driven primarily due to trading levels and working capital timing.
Previous wording
Change in fair value of derivative liabilities and stock-based compensation expense decreased by $2.4 million to $3.9 million due to a $2.1 million reduction in the stock-based compensation expense and a $0.3 million reduction in the recycling of the terminated currency swaps which ended on September 30, 2023.
Current wording
Change in fair value of derivative liabilities and stock-based compensation expense decreased by $4.1 million to $5.7 million due to a $3.6 million reduction in the stock-based compensation expense and a $0.5 million reduction in the recycling of the terminated currency swaps which ended on September 30, 2023.
Previous wording
Depreciation and amortization increased by $1.1 million, to $22.5 million, with increases of $1.1 million for intangible assets and $0.9 million for contract costs partly offset by a $0.5 million reduction in machine depreciation and a $0.4 million reduction in software development amortization.
Current wording
Depreciation and amortization increased by $2.5 million, to $35.1 million, with increases of $1.4 million for intangible assets and $1.1 million for contract costs.
Previous wording
Other net cash (utilized)/generated by operating activities decreased by $24.5 million, to a $19.7 million outflow. The relative movements between the six months ended June 30, 2024 and the six months ended June 30, 2023 resulted in adverse movements in deferred revenue and tax of $23.0 million and $4.6 million respectively due to invoice timing in the prior year, accounts payable $10.1 million due to differing production levels and accounts receivable $4.8 million. These were partly offset by a favorable $16.4 million inventory movement due to the large increase in the prior year for Vantage machine production and a $2.5 million movement in other debtors and prepayments.
Current wording
Other net cash utilized by operating activities increased by $8.4 million, to a $16.4 million outflow. The relative movements between the nine months ended September 30, 2024 and the nine months ended September 30, 2023 resulted in adverse movements in accounts payable and accruals of $12.5 million and accounts receivable of $16.1 million, both figures impacted by timing of deals and the relative levels of manufacturing activity. These were partly offset by favorable movements in inventory $11.7 million, payroll and business taxes $5.5 million and prepayments $2.0 million.
Previous wording
Net cash utilized in investing activities decreased by $2.5 million, to $13.5 million during the six months ended June 30, 2024. This was driven by lower spend on plant, property and equipment of $1.3 million, lower capital software spend of $0.6million and the acquisition of Lot.to in 2023 for $0.6 million.
Current wording
Net cash utilized in investing activities decreased by $9.9 million, to $29.5 million during the nine months ended September 30, 2024. This was driven by an $8.4 million decrease in plant, property and equipment, a $1.9 million decrease in capitalized software spend and a $0.9 million increase in contract cost additions. The prior period also included the acquisition of Lot.to for $0.6 million.
Previous wording
During the six months ended June 30, 2024, net cash used by financing activities was $0.5 million relating to finance lease spend. During the six months ended June 30, 2023, net cash utilized by financing activities was $0.8 million, with $0.7 million of finance lease spend and $0.1 million on share repurchases.
Current wording
During the nine months ended September 30, 2024, net cash used by financing activities was $0.4 million relating to finance lease spend. During the nine months ended September 30, 2023, net cash utilized by financing activities was $2.6 million, with $1.0 million of finance lease spend and $1.6 million on share repurchases.
Previous wording
To fund our obligations, we have historically relied on a combination of cash flows provided by operations and the incurrence of additional debt or the refinancing of existing debt. As of June 30, 2024, we had liquidity consisting of $23.5 million in cash and cash equivalents and a further $6.3 million of undrawn revolver facility. This compares to $42.1 million of cash and cash equivalents as of June 30, 2023, with a further $25.4 million of revolver facilities undrawn. We had a working capital outflow of $19.8 million for the six months ended June 30, 2024, compared to a $4.8 million inflow for the six months ended June 30, 2023.
Current wording
To fund our obligations, we have historically relied on a combination of cash flows provided by operations and the incurrence of additional debt or the refinancing of existing debt. As of September 30, 2024, we had liquidity consisting of $36.5 million in cash and cash equivalents and a further $6.7 million of undrawn revolver facility. This compares to $26.4 million of cash and cash equivalents as of September 30, 2023, with a further $24.4 million of revolver facilities undrawn. We had a working capital outflow of $16.4 million for the nine months ended September 30, 2024, compared to an $8.0 million outflow for the nine months ended September 30, 2023.
Previous wording
The level of our working capital surplus or deficit varies with the level of machine production we are undertaking and our capitalization as well as the seasonality evident in some of the businesses. In periods with minimal machine volumes and capital spend, our working capital is typically more stable. In periods where significant numbers of machines are being produced, the levels of inventory and creditors are typically higher and there is a natural timing difference between converting the stock into sellable or capitalized plant and settling payments to suppliers. These factors, along with movements in trading activity levels can result in significant working capital volatility. In periods of low activity, our working capital volatility is reduced. Working capital is reviewed and managed with the aim of ensuring that current liabilities are covered by the level of cash held and the expected level of short-term receipts.
Current wording
The level of our working capital surplus or deficit varies with the level of machine production and procurement we are undertaking and our capitalization as well as the seasonality evident in some of the businesses. In periods with minimal machine volumes and capital spend, our working capital is typically more stable. In periods where significant numbers of machines are being produced or procured, the levels of inventory and creditors are typically higher and there is a natural timing difference between converting the stock into sellable or capitalized plant and settling payments to suppliers. These factors, along with movements in trading activity levels can result in significant working capital volatility. In periods of low activity, our working capital volatility is reduced. Working capital is reviewed and managed with the aim of ensuring that current liabilities are covered by the level of cash held and the expected level of short-term receipts.
Previous wording
Some of our business operations require cash to be held within the machines. As of June 30, 2024, $6.4 million of our $23.5 million of cash and cash equivalents were held as operational floats within the machines. At June 30, 2023, $5.8 million of our $42.1 million of cash and cash equivalents were held as operational floats within the machines
Current wording
Some of our business operations require cash to be held within the machines. As of September 30, 2024, $6.7 million of our $36.5 million of cash and cash equivalents were held as operational floats within the machines. At September 30, 2023, $6.0 million of our $26.4 million of cash and cash equivalents were held as operational floats within the machines
Previous wording
Under our debt facilities in place as of June 30, 2024, we are not subject to covenant testing on the Senior Secured Notes. We are, however, subject to covenant testing at the level of Inspired Entertainment Inc., the ultimate holding company, on our RCF which requires the Company to maintain a maximum consolidated senior secured net leverage ratio of 6.0x on March 31, 2022, stepping down to 5.75x on March 31, 2023 and 5.50x from March 31, 2024 and thereafter (the “RCF Financial Covenant”). The RCF Financial Covenant is calculated as the ratio of consolidated senior secured net debt to consolidated pro forma EBITDA (defined as net income (loss) excluding depreciation and amortization, interest expense, interest income and income tax expense) for the 12-month period preceding the relevant quarterly testing date and is tested quarterly on a rolling basis, subject to the Initial Facility (as defined in the RCF Agreement) being drawn on the relevant test date. The RCF Financial Covenant does not include a minimum interest coverage ratio or other financial covenants. Covenant testing at June 30, 2024 showed covenant compliance with a net leverage of 3.1x.
Current wording
Under our debt facilities in place as of September 30, 2024, we are not subject to covenant testing on the Senior Secured Notes. We are, however, subject to covenant testing at the level of Inspired Entertainment Inc., the ultimate holding company, on our Super Senior Revolving Credit Facility which requires the Company to maintain a maximum consolidated senior secured net leverage ratio of 6.0x on March 31, 2022, stepping down to 5.75x on March 31, 2023 and 5.50x from March 31, 2024 and thereafter (the “RCF Financial Covenant”). The RCF Financial Covenant is calculated as the ratio of consolidated senior secured net debt to consolidated pro forma EBITDA (defined as net loss excluding depreciation and amortization, interest expense, interest income and income tax expense) for the 12-month period preceding the relevant quarterly testing date and is tested quarterly on a rolling basis, subject to the Initial Facility (as defined in the RCF Agreement) being drawn on the relevant test date. The RCF Financial Covenant does not include a minimum interest coverage ratio or other financial covenants. Covenant testing at September 30, 2024 showed covenant compliance with a net leverage of 3.1x.
Previous wording
The Indenture governing the Senior Secured Notes contains covenants and certain reporting requirements including the requirement to provide the lender, within 60 days after the close of the quarter, unaudited quarterly financial statements with footnote disclosures.
Current wording
The Indenture contains covenants and certain reporting requirements including the requirement to provide the Lender, within 60 days after the close of the quarter, unaudited quarterly financial statements with footnote disclosures. The Company was unable to comply with this requirement as of September 30, 2023 due to the requirement to restate previously reported financial statements as reported in a Current Report on Form 8-K filed with the SEC on November 8, 2023. The debt agreement allows the Company a 30-day grace period to provide such financial information once they receive any notice of non-compliance. No such notice was received and concurrent with the filing of the September 30,2023 10Q with the SEC on February 27, 2024, the reporting requirement was met. There were no other breaches of the debt covenants in the periods.
Previous wording
There were no covenant violations in the periods ended June 30, 2024 or June 30, 2023.
Current wording
There were no other breaches of the debt covenants in the periods ended September 30, 2024 or September 30, 2023.
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