Inspired Entertainment, Inc.

1. Nature of Operations, Management’s Plans and Summary of Significant Accounting Policies

Company Description and Nature of Operations

We are a global gaming technology company, supplying content, platform, gaming terminals and other products and services to online and land-based regulated lottery, betting and gaming operators worldwide through a broad range of distribution channels, predominantly on a business-to-business basis. We provide end-to-end digital gaming solutions (i) on our own proprietary and secure network, which accommodates a wide range of devices, including land-based gaming machine terminals, mobile devices and online computer applications and (ii) through third party networks. Our content and other products can be found through the consumer-facing portals of our interactive customers and, through our land-based customers, in licensed betting offices, adult gaming centers, pubs, bingo halls, airports, motorway service areas and leisure parks.

Management Liquidity Plans

As of March 31, 2025, the Company’s cash on hand was $39.0 million and the Company had working capital in addition to cash of $9.7 million. The Company recorded a net loss of $0.1 million and $6.4 million for the three months ended March 31, 2025 and 2024, respectively. Net losses include non-cash stock-based compensation of $1.4 million and $2.3 million for the three months ended March 31, 2025 and 2024, respectively.

Historically, the Company has generally had positive cash flows from operating activities and has relied on a combination of cash flows provided by operations and the incurrence of debt and/or the refinancing of existing debt to fund its obligations. Cash flows provided by operations amounted to $25.5 million and $6.0 million for the three months ended March 31, 2025 and 2024, respectively.

Management currently believes that the Company’s cash balances on hand, cash flows expected to be generated from operations, ability to control and defer capital projects and amounts available from the Company’s external borrowings will be sufficient to fund the Company’s net cash requirements through May 2026.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the years ended December 31, 2024 and 2023. The financial information as of December 31, 2024 is derived from the audited consolidated financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 26, 2025. The financial information for the three months ended March 31, 2024 is derived from the unaudited consolidated financial statements presented in the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2024 filed with the SEC on May 10, 2024, as revised (see note 19 to these financial statements for details of the revision). The interim results for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or for any future interim periods.

2. Allowance for Credit Losses

Changes in the allowance for credit losses are as follows:

3. Inventory

Inventory consists of the following:

Component parts include parts for gaming terminals. Our finished goods inventory primarily consists of gaming terminals which are ready for sale.

4. Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following:

5. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

6. Contract Related Disclosures

The following table summarizes contract related balances:

Revenue recognized that was included in the deferred income balance at the beginning of the period amounted to $1.7 million and $1.9 million for the three months ended March 31, 2025 and 2024, respectively.

For the periods ended March 31, 2025 and 2024 respectively, therewas no significant amounts ofrevenue recognized as a result of changes in contract transaction price related to performance obligations that were satisfied in the respective prior periods.

Transaction Price Allocated to Remaining Performance Obligations

At March 31, 2025, the transaction price allocated to unsatisfied performance obligations for contracts expected to be greater than one year, or performance obligations for which we do not have a right to consideration from the customer in the amount that corresponds to the value to the customer for our performance completed to date, variable consideration which is not accounted for in accordance with the sales-based or usage-based royalties guidance, or contracts which are not wholly unperformed, is approximately $144.7 million. Of this amount, we expect to recognize as revenue approximately 27% through December 31, 2025, approximately 43% through December 31, 2027, and the remaining 30% through December 31, 2031.

7. Long Term Debt

Senior Secured Notes

Long-term debt consists of £235.0 million ($303.4 million) of Senior Secured Notes less $1.9 million of capitalized debt fees which are being amortized over the length of the Senior Secured Notes. The Senior Secured Notes bear interest at a fixed rate of 7.875% and are fully repayable on June 1, 2026.

Under our debt facilities in place as of March 31, 2025, we were not subject to covenant testing on our senior secured notes (the “Senior Secured Notes”). We are, however, subject to covenant testing at the level of Inspired Entertainment Inc., the ultimate holding company, on our Revolving Credit Facility Agreement (the “RCF Agreement”) which required 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 March 31, 2025 showed covenant compliance with a net leverage of 2.9x.

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.

There were no covenant violations in the periods ended March 31, 2025 or March 31, 2024.

8. Stock-Based Compensation

A summary of the Company’s restricted stock unit (“RSU”) activity during the three months ended March 31, 2025 is as follows:

The Company issued a total of 322,860 shares during the three months ended March 31, 2025, in connection with the Company’s equity-based plans, which included an aggregate of 274,112 shares issued in connection with the net settlement of RSUs that vested during the prior year (on December 31, 2024) and an aggregate of 36,968 shares subject to awards that vested between 2020 and 2023.

9. Accumulated Other Comprehensive Loss (Income)

The accumulated balances for each classification of comprehensive loss (income) are presented below:

10. Net Income (Loss) per Share

Basic income/loss per share (“EPS”) is computed by dividing net income/loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period, including stock options and RSUs, unless the inclusion would be anti-dilutive.

The computation of diluted EPS excludes the common stock equivalents of the following potentially dilutive securities because they were either contingently issuable shares or because their inclusion would be anti-dilutive:

There were no reconciling items for the three months ended March 31, 2025 or March 31, 2024.

The calculation of Basic EPS includes the effects of 2,160,393 and 1,840,165 shares for the three months ended March 31, 2025 and 2024, respectively, with respect to RSU awards that have vested but have not yet been issued.

11. Other Finance Income (Expense)

Other finance income (expense) consisted of the following:

12. Income Taxes

The effective income tax rate for the three months ended March 31, 2025 and 2024 was 97.3% and 25.4%, respectively, resulting in a $5.1 million and $2.1 million income tax benefit, respectively.

The effective tax rate reported in any given year will continue to be influenced by a variety of factors, including the level of pre-tax income or loss, the income mix between jurisdictions, and any discrete items that may occur.

In the fourth quarter of 2024, the Company determined that, due to positive income generation in the United Kingdom in recent years leading to a cumulative income position, and based on forecasted future taxable income, while considering expected permanent and temporary timing tax differences, a significant portion of the valuation allowance against its deferred tax assets was no longer necessary. Consistent with the position at December 31, 2024, the company maintains a valuation allowance related to capital loss carryovers in the United Kingdom, state net operating losses unable to be utilized in the United States, and United States interest expected to be limited under Section 163(j).

13. Related Parties

Macquarie Corporate Holdings Pty Limited (UK Branch) (“Macquarie UK”) (an arranger and lending party under our RCF Agreement) is an affiliate of MIHI LLC, which beneficially owned approximately 11.2% of our common stock as of March 31, 2025. Macquarie UK held $2.1 million of the total $19.4 million of RCF drawn at March 31, 2025 and $2.1 million of the total $18.8 million of RCF drawn at December 31, 2024. Interest expense payable to Macquarie UK for the three months ended March 31, 2025 and 2024 (including non-utilization fees) amounted to $0.1 million and $0.1 million, respectively. Macquarie UK did not hold any of the Company’s senior notes at March 31, 2025 or December 31, 2024. MIHI LLC is also a party to a stockholders agreement with the Company and other stockholders, dated December 23, 2016, pursuant to which, subject to certain conditions, MIHI LLC, jointly with Hydra Industries Sponsor LLC, are permitted to designate two directors to be nominated for election as directors of the Company at any annual or special meeting of stockholders at which directors are to be elected, until such time as MIHI LLC and Hydra Industries Sponsor LLC in the aggregate hold less than 5% of the outstanding shares of the Company.

Richard Weil, the brother of A. Lorne Weil, our Executive Chairman, provides consulting services to the Company relating to our lottery operations in the Dominican Republic under a consultancy agreement dated December 31, 2021, as amended. The aggregate amount incurred by the Company in consulting fees was $37,500 and $37,500 for the three months ended March 31, 2025 and 2024, respectively.

14. Leases

Certain of our arrangements include leases for equipment installed at customer locations. As the lessor, we combine lease and non-lease components for all classes of underlying assets in arrangements that involve operating leases. The single combined component is accounted for under ASC 606,Revenue from Contracts with Customers based on the consideration that the non-lease components are the predominant items in the arrangements. If a component cannot be combined, the consideration is allocated between the lease component and the non-lease component based on relative standalone selling price. The lease component is accounted for under ASC 842,Leasesand the non-lease component is accounted for under ASC 606.

Lease income from operating leases is not material for any of the periods presented, and lease income from sales type leases for the three months ended March 31, 2024 is not material. Lease income from sales type leases for the three months ended March 31, 2025 is as follows:

15. Commitments and Contingencies

Employment Agreements

We are party to employment agreements with our executive officers and other employees of the Company and our subsidiaries which contain, among other terms, provisions relating to severance and notice requirements.

Legal Matters

From time to time, the Company may become involved in lawsuits and legal matters arising in the ordinary course of business. While the Company believes that, currently, it has no such matters that are material, there can be no assurance that existing or new matters arising in the ordinary course of business will not have a material adverse effect on the Company’s business, financial condition or results of operations.

16. Pension Plan

We operate a defined contribution plan in the US, and both defined benefit and defined contribution pension schemes in the UK. The defined contribution scheme assets are held separately from those of the Company in independently administered funds.

Defined Benefit Pension Scheme

The defined benefit scheme has been closed to new entrants since April 1, 1999 and closed to future accruals for services rendered to the Company for the entire financial statement periods presented. The Actuarial Valuation of the scheme as at March 31, 2024, determined that the statutory funding objective was not met, i.e., there were insufficient assets to cover the scheme’s technical provisions and there was a funding shortfall.

In March 2025, a recovery plan was put in place to eliminate the funding shortfall. The plan expects the shortfall to be eliminated by October 31, 2026.

The following table presents the components of our net periodic pension cost:

17. Segment Reporting and Geographic Information

Operating segments are identified as components of an enterprise for which separate and discrete financial information is available and is used by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief decision-making group consists of the Executive Chairman, the Chief Executive Officer and the Chief Financial Officer.

The Company’s chief decision-making group uses measures of segment profit and loss to evaluate the performance areas of 1) Achievement of revenue and gross margin; 2) Level of staff and non-staff expenses against budget; 3) Investment in capitalized software development; and 4) Additional cash expenditures impacting working capital. The decision-making group uses the information to allocate financial resources and drive operation decisions such as investing in new customers, products, geographies and refocusing commercial teams to drive new sales, accelerating or delaying staffing or other selling, general and administrative expenditures and ensuring technology staff utilization on new product development.

The Company operates its business along four operating segments, which are segregated on the basis of revenue stream: Gaming, Virtual Sports, Interactive and Leisure. The Company believes this method of segment reporting reflects both the way its business segments are managed and the way the performance of each segment is evaluated.

Other segment items consist of costs incurred in restructuring activities.

The following tables present revenue, cost of sales, excluding depreciation and amortization, staff-related selling, general and administrative expenses, non-staff related selling, general and administrative expenses, labor costs capitalized, depreciation and amortization, stock-based compensation expense, acquisition related transaction expenses, other segment items, operating profit/(loss), total assets and total capital and other long-lived asset expenditures for the periods ended March 31, 2025 and March 31, 2024, respectively, by business segment. Certain unallocated corporate function costs have not been allocated to the Company’s reportable operating segments because these costs are not allocable and to do so would not be practical. Corporate function costs consist primarily of selling, general and administrative expenses, depreciation and amortization, capital expenditures, right of use assets, cash, prepaid expenses and property and equipment and software development costs relating to corporate/shared functions. All acquisition and integration related transaction expenses are allocated as corporate function costs.

Segment Information

Three Months Ended March 31, 2025

Three Months Ended March 31, 2024

Geographic Information

Geographic information for revenue is set forth below:

UK revenue includes revenue from customers headquartered in the UK, but whose revenue is generated globally.

Geographic information of our non-current assets excluding goodwill and deferred tax is set forth below:

Software development costs are included as attributable to the market in which they are utilized.

18. Customer Concentration

During the three months ended March 31, 2025, there wereno customers that represented at least 10% of the Company’s revenues. During the three months ended March 31, 2024, there was one customer that represented at least 10% of the Company’s revenues, accounting for approximately 11% of the Company’s revenues. This customer was served by the Virtual Sports and Interactive segments.

At March 31, 2025 there was one customer that represented at least 10% of the Company’s accounts receivable, accounting for approximately 11% of the Company’s accounts receivable. At December 31, 2024, there was one customer that represented at least 10% of the Company’s accounts receivable, accounting for approximately 16% of the Company’s accounts receivable.

19. Revision of Previously Reported Information

In connection with the preparation of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “2024 Form 10-K”), the Company identified immaterial errors in its previously reported financial statements for the periods ended March 31, 2024, June 30, 2024 and September 30, 2024 relating to the classification of leases between operating and sales type.

In accordance with Staff Accounting Bulletin (“SAB”) 99, Materiality, and SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements, the Company evaluated the materiality of the errors from qualitative and quantitative perspectives, and concluded that the errors were immaterial to any prior interim financial statements. Notwithstanding this conclusion, management has revised the accompanying consolidated financial statements for 2024, and related notes included herein to correct the errors. Management also revised the consolidated financial statements for 2024 and related notes in the 2024 Form 10-K, filed with the SEC on March 26, 2025.

The following tables present the effect of correcting this error on the Company’s previously issued financial statements.

For the period ended March 31, 2024

For the period ended March 31, 2024

20. Subsequent Events

The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements were issued. The Company did not identify subsequent events that would have required adjustment or disclosure in the consolidated financial statements.