NEW YORK, Nov. 11, 2021 /PRNewswire/ --

• Third Quarter Revenue of $77.6 million demonstrates continued momentum in our Interactive and Virtual Sports segments and strong recovery in our Gaming and Leisure segments from prior-year levels
• Third Quarter Interactive Revenue increased 73.4% year-over-year
• Third Quarter Net Income increased to a quarterly record $25.0 million
• Third Quarter Adjusted EBITDA¹ of $30.1 million, ahead of management's Third Quarter guidance range of $28 million to $30 million
• Generated $19.8 million in operating cash flow during Third Quarter

Inspired Entertainment, Inc. ("Inspired" or the "Company") (NASDAQ: INSE), a leading B2B provider of gaming content, systems and solutions, today reported financial results for the three-month period ended September 30, 2021. The results reflect continued growth in the Interactive and Virtual Sports segments and strong recovery in the Gaming and Leisure segments following customers' retail venues reopening following COVID-19 lockdowns.  

• Total Revenue increased 29.0% year-over-year to $77.6 million in the three months ended September 30, 2021, on a reported basis², compared to $60.1 million in the prior-year period. Total Revenue increased 52.7% year-over-year excluding the $9.3 million payment from a UK LBO customer related to our contractual revenue share of the customer's value added tax (VAT) rebate ("VAT-related revenue") received in third quarter 2020.
• Net income increased to a quarterly record $25.0 million, or $1.10 per basic share and $0.30 per diluted share, compared to $0.5 million, or $0.02 per basic and diluted share, in the prior-year period.
• Adjusted EBITDA increased 20.4% year-over-year to $30.1 million compared to $25.0 million in the prior-year period. Adjusted EBITDA increased 88.8% year-over-year excluding $9.1 million of income received in third quarter 2020 relating to the VAT-related revenue and associated third party fees ("VAT-related income").
• Adjusted EBITDA Margin¹ was 38.8% in third quarter 2021 compared to 41.6% in third quarter 2020. Third quarter 2021 Adjusted EBITDA Margin increased approximately 740 basis points year-over-year when compared to the third quarter 2020 Adjusted EBITDA Margin of 31.4% excluding the VAT-related revenue and VAT-related income.
• Net Cash Provided by Operating Activities Less Cash from Investing Activities during the quarter was an inflow of $13.8 million.

"I am very pleased with our third quarter results, as they reflect that we have emerged from the pandemic a much stronger, leaner and more efficient Company with significant momentum and increased growth opportunities," said Lorne Weil, Executive Chairman of Inspired.  "Our evolution this year, compared to pre-pandemic periods, is being driven by consistent growth in the operating performance of our capital efficient Interactive and Virtual Sports segments, demonstrating the substantial demand that exists for our products as well as an acceleration in general industry trends."

"Our strong third quarter financial results exceeded our expectations, in the face of changing foreign exchange rates and delays in COVID-19 restriction removals, supporting our confidence in the long-term outlook for the Company. Between the strong retail gaming outlook, robust iGaming trends and the overall improvement in our cost structure coming out of COVID-19, we were able to generate $19.8 million in operating cash flow and increase our cash position by $12.6 million during the quarter. At September 30, 2021, we had a cash balance of approximately $37.1 million and undrawn revolver availability of approximately $27.0 million³, leaving us in a better financial position than ever to deliver on our strategic plan and maximize shareholder value," said Stewart Baker, Executive Vice President and Chief Financial Officer of Inspired.

"Our North American business remains a key driver of growth as we continue to expand our footprint, add to our portfolio of games and improve our speed to market. In addition to introducing our Virtuals online with BetMGM in New Jersey in the third quarter, we launched our Interactive games with DraftKings in Michigan and signed a multi-year exclusive contract with the Major League Baseball Players Alumni Association (MLBPAA) to bring the MLBPAA greats to life in a virtual homerun hitting competition.  We have been actively pursuing online gaming supplier licenses in several additional jurisdictions and announced Loto-Quebec as our first iLottery customer, which we believe is an underpenetrated sector.  We continue to see significant opportunities in the North American gaming landscape, and we believe we are well positioned based on our content-driven strategy and depth of relationships," continued Weil.

"We believe the third quarter is a good indicator of the strength of each of our segments coming out of COVID-19.  Looking out to 2022, we see continued growth across each of our segments, with our Interactive and Virtual Sports segments increasing their relative contribution to overall results," concluded Weil. 

Recent Highlights (as of November 11, 2021)

Interactive

• New Customers – Interactive content was launched with 12 new brands during the third quarter, including DraftKings in Michigan, four brands with The Stars Group and Leo Vegas in Spain. 
• New Jurisdictions –In the current quarter, our Interactive games went live with bet365 in the Netherlands.
• New Content – Eight games were launched during the third quarter across the estate including Big Piggy Bonus™, which has proven popular with players.
• First iLottery Customer – Loto-Quebec has agreed to launch our iLottery games in addition to our Interactive slots subsequent to the end of the third quarter. This will be Inspired's first entry into the iLottery market. 
• License Update – In the third quarter, Inspired received a license from Alberta Gaming, Liquor and Cannabis ("AGLC") to include Interactive games on PlayAlberta.ca, the only regulated online gaming site in the Province. Subsequent to the end of the quarter, we were granted an iGaming supplier license in the newly regulated Connecticut market, with several games submitted for approval.

Virtual Sports

• Retail and Online Virtual Sports Agreements – During the third quarter, Inspired signed Virtual Plug & Play™ (VPP) agreements with Mozzartbet (Serbia), Novibet (Greece), Betshop (Greece) and iBet. Subsequent to the end of the quarter, the Company signed VPP agreements with FonBet and BetPlay (Colombia). VPP allows online players to access multiple Virtual Sports via an intuitive player interface.
• Online Virtual Plug & Play™ ("VPP") Launches – During the third quarter, Inspired launched VPP with BetMGM in New Jersey.
• New Products – Inspired launched four channels of its brand-new V-Play Soccer 3.0 with bet365 in the third quarter. In Greece, our U.S. Basketball product was deployed into the OPAP retail estate of approximately 3,500 venues. In addition, multiple Italian clients, including Snaitech, launched with our new Penalty shootout, Matchday Ultra and Marbles products as well as upgrades to existing products. Subsequent to the end of the quarter, Inspired signed a multi-year exclusive contract with the Major League Baseball Players Alumni Association (MLBPAA) to bring the MLBPAA greats to life, delivering an experience with 'Home Run Shoot Out™', a virtual homerun hitting competition, which can be licensed to all of Inspired's Virtual Sports customers, both online and in retail.

Gaming

• 60 Valor™ Sales in Illinois – Third quarter sales bring total Valor™ terminal sales in North America since launch to 600. The Company has commitments for 95 additional units in Illinois thus far in the fourth quarter.
• More Units in Greece –Awarded a further 500 Valor units in Greece during the third quarter. Once delivered, our total unit count in Greece will be approximately 9,440 terminals. 
• Italy Content Strategy – In the third quarter, we recognized a 944 video lottery terminal (VLT) sale to Sisal in Italy, completing a 1,624 VLT hardware sale. Inspired will continue to supply Sisal with downloadable content.

Leisure

• Record Holiday Parks Demand- We experienced record revenues from the holiday park sector in the third quarter driven by prior-year investment in product mix and consumer demand.
• Cashless Operations – Our new cashless solution has been successfully implemented in a representative selection of Leisure Parks.
• Strong Machine Performance - We also saw strong revenues from MSAs and improving machine performance in Pubs in the quarter with 97% of Pubs operational.

Overview of Third Quarter 2021 Results Versus Third Quarter 2020 on a Reported Basis

Total Revenue increased 29.0% year-over-year to $77.6 million in the three months ended September 30, 2021, on a reported basis, compared to $60.1 million in the prior-year period. Excluding the VAT-related revenue, Total Revenue increased 52.7% year-over-year reflecting the continued growth in the Interactive and Virtual Sports segments and strong recovery in the Gaming and Leisure segments following customers' retail venues reopening following COVID-19 lockdowns.

Interactive Revenue grew 73.4% year-over-year to a record $6.1 million from $3.5 million, due to the consistent launch of new content across the estate, growth in the customer base in new, emerging and core markets and increased promotional activity through exclusive deals with tier-one customers. This performance led to Interactive segment operating income increasing 44.9% year-over-year to $2.3 million, primarily due to the increase in revenue and partly offset by an increase in cost of sales and third-party platform provider costs in line with the revenue increase as well as an increase in SG&A expenses driven by the investment in the segment to help drive the increasing revenues.  Interactive Adjusted EBITDA increased 53.9% year-over-year to $3.4 million from $2.2 million in the prior-year period. 

Virtual Sports Revenue increased to a record $10.5 million in third quarter 2021 from $8.3 million in the prior-year period primarily due to a $2.8 million increase in Online Virtuals driven by the migration of customers to online, partially offset by a decline in recurring Retail Virtuals of $0.5 million.  Some retailers are reporting revenues ahead of pre-Covid levels, but others remain modestly behind with an improving picture week-on-week as recreational players return to shops. In addition, the Italian government introduced a proof of vaccination requirement during August which has slowed recovery. Virtual Sports Segment Operating Income was $7.6 million, which compares favorably to $5.7 million in the third quarter 2020 primarily due to the increase in revenue. Virtual Sports Adjusted EBITDA increased to $8.6 million from $6.8 million in the third quarter 2020. 

Gaming Service Revenue (excluding VAT-related revenue) increased year-over-year by $1.8 million as Inspired's retail customers returned to pre-COVID performance levels in third quarter 2021. Total Gaming Customer Gross Win per unit per day (in our functional currency, GBP) for the three-month period increased by £6.08, or 8.6%, as retail venues in the UK LBO estate showed year-over-year growth.  Revenues returned to prior-year levels in Greece and Italy. Gaming Product Revenue increased by $3.7 million driven by product sales of $2.0 million in the UK markets, $1.1 million in sales to Italy and $0.8 million of VALOR™ terminal sales in North America. Gaming Segment Operating Income for third quarter 2021 was $5.1 million. Excluding VAT-related income, Gaming Operating Income increased by $4.6 million year-over-year due to an increase in product revenue and a decrease in depreciation and amortization, partly offset by an increase in SG&A as all staff returned from furlough.  Gaming Adjusted EBITDA was $10.9 million.  Excluding VAT-related income, Gaming Adjusted EBITDA increased by $3.6 million year-over-year. 

Leisure Revenue increased $16.0 million to $33.4 million in third quarter 2021 from $17.4 million in third quarter 2020 driven by record incomes in leisure parks with the removal of all COVID-19 restrictions for the majority of the period. COVID-19 restrictions resulted in frequent amendments to overseas travel policies in the UK, resulting in a record summer season for our Leisure Parks business despite initial restrictions in Wales and Scotland.  During the prior-year period, many sectors of the Leisure segment (Pubs, Holiday Parks, Motorway Service Areas and Bingo) were impacted due to the COVID-19 lockdown in the UK. Motorway Service Areas have delivered strong performance in the quarter with revenue ahead of pre-pandemic levels on a like-for-like basis. Pubs have been slower to recover following reopening, however, machine performance has improved during the quarter. Digitization of the pub estate has continued with further digital machines placed in the quarter taking digital penetration to 78%. Leisure Segment Operating Income improved to $9.0 million from a loss of $2.1 million.  Leisure Adjusted EBITDA improved to $13.0 million from $3.3 million in the third quarter 2020. Leisure Adjusted EBITDA Margin nearly doubled year-over-year to 38.9% from 19.1%, exhibiting the strength of the business and the results of the integration efforts.

Total Company Selling, General and Administrative expenses increased to $29.2 million from $21.5 million in the prior-year period. This $7.7 million increase was driven by all staff returning from furlough for the whole period ($3.6 million), additional other employee costs ($0.4 million), additional IT costs due to returning staff ($0.3 million) and lower labor capitalization ($0.3 million). Currency movements accounted for $1.8 million of the increase.

Net Income during the quarter increased to $25.0 million compared to $0.5 million in the prior-year period primarily due to the increase in net operating income ($6.7 million), the increase in credit of the change in fair value of warrant liability ($17.1 million) and a decrease in net interest expense ($1.0 million). 

Total Company Net Cash Provided by Operating Activities Less Capital Expenditures during the quarter was an inflow of $13.8 million.