Troubled trading in the UK LBO sector, caused by the £2 maximum B2 stake, has had a marked effect on the latest financial results for US gaming technology provider Inspired Entertainment during the three-month period ended June 30, 2019. Total Revenue was $26.7m, a year-on-year decrease of $10.2m, or 27.6%, on a reported basis, and $8.7m, or 23.6%, on a functional currency (£) at constant rate basis.
Adjusted EBITDA for the three months ended June 30, 2019 was $8.9m, a year-on-year decrease of 42.8% on a reported basis and 39.7% on a functional currency at constant rate basis.
Looking more specifically at the impact of the UK LBO market, Inspired cited a $5.5m fall in revenue and $4m drop in adjusted EBITDA as a result of the implementation of the £2 limit in April this year. Excluding the Triennial implementation, said the firm, those two numbers would have been more in line with the previous quarter’s levels.
“The impact of the Triennial Implementation was in line with our expectations,” said Lorne Weil, Executive Chairman. “We believe we’ve taken much of the hit on the loss of revenue in the second quarter with very little mitigation so far. We’ve actually begun to see the revenue creep back up, with gross win per unit per day improving from 44.5% decline in April to a 38% decline in June.
“This trend has continued thus far in the third quarter and we anticipate the trend will be more pronounced with the acceleration of shop closures and the restructuring mitigation. We remain confident in our plan to manage the effect of this regulatory change and we believe the ultimate projected impact on our Adjusted EBITDA should be at the lower end of the range of our guidance of approximately $10m to $11m annually on a steady state basis.”
Weil continued, “Looking forward, we are extremely focused and encouraged by our business development opportunities across a number of key territories that we believe will help offset the impact of the Triennial Implementation. We continue to see positive momentum in our North American business with new Virtual Sports and Interactive agreements in Canada and progress on our initial terminal placements anticipated in the fourth quarter. We have also deployed several interactive content launches, all while generating significant free cash flow.”
“We also see our pending transformational acquisition of NTG (Novomatic UK’s technology group), which is on track to close in the third quarter, subject to regulatory approval, as a huge catalyst in our business, dramatically increasing our size, scope and scale and augmenting the existing growth trends for our company.”