Inspired Entertainment takes a $43.8m hit despite positive progress in Q2 trading

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Virtual sports and gaming operator Inspired Entertainment has posted a net loss of $43.8m in its financial results for Q2 of FY2021, despite revenues growing by 166.4% from $15.6m to $41.5m year-on-year. More positively, the firm reported a 289.3% increase in adjusted EBITDA to $8m versus $2.1m in Q2 of FY2020.

Growth in sales, said the company, was driven by the reopening of society following the COVID-19 pandemic, which allowed betting shops, holiday parks and pubs to reopen, all of which are significant sales drivers.

The Interactive business continued to display strong performance, and sequential growth, in all major markets, with revenue of $5.8m, an increase of 69% year-on-year, due to the addition of new customers and territories and the consistent launch of new high-quality content.  

This expansion, as well as the associated costs to establish new geographies and licensed content, led to Interactive segment operating income increasing 46.8% year-on-year to $2.6m, and adjusted EBITDA increasing 45.7% to $3.6m from $2.4m in the prior-year period.  

Executive Chairman Lorne Weil stated: “We are pleased with our second quarter results as the majority of our retail businesses steadily reopened throughout the quarter and our Interactive business built upon its momentum coming into the quarter to continue its rapid growth trajectory.

“From what we have seen in July and so far in August, this momentum in the Interactive business has continued—leading to record-level revenues in July, notwithstanding the reopening of retail customers during the quarter—while our retail businesses appear to have rebounded quickly to roughly pre-COVID levels, as we had forecasted.” 

Weil continued: “Our North American business remains a key driver of growth opportunities as we continue to build momentum and expand our footprint.  Early results from our installed base of Valor terminals with Western Canada Lottery Corporation (WCLC) have been very encouraging.  

“We believe this bodes well not only for future placements with WCLC, but also for our video lottery terminal business in the Canadian lottery market, which has approximately 33,000 machines in total. We see the North American online gaming and betting markets as significant opportunities, and we believe we are well positioned in these markets.  

Commenting further on North America, he added: “We launched our first games into Michigan in the second quarter and North America has now become our second largest Interactive market, with further opportunities as we continue to reach full deployment across Michigan and New Jersey and seek to benefit from opportunities with several additional states.  

“We have also started to work with BetMGM in New Jersey on promoting our Virtual Plug & Play, which allows their online players to access multiple virtual sports via an intuitive player interface, and we are very excited about the prospects for this product.”

Stewart Baker, Executive Vice President and CFO, commented: “During the second quarter, we refinanced all of our borrowings, which extended our maturity profile and provided us increased operating flexibility, while lowering our expected interest expense (excluding the amortization of debt fees) for 2022 by approximately $3.6m. 

“Between the strong retail gaming recovery outlook, robust igaming trends, refinancing and the overall improvement in our cost structure coming out of COVID-19, we believe we are in a better position than ever to deliver on our strategic plan and maximize shareholder value.”

In its Q2 2021 overview of results versus Q2 2020, the firm revealed gaming revenue of $16.2m, up $12m due to retail customers reopening throughout the second quarter 2021 versus being shut down almost entirely for COVID-19-related closures in the prior-year period. 

Second quarter 2021 included the sale of 71 Valor terminals in Illinois. Gaming Segment operating loss improved by $4.4m over the prior-year period to $2.7m. Gaming adjusted EBITDA increased $3.5m over the prior period to $3.5m due to the reopening of retail venues.

Virtual sports revenue in the period increased to $8.2m from $7.6m year-on-year, primarily due to a $0.9m increase in retail virtual sports revenue. This was primarily offset by a $0.8m decline in one-time sales driven by the lack of real live sports in the prior-year period and a $0.4m decline in online recurring revenue due to the lack of live sports betting available in second quarter 2020.