Inspired Q3 financials reflect strong recovery following pandemic challenges

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Virtual sports and gaming firm Inspired Entertainment Inc has reported Q3 financials for the period ended September 30, 2021, reflecting continued growth in the Interactive and Virtual Sports segments and strong recovery in the Gaming and Leisure segments. 

Total revenue, said the firm, increased 29% year-on-year to $77.6m, compared to $60.1m in the prior-year period. Net income increased to a quarterly record $25m, compared to $0.5m, while adjusted EBITDA grew 20.4% year-on-year to $30.1m versus $25m in the prior-year period. 

Executive Chairman Lorne Weil told investors: “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.  

“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.”

Stewart Baker, Executive VP and CFO, added: “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 $19.8m in operating cash flow and increase our cash position by $12.6m during the quarter. At September 30, 2021, we had a cash balance of approximately $37.1m and undrawn revolver availability of approximately $27m, leaving us in a better financial position than ever to deliver on our strategic plan and maximize shareholder value.” 

According to Weil, Inspired’s North American business remains a key driver of growth as the firm continues to expand its footprint, adds to its portfolio of games and improves its speed to market. 

He stated: “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.”

During Q3, Inspired saw its Interactive revenue grow 73.4% year-over-year to a record $6.1m from $3.5m, 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-on-year to $2.3m, 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. 

Virtual Sports revenue, meanwhile, increased to a record $10.5m in Q3 from $8.3m in the prior-year period primarily due to a $2.8m increase in Online Virtuals driven by the migration of customers to online, partially offset by a decline in recurring Retail Virtuals of $0.5m. 

Virtual Sports Segment Operating Income was $7.6m, which compares favorably to $5.7m in the third quarter 2020 primarily due to the increase in revenue. 

Gaming Service Revenue (excluding VAT-related revenue) increased year-over-year by $1.8m as Inspired’s retail customers returned to pre-COVID performance levels in third quarter 2021.