Inspired Entertainment, Inc. Q3 FY2025 earnings call

• Discussed upcoming U.K. budget and potential gaming tax changes, noting past management through similar changes.
• Highlighted strong Q3 performance with momentum into Q4, confident of exceeding Q4 2024 performance.
• Sale of holiday parks business on November 7, providing margin boost and improving net leverage.
• Reauthorized a $25 million share buyback plan.
• Hybrid Dealer won award for innovative product of the year, with network effect rolling out.
• Plan to increase game deliveries through added capacity and new interactive studio.
• Focus on market share gains in key geographies for Interactive and Gaming segments.

The Interactive segment achieved over 40% year-over-year adjusted EBITDA growth for the ninth consecutive quarter, with October being the single largest revenue month in its history and last week the biggest week ever. The Virtual Sports segment saw stabilization for the second consecutive quarter, and is expected to grow year-over-year in Q4. The Gaming business performed well across the U.K., Greece, and North America. Trailing 12-month adjusted EBITDA was $110 million, with digital business being a key driver of financial performance.

• Projecting digital mix to reach 60% by 2027, headcount to decline by nearly 40%, adjusted EBITDA margin to grow from 35% to 45%, free cash flow conversion to 30% of EBITDA, and net leverage to decline to 2.
• Expressed absolute adjusted EBITDA guidance in high single-digits due to potential U.K. tax changes, with specific guidance to follow once budget is announced.
• Bullish on opportunity for increased iGaming states, seeing potential for significant operating leverage.

• Potential impact of U.K. budget gaming tax changes.
• Shop closures potentially manageable but lower-performing shops at risk.
• Potential increase in remote gaming duty.

Q: Ryan Sigdahl asked about Virtual Sports expecting year-over-year growth in Q4 and what gives confidence in acceleration.

A: Brooks Pierce said adjustments with largest customer, added 6 customers in Brazil, and growth in Turkey with new content give confidence.

Q: Barry Jonas inquired about M&A commentary.

A: Lorne Weil said interested in tuck-in acquisitions strengthening existing businesses, like interactive studios or equipment businesses, not diversification or crazy prices.

Q: Jordan Bender asked about new interactive studio and share buyback philosophy.

A: Brooks Pierce said studio is built in-house, and Lorne Weil said share buyback is opportunistic, balancing leverage reduction and M&A potential.

Q: Chad Beynon asked about Interactive's growth and prediction markets.

A: Brooks Pierce said Interactive is broad-based with share gains, and prediction markets not impacting Interactive much, but Virtuals in North America affected by slow operator adoption.

Q: Josh Nichols asked about Interactive growth pace and Virtual Sports' growth for 2026.

A: Brooks Pierce said Interactive expects to sustain growth with increased game deliveries, and Virtual Sports expects catalyst with BetMGM going live in North America.