Inspired Entertainment, Inc. Q1 FY2026 earnings call

• Lessened lower margin, more capital intensive, and less strategic holiday parks business and restructured pubs estate to be less capital and labor intensive, leading to shift to higher margin digital businesses and improved retail performance, driving overall growth in EBITDA, margin expansion and significant improvement in cash flow.
• Focused on delivering best content to support strategy. Projecting underlying trends seen will continue, expecting steady sequential growth in EBITDA from Q1 onward now seasonality removed with holiday park sale, targeting strong cash flow conversion and declining leverage driven by debt pay down and growing EBITDA.
• Will look to continue debt repayment and share repurchase in asset allocation.

Year-to-year growth in EBITDA was 29% in the first quarter. Digital accounted for about 60% of EBITDA. Generated about $16 million in free cash flow, which was used to repurchase stock and repay debt. Expect steady sequential growth in EBITDA from Q1 onward, targeting strong cash flow conversion and declining leverage driven by debt pay down and growing EBITDA.

• Expect steady sequential growth in EBITDA from Q1 onward as seasonality removed with holiday park sale.
• Target strong cash flow conversion and declining leverage driven by debt pay down and growing EBITDA.
• See large opportunity for expansion of iGaming in North America with more states likely coming on board.
• New studio for interactive will start producing games in the second half of the year, and utilization of AI to accelerate game development and get games quicker to market for partners.

• Macro and geopolitical issues impacting top line and cost environment, although not seeing impact thus far but mindful of it.

Q: Barry Jonas of Truist Securities asked about macro and geopolitical issues impacting top line and cost environment.

A: Said aligned with others, watching closely, not seeing impact thus far but mindful of it.

Q: Barry Jonas asked about updated thoughts on longer term opportunity for virtuals.

A: Frustrated at growth expected, in North America online sports betting in 39 states but only allowed in couple states, expect some product initiatives and tailwind from World Cup, opportunity in lottery space too.

Q: Ryan Siegel from Craig Helium Capital asked about guide where adjusted EBITDA margin increased implying lower revenue and main factor.

A: Slight tweak, margins continue to increase, confident in EBITDA margin targets.

Q: Ryan Siegel asked about future expansion opportunities for interactive.

A: Going into regulated markets, large opportunity for expansion of iGaming in North America with more states likely, little cost for additional states other than bandwidth.

Q: Chad Bannon of Macquarie asked about interactive new studio, game launches and AI.

A: Built own studio, will start producing games in second half of year, AI accelerates game development to get games quicker to market.

Q: Chad Bannon asked about retail business in US.

A: Built at right pace, mentioned Canadian provinces ordering machines, Illinois Chicago starting in fourth quarter, developed game with gaming arts for class three cabinet, looking at North American and worldwide distributed gaming.

Q: B Riley Securities' Matthew asked about play tech deal alongside World Cup and MGM sports book tab integration in New Jersey.

A: Play tech deal more of second half and 2027 revenue driver, MGM in New Jersey results mixed so far, early but bullish on conversations with other sports betting operators, virtual sports has big opportunity in lottery industry.

Q: B Riley Securities' Matthew asked about hybrid dealer pipeline.

A: Joseph Baeta and Best Friend expected to be live in June, Wolf It Up game first to go out, rolling out to customers starting in June, will talk in more detail in August call.