INSE

Business Transformation Progress

• The company continues to advance its transformation to a more digital-led, less capital-intensive business model, with adjusted EBITDA margin expanding 1,000 basis points year-over-year to 45% at the end of Q2 2026, in line with full-year targets.
• Year-to-date 2026, the company has retired $23 million in debt, repurchased over 700,000 shares, and reduced net leverage to 3.0x.

Operational Updates

• Retail: The company is executing its margin expansion strategy post divestment of the holiday parks business and pub segment restructuring. It continues to refresh terminal hardware and game content across markets, leveraging omnichannel synergy by moving successful online titles to retail, with early results from the Wolf It Up title proving encouraging.
• Interactive: The new Manchester content studio (Be Real Games) is on track to launch its first game by the end of 2026, and will add one new game per month focused on market-specific content to complement the company's existing franchise portfolio. Seasonal trends historically point to much stronger second-half performance, with Q4 typically being the strongest quarter, and several custom game development upfront payments are scheduled for Q4 2026 that will deliver incremental benefit.
• Virtual Sports: The segment is growing via new product rollouts (including Soccer 4.0 with BetBuilder) and expanded distribution to new partners and regulated markets, with strong early growth from the recently launched BetMGM integrated offering.

Long-Term Strategic Targets (through end of 2027)

• Midpoint target of $130 million in full-year EBITDA, with EBITDA margin expanding to 47%.
• Target net leverage declining to under 2.5x, with free cash flow conversion stabilizing between 25% and 30% of EBITDA.

• Full-year 2026 EBITDA guidance is maintained at $112 to $118 million, matching the prior target range.
• Reported full-year 2026 free cash flow conversion is guided at 20%+ of EBITDA. Excluding a one-time $7 million non-recurring working capital outflow from pub restructuring, pro forma free cash flow conversion is expected to exceed 25% of EBITDA.
• Management maintains that sequential interactive growth will follow historical seasonal patterns, with Q3 2026 results exceeding Q2, and Q4 2026 exceeding Q3, as the full impact of the UK tax increase is already reflected in Q2 results and will not create additional headwinds for future sequential growth.
• 2027 long-term targets are unchanged, calling for midpoint EBITDA of $130 million, EBITDA margin of 47%, net leverage below 2.5x, and free cash flow conversion of 25% to 30%.

1. Retail Solutions: The segment achieved adjusted EBITDA margins (pre-corporate allocation) of over 50% for the first time, driven by cash box growth across UK retail locations and successful redeployment of terminals from closed William Hill shops. In Greece, it delivered year-over-year cash box growth and expanded its leading market share, with a new order of 2,000 replacement Vantage Flank Cabinets scheduled for Q4 2026 delivery. It also installed 125 terminals for AGLC in Alberta, strengthening its position in the Canadian VLT market, and achieved strong performance in Illinois via 92% terminal base subscription to new game packs. It accounts for a significant portion of the company's continuing retail footprint, contributing stable high-margin revenue alongside digital growth.

2. Interactive: Revenue grew 15% year-over-year and adjusted EBITDA grew 13% year-over-year. The 13% EBITDA growth lagged revenue growth due to the UK remote gaming duty increase, which nearly doubled the tax rate from 21% to 40% starting April 1, 2026. UK gross gaming revenue grew 40% year-over-year, with the company gaining market share that partially offset the tax impact. Hybrid dealer turnover grew 13% and GGR grew 25% sequentially from Q1 2026. The segment gained share in North America, launched in the newly regulated Alberta market in July 2026, and is developing new iLottery capabilities for 2027 launch. It is the fastest-growing segment, with underlying growth remaining strong even after the tax impact.

3. Virtual Sports: The segment delivered stable results, with overall revenue growing 3% sequentially quarter-over-quarter. Turnover for BetMGM's integrated virtual sports offering in New Jersey and Ontario increased 50% from Q1, with continued growth recorded in early July. The new Soccer 4.0 product with BetBuilder functionality delivered a 6% turnover increase for customers during the World Cup period. Latin America turnover grew 55% and GGR grew 61% year-over-year via the Altanard partnership. A launch with the Massachusetts Lottery via Aristocrat Interactive is scheduled for Q3 2026, which will expand the segment's presence to four U.S. lottery states.

• The near doubling of UK remote gaming duty from 21% to 40% reduced Q2 2026 interactive EBITDA growth and will continue to distort year-over-year comparisons for the remainder of 2026, offsetting 40% year-over-year UK GGR growth.
• A UK think tank has proposed further tax increases on B2 gaming machines, which could negatively impact retail segment margins if adopted; while the industry is now unified in opposing large hikes, the outcome of regulatory budget proposals remains uncertain.
• Further regulatory tax changes in the UK could create additional margin pressure for both retail and interactive segments, with the potential for job losses and high street business decline if large increases are implemented.
• The timing of the Chicago VLT market launch remains uncertain; while management expects it to be a strong long-term opportunity, launch may slip to 2027 rather than occurring in Q4 2026 as currently speculated.

Q: Given the visible deceleration in interactive growth following the UK tax hike, can you share the underlying interactive growth outside the UK, and explain the sustainability of recent UK market share gains? / A: UK GGR grew 40% year-over-year, and the company gained UK market share despite the tax impact, with the tax headwind exactly matching what was previously guided. Ex-UK interactive growth is significantly higher than UK growth, as the full tax increase hits reported UK revenue directly. The company expects sustainable UK share growth driven by continued content investment, the new Manchester studio, and omnichannel synergy from its large existing UK retail footprint, which drives online player familiarity with the company's games. After the Q2 2026 tax increase is lapped in 2027, year-over-year growth comparisons will return to normal with the same tax base.

Q: Is Q2 2026 the sequential revenue trough for interactive this year, and what drives higher free cash flow conversion in the second half of 2026? / A: Q2 is definitely the sequential trough for 2026. The slight sequential revenue decline is entirely due to the new UK tax, which is now fully reflected in results, so sequential growth will resume in Q3 and Q4 in line with historical seasonal patterns, where the second half is always stronger than the first. The full $7 million one-time non-recurring working capital outflow from pub restructuring hit the first half, with no similar outflow expected in the second half, which will raise full-year pro forma free cash flow conversion to over 25% from the reported 20%+ guidance.

Q: With capital currently allocated to debt repayment and share repurchases, is M&A off the table in the near term, and what is the long-term ceiling for interactive EBITDA margins? / A: M&A is not off the table. The company will still consider opportunistic acquisitions that offer significant synergies with the existing business and are immediately accretive to earnings. Interactive EBITDA margins are already near 70%, which is very healthy, and while further scaling will deliver a few more points of margin expansion over time, a 10-15% jump in margins is not expected.

Q: What are the revenue and capex terms for the new 2,000 terminal order in Greece, and what has been the World Cup impact on virtual sports performance? / A: The revenue share terms for the Greek order are unchanged from prior batches, with a higher mix of higher-performing slant terminals in this refresh. The Greek capex for this order is customer-funded, so it is excluded from the company's guided 2026 $30-35 million cash capex range. World Cup combined with the new Soccer 4.0 product (with bet builder functionality) delivered a 6% uplift in virtual turnover, and the recent full virtual integration with major U.S. operator BetMGM is expected to drive continued growth through the upcoming American football season.