Earnings call transcript: Inspired Entertainment beats Q1 2025 EPS forecast

Inspired Entertainment (INSE) reported its Q1 2025 earnings, significantly surpassing analysts’ expectations with an EPS of $0.13 compared to the forecasted -$0.04. The company missed revenue projections, reporting $60.4 million against an anticipated $68.4 million. Despite the earnings beat, the stock saw a slight decline of 1.47% in premarket trading. According to InvestingPro data, the company maintains impressive gross profit margins of 69% and trades at a modest P/E ratio of 3.85x, suggesting potential value for investors.

Key Takeaways

• Inspired Entertainment reported a higher-than-expected EPS of $0.13, beating the forecast by $0.17.
• Revenue fell short of expectations, coming in at $60.4 million versus the forecasted $68.4 million.
• The company’s stock dropped 1.47% in premarket trading following the earnings release.
• The interactive business segment showed substantial growth, with a 49% revenue increase.
• Challenges included regulatory changes in Brazil and a shift in holiday schedules in the UK.

Company Performance

Inspired Entertainment demonstrated robust performance in its interactive business, which grew by 49% in revenue and 75% in EBITDA. The company faced challenges such as the UK Easter holiday shift and regulatory changes in Brazil, which impacted its virtual sports segment. Despite these hurdles, the gaming segment showed strength with 5,000 Vantage terminals delivered to William Hill.

Financial Highlights

• Revenue: $60.4 million, below the forecasted $68.4 million.
• Earnings per share: $0.13, exceeding the forecast of -$0.04.
• Q1 Adjusted EBITDA: $18.5 million, a nearly 20% year-over-year increase.

Earnings vs. Forecast

Inspired Entertainment’s EPS of $0.13 beat the forecast by $0.17, marking a significant positive surprise. However, the revenue fell short by $8 million, indicating challenges in meeting sales expectations. This mixed result reflects both operational strengths and market challenges.

Market Reaction

Following the earnings announcement, Inspired Entertainment’s stock declined by 1.47% in premarket trading. This reaction suggests that while the EPS beat was positive, the revenue miss and broader market conditions may have tempered investor enthusiasm. The stock’s current price of $7.47 remains above its 52-week low of $6.50 but well below its high of $11.61. InvestingPro analysis indicates the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report, part of InvestingPro’s coverage of over 1,400 US stocks.

Outlook & Guidance

The company expects its digital business to contribute more than 40% of EBITDA, with a focus on expanding its hybrid dealer product. Virtual sports are anticipated to recover in Q3 and Q4, driven by new content and market stabilization. Forward guidance suggests continued growth, with projected EPS of $0.56 for FY2025 and $0.79 for FY2026. With a healthy current ratio of 1.54 and an overall financial health score of "GOOD" from InvestingPro, the company appears well-positioned to execute its growth strategy. InvestingPro subscribers have access to 10 additional key insights about INSE’s financial health and growth potential.

Executive Commentary

"Our interactive business continues on its incredible growth trajectory," said Lorne Will, Executive Chairman, highlighting the company’s strong performance in digital segments. Brooks Pierce, an executive, expressed optimism about the iGaming business’s growth, stating, "We’re super excited about how just the core iGaming business is growing."

Risks and Challenges

• Regulatory changes in Brazil could continue to impact the virtual sports segment.
• The UK retail market faces challenges, potentially affecting revenue streams.
• Interest expenses are expected to rise with new debt refinancing, impacting profitability.
• Market saturation in mature segments could limit growth opportunities.
• Macroeconomic pressures may affect consumer spending and gaming demand.

Q&A

During the earnings call, analysts inquired about the impact of US tariffs, to which executives responded that the effect was minimal. Questions also focused on the company’s deleveraging strategy and the potential of the hybrid dealer product, which executives are optimistic about. Additionally, analysts sought clarity on the stabilization of the virtual sports market, with executives expressing confidence in future growth.

Full transcript - Inspired Entertainment Inc (INSE) Q1 2025:

Conference Call Operator: Good morning, everyone, and welcome to the Inspired Entertainment First Quarter twenty twenty five Conference Call. Please note, today’s event is being recorded. Please refer to the company’s safe harbor statement that appears in the first quarter twenty twenty five earnings press release, which is also available in the Investors section of the company’s website at www.inthinc.com. This Safe Harbor statement also applies to today’s conference call as the company’s management will be making certain statements that will be considered forward looking under securities laws and rules of the SEC. These statements are based on management’s current expectations or beliefs and are subject to risks, uncertainties and changes in circumstances.

In addition, please note that the company will discuss both GAAP and non GAAP financial measures. A reconciliation is included in the earnings press release. With that completed, I would now like to turn the conference call over to Lorne Will, the company’s Executive Chairman. Mr. Will, please go ahead.

Lorne Will, Executive Chairman, Inspired Entertainment: Thank you, operator. Good morning, everyone, and thank you for joining our first quarter call. With me here, as usual, are Brooks Pierce, James Richardson and Era Carrera. First quarter adjusted EBITDA of about $18,500,000 was nicely ahead of last year, growing at close to 20% despite some unexpected negatives. As Brooks will discuss in a few minutes, the leisure business was hurt by the slippage of the UK Easter holiday from the first to the second quarter, which is a very important period for the business.

So onetime product sales similarly slipped from the first into the second quarter. And there were disturbances in Brazil as new regulations, including new taxes, came into effect. And finally, we lost about $1,000,000 of EBITDA due to the reclassification of lease revenue as we discussed recently at our year end call. So in summary then, we were actually very pleased with the underlying progress in the first quarter. Following the close of the quarter, we have successfully negotiated the refinancing of our existing publicly syndicated bonds due in June 2026 with a five year sterling denominated floating rate financing with Barclays and HG Vora.

We expected to sign definitive agreements and to have the new financing in place next month. As previously discussed, we hope to complete the sale of our Holiday Park business in the relative near term and we intend to use the proceeds towards deleveraging. Finally, as compared to our existing bonds, the new financing will allow much greater flexibility going forward. All in all then, we’re very pleased to have successfully negotiated this financing in a less than ideal environment with two lenders with whom we have had a great relationship for many years. Let me stay on this issue of deleveraging for a long time.

Once we finalize the sale of our Holiday Park business, we will have divested the part of our business with the highest relative capital intensity. As we explained in the past, our recurring retail bedding shop revenue in The UK and Europe is at this point predominantly capital light. And in North America, our retail business is a combination of equipment sales and recurring content revenue similarly involving essentially no CapEx. So our one remaining capital intensive retail segment is The UK pub business. And here again, have begun to implement a plan to mirror our other retail businesses where we will sell the equipment, generating recurring and predictable content and server platform fees and minimize CapEx.

As was the case with our bedding shop business, there will be some loss of pub revenue in the transition phase since there will no longer be a return of capital component in pricing, but this will be ultimately outweighed by the free cash flow and deleveraging benefit. Our goal with all these initiatives is to get our annual CapEx to around 25,000,000 almost all of the content related for both our retail businesses and more importantly, our rapidly growing and very profitable digital businesses. So let me then turn to a discussion of businesses. Our interactive business continues on its incredible growth trajectory with revenue and EBITDA in the first quarter growing 4979% respectively over Q1 twenty twenty four and margins expanding from 54% in 2024 to 64% in 2025, demonstrating the incredible scalability of this business. Virtually every week since the close of the quarter has recorded a new high.

Our business in The United States in the first quarter grew by 90% against underlying market growth of about 20%, reflecting the quality and quantity of our content and the intensity of our account management. And bear in mind that we have only begun to see the potential for hybrid dealer. It’s pretty clear at this point that looking ahead, the individual states in The United States are being forced to be far less dependent on the federal government in terms of health care, education, housing and so forth. And there will be a predictable requirement for new sources of state revenue. This is inescapable.

I have mentioned previously that in states like Michigan, New Jersey, Pennsylvania and most recently Delaware, iGaming where our interactive business participates overwhelms sports betting in terms of revenue and profitability. So looking back over the arc of the fifty year history of the relationship between gaming and state finances, we can see pretty clearly how this is going to play out and we’re ideally positioned to benefit. Our Virtual Sports business continues to show a remarkable level of profitability, although obviously accompanied by difficult dynamics. While the year over year quarterly decline in Virtual Sports EBITDA unfortunately masks the overall strength and acceleration in the rest of the business, the sequential performance is telling a somewhat different story. The data from the last several weeks is indicating that the business has essentially stabilized and as Brooks will discuss at far greater detail, driven by a number of important initiatives.

We expect the business to return to year over year growth by the third quarter or certainly the second half of this year. Together with the strength in our Interactive and Retail businesses, this would allow for an acceleration in aggregate company performance. And with that, I’m pleased to hand things over to Brooks.

Brooks Pierce, Executive/Management, Inspired Entertainment: Okay. Thank you, Lorne. I’ll go through each business segment in some detail. My remarks will be a little longer than usual as we have a number of items to cover to give a comprehensive perspective on what we’re seeing in the business and the markets we serve. So again, just reiterating what Lauren said, let’s start with the Interactive segment that continues to produce incredibly strong results and that momentum is carrying over into the second quarter with Q1 revenue increasing 49% and as Lorne mentioned adjusted EBITDA increasing 75% over the same period continuing the trend of substantial growth and increased operating leverage.

All of this growth is broad based geographically where we’ve seen the biggest growth year over year is in North America, where we’ve now added Delaware through our partnership with Rush Street and the partnership is off to an outstanding start. Our game designers have increased their focus on U. S. Style games, which has really paid off with leading titles like Wolf It Up and Big Piggy Bank that use a unique game mechanic that’s resonated with players. We recently completed a tour of some of the key U.

S. Operators and they affirm that our games are continuing to grow with them and that they are some of their key titles. Additionally, we’re excited to be adding some key markets later this year in North America and abroad with our games going live in West Virginia as well as in South Africa. Now let’s go over to hybrid dealer. So hybrid dealer, which comes from a combination of the game design and virtual design teams, is a product category we’ve talked about a lot and is now scaling rapidly.

So this product has three derivatives at the moment. So the branded wheel games, single zero roulette and four ball extra bet roulette. But we have many more derivatives in development that we’re excited to get out to the market. Our branded wheel games are live with both BetMGM and Caesars in New Jersey and in Michigan with BetMGM and with Caesars going live in Michigan and Ontario likely in the second quarter this year. We’ll also deliver this product to the Pennsylvania market once we receive the requisite regulatory approvals.

BetMGM Bonus City has now been live for over fourteen months and has enjoyed sustained performance and even has seen substantial increases in total value played over the last two months. We’re obviously gratified to see that this product has the staying power and continues to be enjoyed by players more than a year after its launch. We now also have both Single Zero Roulette live in The UK with Bet365 and with GameSys and integrated with Relax, which has it deployed with a number of operators. We expect to go live with Lotto Quebec, in May and expect that that will be a key launch for us. We’ll also be rolling this out with a number of operators in Brazil here in the second quarter and later in the year starting with BET365 in Brazil.

And then moving on to the latest derivative game, the four ball extra bet game, now live with GameSys and Relax, and the early results are encouraging. We’ll be rolling this out to BET365 and BET MGM in New Jersey later this quarter as well as to another to a number, excuse me, of additional integrators in multiple markets. Needless to say, it’s a very busy time with this product category and we’ll start sharing metrics later in the year as it settles in. But I can say safely that the combination of continued growth in the core iGaming segment along with the accelerating rollout of hybrid dealer has us feeling very good about the segment of the company. Going over to the virtuals business, we’re encouraged by the stabilization we’ve seen in the business after a clearly challenging start to January due to the move to a fully taxed and regulated market in Brazil that’s been discussed broadly across the industry.

We were no different and were impacted as well, but have seen a steadying in that market from our two biggest customers in the last few months. We also have a number of key initiatives happening over the next several quarters that we believe will put Virgil’s back on a growth trajectory. We’re focused on launching our licensed content such as the NFL, NBA and NHL. That cater to a North American audience with key operators in North America, and we aim to be able to go live with BetMGM during the second half of the year. In Brazil, although it’s early days, we launched a Brazil specific soccer game in Portuguese and with local stadium views.

The early performance numbers are encouraging with one operator showing stakes growth of over 25%, and we’ll be deploying this version to our largest Brazil customers over the next several months. In Greece, OPAP is adding a fourth virtual sports channel to its retail state that should drive incremental play. And we’ve also just gone live in Turkey through our partnership with SEASL, partner of Flutter, to add our virtuals products in 2,000 retail shops with monitors, in addition another 3,000 shops where customers will be able to bet using a QR code. Finally, we’re excited to launch our V lottery game with the Virginia Lottery here in the second quarter, which will be our first online lottery deployment in North America through a partnership with Aristocrat Interactive and with a very successful iLottery operator in the Virginia Lottery. We’re very active in the lottery space in both North America and around the world and expect this to be a very good channel for the virtual sports product.

Moving on to the Gaming segment. The business continues to perform well through a combination of new cabinets with a key customer as well as cost savings initiatives being realized despite some macroeconomic challenges in the retail sector in The UK. We successfully delivered and installed the 5,000 Vantage terminals to the William Hill Estate on time and on budget and we’re seeing high single digit growth from this customer year over year. In Greece, we also expect to see the benefit of the rollout of our newest terminals in the market throughout this year and have a roadmap of strong local based content that will be delivered. And in Illinois, it’s early in the trial period, but we are seeing strong performance from our portrait style valiant cabinet and our game subscriptions were taken up by almost all customers in the market, leading to the strongest game performance since we went live there several years ago.

And finally, our leisure business performed as expected with the one notable point that Lauren mentioned being that The U. K. Holiday was in the first quarter last year and was in the second quarter this year, which caused a disconnect in the performance numbers. And now that we’ve had that holiday period, we’ve seen strong results at the holiday parks over that holiday weekend. With that, I’ll hand it back over to Lauren for any closing remarks.

Thanks

Lorne Will, Executive Chairman, Inspired Entertainment: Brooks. That was a great summary of actually an incredible range of activities going on in the company right now, but I don’t have any further comments to make. So operator, if you could please turn the program over to Q and A.

Conference Call Operator: All right. Our first question comes from the line of Barry Jonas from Truist Securities. Please go ahead.

Barry Jonas, Analyst, Truist Securities: Hey, guys. Main question we’re getting now is just on the tariffs in The U. S. Can you maybe just talk about the ramifications on the business, both on the cost side and also if you’re seeing any changes in operator or player behaviors? Thank you.

Brooks Pierce, Executive/Management, Inspired Entertainment: Yeah. Tariff is not a big issue for us because really the only impact could potentially be in sales in Illinois, which is not a huge part of our business. Ironically, being kind of UK based, we have an opportunity to sell into the Canadian markets that we think actually the tariff issue could actually potentially help us. But but frankly, the tariff issue, not a big issue for us as we’re seeing it right now.

Lorne Will, Executive Chairman, Inspired Entertainment: Well, there was also a Barry, there was there was a thing in the press this morning. I didn’t have a chance to read it carefully, but something about announcing that president Trump did some kind of trade deal with The UK. So if if that’s actually the case, then, we absolutely don’t have any issue, you know, with tariffs, obviously.

Barry Jonas, Analyst, Truist Securities: And just I mean, one of your customers, reported last night on the interactive side and and said not really seeing much, just confirming across your US interactive base. It’s the same thing. No no expected ramifications.

Josh Nichols, Analyst, B. Riley Securities: No. Not at all.

Lorne Will, Executive Chairman, Inspired Entertainment: Not in the end.

Ryan Sigdahl, Analyst, Craig Hallum Capital Group: From a

Conference Call Operator: consumer perspective?

Brooks Pierce, Executive/Management, Inspired Entertainment: No. I mean, we’re I think as I said in my remarks, you know, the first quarter was great and the trends continue. Now that we’re kind of almost halfway through the second quarter, we’re not seeing any slowing down at all in the interactive numbers.

Barry Jonas, Analyst, Truist Securities: Got it. So appreciate the commentary about the Holiday Park business sale and reworking the pub business. Does that sort of set you on the path to hit that 40 EBITDA margin target you’ve talked about in the past? And maybe just a sense of timing to achieve that goal, broadly speaking?

Lorne Will, Executive Chairman, Inspired Entertainment: Yeah. So I think it more it’s done, it more than sets us on the path. It it pretty much guarantees that we’re gonna have EBITDA margins, comfortably over 40%. We’re cautiously optimistic that we will conclude that, well, certainly this year and hopefully, you know, within the next few months.

Conference Call Operator: Got it. Alright. Thank you so much, guys.

Brooks Pierce, Executive/Management, Inspired Entertainment: Thanks, Barry.

Conference Call Operator: Our next question comes from the line of Ryan Sigdahl from Craig Hallum Capital Group. Please go ahead.

Ryan Sigdahl, Analyst, Craig Hallum Capital Group: Hey, good morning, guys. Wanna go to virtual sports. So if I look at comments from March 17 when you reported q four, so order almost over, it said we indeed, we passed the inflection point. We’ve seen stabilization in virtual sports in the first quarter thus far, etcetera, etcetera. I guess, what happened?

The numbers stepped down in a pretty big way sequentially, even bigger year over year. I get the reasons, and we’ve heard the same thing from Brazil, the transition period, Flutter said it last night, etcetera, but just the friction with customers. But I guess what happened from the last time you guys spoke at the tail end of the quarter to, I guess, the results in the quarter?

Brooks Pierce, Executive/Management, Inspired Entertainment: Yeah. I mean, I think well, a couple of things. In terms of the stabilization, now, obviously, here we are, you know, in the May. So we have another, you know, five weeks of well, actually, since March 17, really, probably seven or eight weeks of data that we, you know, we look at very closely and we plot, and we do see a stabilization. Now on a week to week basis, we do see continued volatility.

So we feel, again, probably more comfortable. We were seeing those trends when we talked about it in March. But now that we’re in the May, we just have more time to be able to see that it really has stabilized. But I will say, you know, in terms of the of the volatility, over the course of the thirteen or fourteen weeks, it stabilizes. But each week, you know, there’s ups and downs.

But the biggest issue is, you know, we talked about was in the beginning of the of the quarter was the the combination of, obviously, the changes in, you know, signing up customers and everything else in Brazil and, obviously, the tax rate.

Conference Call Operator: Yeah. But but just but, Brian, just to make it

Lorne Will, Executive Chairman, Inspired Entertainment: clear, you know, when when we talked in March, in the year end conference call, So we at that point, we had had, you know, January, February, March, most of March results. And although, we knew that the first quarter itself was gonna be down sequentially from the fourth quarter, although at a diminishing rate. We saw pretty clearly in March that that that that that once we had that step down from the fourth quarter that that had stopped, that we had had definitely leveled out in January, February, March, and we’re we still saw that in April and so far in May. So I think I think we’re as as comfortable as we can be that that we have seen the bottom of, you know, of of the virtual sports volume, and, we should be heading upward from here.

Ryan Sigdahl, Analyst, Craig Hallum Capital Group: Great. Glad to hear the debt refinance. Anything you can share from a term standpoint, how the the rate may or may have may

Brooks Pierce, Executive/Management, Inspired Entertainment: or may not compare to the existing?

Conference Call Operator: Yeah.

Lorne Will, Executive Chairman, Inspired Entertainment: So let me start answering that, Ryan, by saying that in that refi, you know, we had a bunch of objectives to push the maturity out obviously for five years, very importantly to minimize the call protection so that we have maximum flexibility for example, to either refinance or to make a major M and A transaction going forward. We wanted a floating rate to take advantage of the downward sloping forward. So when you’re Sterling curve and ideally, we also wanted a starting rate that was inside where our current brands were trading in a pretty tough market. And I think we accomplished all these given obviously that there are trade offs among them. We could have agreed to a fixed rate and had other better terms, but I think the idea was to get the best possible package of stuff.

So with the rate reduction that coincidentally and fortuitously was announced this morning by the Bank of England, our going in rate of six points over so called Sonia is a little over 10%. And given the slope of the curve and the currently projected rate projections, we feel that we’ll comfortably be at about 9.5%

Conference Call Operator: by the end of this year.

Lorne Will, Executive Chairman, Inspired Entertainment: And beyond that we have two steps down in the spread as we deleverage beginning with the anticipated sale of our Holiday Park business later this year. So in terms of an interest expense number, let’s say, Ryan, for modeling purposes, I think $30,000,000 in interest for 2026 is a very safe number and we could see reductions from there as either the Sonya rate drops more more likely we get benefits from deleveraging. This is a little higher than where we are now. But from a cash point of view, given a very significant reduction in CapEx, as I noted previously, we should be well ahead in terms of free cash flow. Hopefully that answers your question.

Ryan Sigdahl, Analyst, Craig Hallum Capital Group: That was very, very helpful. Thank you, Lauren. And flexibility, yes, is very important in this market with everything you have going on. Looking forward to hearing the Holiday Park sale. And that’s it for us.

Conference Call Operator: Thanks. Good luck,

Brooks Pierce, Executive/Management, Inspired Entertainment: Thanks, Ryan.

Conference Call Operator: Your next question comes from the line of Jordan Bender from Citi. Go ahead.

Jordan Bender, Analyst, Citi: Good morning, everyone. I maybe want to follow-up on the prior conversation. You mentioned several times, the intention to deleverage and in past quarters you’ve been comfortable with the balance sheet. Is that new way of thinking really just a function of the terms of the new debt? They just become more favorable as leverage continues to fall.

Is that kind of what you’re getting at, Lauren?

Lorne Will, Executive Chairman, Inspired Entertainment: Well, yes. Certainly, with a a new debt deal where we where we benefit from deleveraging, it it gives us plenty of incentive to deleverage. But in a way, it it it was also the reverse that in negotiating the deal because we were pretty confident that we were going to be deleveraging. We were willing to enter into a deal where we would get to where we feel we want to be once we deleverage. So I think the deleveraging is has always been sort of implicit as our fastest growing and most profitable and least capital intensive business is the digital business and the slower growing business is the retail business.

But the sale of holiday parks and the, let’s say, remodeling of our of our pub business just accelerates that.

Jordan Bender, Analyst, Citi: Great. And moving back to Brazil, it was fairly well telegraphed. That market had a slow start, and it’s good to see you’re seeing stabilization there. Curious on the adoption rate of the new wave of players to the virtual sports market. And, you know, we’ve we’ve all seen the estimates for the size and potential of Brazil.

But is there any kind of aspirational number in terms of revenue that you could look to drive from that market? Thank you.

Brooks Pierce, Executive/Management, Inspired Entertainment: Yeah. I mean, one of the things I mentioned is, the performance that we’ve seen from this kind of localized content. I mean, obviously, it’s a very soccer slash football crazy market, and that’s where the majority, at least in virtual sports, is played out. You know, we saw it with with one of our smaller customers, you know, this huge uplift. We actually just went live yesterday with one of our two big customers in Brazil with that product, and we saw a very nice day yesterday, obviously, very early days.

The thing that we need to do in Brazil, quite frankly, is we need to get we have the two biggest customers, BET three sixty five and Pitano, which we think represent about 40% of the market. You add Entane in with SportingBet, and we kind of have half the market. But we need to get the other half of the market live with virtual sports. And that’s gonna take, you know, some time in terms of getting contracts negotiated, getting integrations done. You know, we’re working through channel partners down there such as Altanar and Camby.

So the market’s just gonna take, you know, a little bit longer than probably we would hope to develop, but we are are very bullish based on what we see from our existing customers that Brazil is gonna be a very, very strong market for virtual sports.

Jordan Bender, Analyst, Citi: Great. Thank you very much.

Brooks Pierce, Executive/Management, Inspired Entertainment: No problem.

Conference Call Operator: Your next question comes from the line of Chad Beynon from Macquarie. Please go ahead.

Chad Beynon, Analyst, Macquarie: Good morning. Thanks for taking my question. Wanted to ask about just trends that you’re seeing outside of The U. S. Or North America.

I think we all have a pretty good handle in terms of the consumer here. But as we look across the pond, kind of what we what you’re seeing from a recurring basis, whether it’s in The UK, Greece, or Italy. Brooks, I know you talked about some of the new product that’s out there. So maybe it’s a little harder to to really kind of focus in on that. But but any additional color just in terms of if you’re seeing the consumer in those areas, holding up through this period?

Thank you.

Brooks Pierce, Executive/Management, Inspired Entertainment: Yeah. Yeah. Sure. Yeah. And I know, you know, some of the operators

K. Have already reported Entain, which is not a retail customer of ours, but they reported they were, I think, down 4% on a retail basis. The good news for us is we’re seeing William Hill get the uplift that we were expecting from Vantage terminals. But if you’re taking a year over year comparison, our two other big customers, Betfred and Paddy Power, have softened a bit. So the overall market for us is up, but it’s driven by the increase that we’re seeing from William Hill.

So as I mentioned in my remarks, I think The UK retail high street market is a bit challenged. Good news is on the iGaming side is we’re continuing to see growth out of The U. K. And continuing to see us take a bigger share of The U. K.

Pot kind of almost on a quarter by quarter basis. In Greece, it’s relatively flat. But as we’ve talked about in the past, we’re just rolling out some of our new terminals. So we would expect that to give us a lift over the course of the year. But Greece as a market itself is relatively flat.

I’d say the same thing for Italy. So not U. K. Is the only one that we’re seeing a little bit of softness with customers that have had the Vantage terminal for over a year. But thankfully, William Hill’s kind of hitting on all cylinders for us.

The market itself in total is up for us.

Chad Beynon, Analyst, Macquarie: Great. Thank you. And then, Lauren, last quarter, I believe it was you made a comment just in terms of where you expected digital to be at the end of the year as a percentage of, I believe it was a percentage of EBITDA. Sounds like things are progressing pretty well and all the initiatives, you know, continue to look good as we kind of get through the year. Has anything changed just in terms of how you view the contribution of EBITDA for the year?

Lorne Will, Executive Chairman, Inspired Entertainment: No. I mean, I think the the the interactive is really so far outperforming where we might have expected it to be at this point. You know, the as I mentioned in my remarks, the, you know, the growth in North America or The United States of 90% year over year without the benefit of any new states is kinda pretty remarkable. And I think for all the reasons that Brooks said, we’re starting to feel and and the data is supporting it, you know, pretty good about, you know, where virtuals is headed. So I think the combination of of of ultimately divesting the the holiday park business and the tremendous performance we’re seeing from digital, I would imagine that by the end of the year, we’ll be at least at the level that we talked about last time, if not higher.

Brooks Pierce, Executive/Management, Inspired Entertainment: And I think just to add to that, the we’ll I think in the next quarter, we’ll look to give some hard data on hybrid dealer since it’s really in its scaling up phase. But now that we’ve seen it with big operators like Caesars, BetMGM, Bet365, Gamesys and a bunch of what we would classify as Tier two operators under this Relax integration. We’re starting to see a pretty broad based support for this on a pretty much everyday basis. That side of the business is growing. So now it’s really about how can we get that out to as many customers as possible.

It’s definitely not a demand issue. It’s a supply issue that we’ve got to get this out to as many customers as we can. But we’ll that’s only going to add to the percentage of the business of the EBITDA contribution that will be digital.

Chad Beynon, Analyst, Macquarie: Thank you, both.

Josh Nichols, Analyst, B. Riley Securities: You’re welcome.

Conference Call Operator: Your final question comes from the line of Josh Nichols from B. Riley Securities. Please go ahead.

Josh Nichols, Analyst, B. Riley Securities: Yes. Thanks for taking my question. Very nice step up during the quarter in cash. I just want to talk a little bit about how should we be thinking about free cash flow generation going forward just given the dynamics you have with increasing high margin digital revenue you have, as well as CapEx light model that you’ve been implementing in this new debt facility?

Lorne Will, Executive Chairman, Inspired Entertainment: Yeah. I mean, I I think, you know, without getting into any, you know, specific number because we we can try not to get involved in, you know, guidance per se, but certainly all the components, that would go into defining what our free cash flow are moving positively. EBITDA is obviously going up. The portion of EBITDA that has relatively little CapEx is also going up. As I mentioned before, we’ve got a little bit of increase in interest expense, but that will be far more than offset by a decline in CapEx, which we think, as I said earlier, is going to probably settle at around $25,000,000 a year, which is way below where it is now.

So I think our free cash flow conversion is going to steadily increase, maybe in the sort of 30% of EBITDA range. They’re gonna be years when it’s gonna be up or down depending upon how working capital plays itself out. You know, it always seems to be a pain at the end of the year, but I think we’re feeling very positive about free cash flow in light of in light the deleveraging, in light of the reduction in CapEx, and obviously the growth in the high margin, high cash convergent digital part of our business.

Josh Nichols, Analyst, B. Riley Securities: Thanks. And then just last follow-up for me. Just there’s a lot of irons in the fire, so to speak, particularly, I think, for the second half that provides some very interesting opportunities. If you were to pick what you’re probably most excited about, I’m guessing hybrid dealer, if you could just talk about is the expectation there that as this ramps that do you think that the growth rate that that business is seeing is sustainable or could even possibly accelerate? Presumably, it’s not a very big right percentage of revenue today, but that should be increasing given opportunities you’ve talked about over the last couple of quarters.

Brooks Pierce, Executive/Management, Inspired Entertainment: Yes. I mean, I think you answered the question very well is that is exactly how we feel is that hybrid dealer look, I mean, we’re super excited about how just the core iGaming business is growing, and we’re taking share and the performance has been phenomenal. And it’s early days with hybrid dealer, but it’s clear. The example I looked at was or that I mentioned was the BetMGM bonus wheel that’s been out now for fourteen months. And this is it’s not like iGaming where they have a kind of a short lived trajectory and then they fade out.

This is a game that’s been out for fourteen months and the numbers now are higher than they were when they started. So we feel confident about that with and now we’re starting to get a good mix of the bigger operators and the smaller operators. We’ve got some big ones that are coming on board. FanDuel will come on board by the end of the year. So yes, I mean that’s the part that we’re certainly the most excited about from a growth standpoint starting from a pretty small start.

But yes, that’s by the end of the year, I think we’ll certainly be able to guide to how big we think that business can be for us.

Josh Nichols, Analyst, B. Riley Securities: Appreciate it. Thank you.

Brooks Pierce, Executive/Management, Inspired Entertainment: You’re welcome.

Conference Call Operator: I will now turn the call back over to Mr. Will for closing remarks.

Lorne Will, Executive Chairman, Inspired Entertainment: Thank you, operator, and thank you, everyone, for joining us on our call. We know that Penn has their call starting at nine. So for those of you who are still on our call, we will now release you to jump on the pen call. But thank you for your support, and we look forward to talking to you in a few months. Thanks.

Conference Call Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

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