Inspired Entertainment, Inc.: Form 10-Q for the period ended Mar 31, 2025
Filed with the SEC on May 8, 2025 and accepted by EDGAR at May 8, 2025, 16:20 ET.
Management's discussion and analysis
As filed, 66,115 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual future results could differ materially from the historical results discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this report.
Forward-Looking Statements
We make forward-looking statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. For definitions of the term “forward-looking statements”, see the definitions provided in the Cautionary Note Regarding Forward-Looking Statements at the forepart of this report.
Seasonality
Our results of operations can fluctuate due to seasonal trends and other factors. Sales of our gaming machines can vary quarter on quarter due to both supply and demand factors. Player activity for our holiday parks is generally higher in the second and third quarters of the year, particularly during the summer months and slower during the first and fourth quarters of the year.
Revenue
We generate revenue in four principal ways: i) on a participation basis, ii) on a fixed rental fee basis, iii) through product sales and iv) through software license fees. Participation revenue generally includes a right to receive a share of our customers’ gaming revenue, typically as a share of net win but sometimes as a share of the handle or “coin in” which represents the total amount wagered.
Geographic Range
Geographically, the majority of our revenue is derived from, and the majority of our non-current assets are attributable to, our UK operations. The remainder of our revenue is derived from, and non-current assets attributable to, Greece and the rest of the world (including North America).
For the three-months ended March 31, 2025, we derived approximately 65% of our revenue from the UK (including customers headquartered in the UK but whose revenue is generated globally), 10% from Greece, 11% from USA, and the remaining 14% across the rest of the world. For the three-months ended March 31, 2024, we derived approximately 74% of our revenue from the UK (including customers headquartered in the UK but whose revenue is generated globally), 10% from Greece, 6% from USA, and the remaining 10% across the rest of the world.
As of March 31, 2025, our non-current assets (excluding goodwill) were attributable as follows: 74% to the UK, 11% to Greece and 15% across the rest of the world. As of March 31, 2024, our non-current assets (excluding goodwill) were attributable as follows: 75% to the UK, 8% to Greece and 17% across the rest of the world.
Foreign Exchange
Our results are affected by changes in foreign currency exchange rates as a result of the translation of foreign functional currencies into our reporting currency and the re-measurement of foreign currency transactions and balances. The impact of foreign currency exchange rate fluctuations represents the difference between current rates and prior-period rates applied to current activity. The geographic region in which the largest portion of our business is operated is the UK and the British pound (“GBP”) is considered to be our functional currency. Our reporting currency is the U.S. dollar (“USD”). Our results are translated from our functional currency of GBP into the reporting currency of USD using average rates for profit and loss transactions and applicable spot rates for period-end balances. The effect of translating our functional currency into our reporting currency, as well as translating the results of foreign subsidiaries that have a different functional currency into our functional currency, is reported separately in Accumulated Other Comprehensive Income.
During the three-months ended March 31, 2025, we derived approximately 35% of our revenue from sales to customers outside the UK, compared to 26% during the three months ended March 31, 2024.
In the section “Results of Operations” below, currency impacts shown have been calculated as the current-period average GBP:USD rate less the equivalent average rate in the prior period, multiplied by the current period amount in our functional currency (GBP). The remaining difference, referred to as functional currency at constant rate, is calculated as the difference in our functional currency, multiplied by the prior-period average GBP:USD rate. This is not a U.S. GAAP measure but is one which management believes gives a clearer indication of results. In the tables below, variances in particular line items from period to period exclude currency translation movements, and currency translation impacts are shown independently.
Non-GAAP Financial Measures
We use certain financial measures that are not compliant with U.S. GAAP (“Non-GAAP financial measures”), including EBITDA and Adjusted EBITDA, to analyze our operating performance. In this discussion and analysis, we present certain non-GAAP financial measures, define and explain these measures and provide reconciliations to the most comparable U.S. GAAP measures. See “Non-GAAP Financial Measures” below.
Results of Operations
Our results are affected by changes in foreign currency exchange rates, primarily between our functional currency (GBP) and our reporting currency (USD). During the periods ended March 31, 2025 and March 31, 2024, the average GBP:USD rates were for the three-month period 1.26 and 1.27, respectively.
The following discussion and analysis of our results of operations has been organized in the following manner:
- a discussion and analysis of the Company’s results of operations for the three-month period ended March 31, 2025, compared to the same period in 2024; and
- a discussion and analysis of the results of operations for each of the Company’s segments (Gaming, Virtual Sports, Interactive and Leisure) for the three-month period ended March 31, 2025, compared to the same period in 2024, including key performance indicator (“KPI”) analysis.
In the discussion and analysis below, certain data may vary from the amounts presented in our consolidated financial statements due to rounding.
For all reported variances, refer to the overall company and segment tables shown below. All variances discussed in the overall company and segment results are on a functional currency (at constant rate) basis, which excludes the impact of any changes in foreign currency exchange rates.
Key Events
During the three-month period ended March 31, 2025 in the Gaming segment, we completed the installation of 5,000 new Vantage® terminals to William Hill venues. In the Greek market 1,400 new terminals were delivered to OPAP as part of the order of 4,000 new VLT’s placed in the fourth quarter of 2024.
During the three-month period ended March 31, 2025 the Interactive segment went live with 18 new operators increasing the total number of customers at the end of the period by 15 due to the closure of a few smaller customers.
During the three-month period ended March 31, 2025 the Leisure segment opened two new motorway service areas with existing customers.
Key agreements signed in the three-month period ended March 31, 2025 include a five-year contract with Buzz Bingo, a five-year contract with MOTO and a five-year contract with Welcome Break all for the provision of gaming machines in the Leisure segment.
Overall Company Results
Three Months Ended March 31, 2025, compared to Three Months Ended March 31, 2024
(In millions)
| Revenue: | For the Three-Month Period Ended March 31, 2025 | March 31, 2024 | Variance March 31, 2025 vs March 31, 2024 Variance Attributable to Currency Movement | Variance on a Functional currency basis | Total Functional Currency Variance % | Total Reported Variance % |
|---|---|---|---|---|---|---|
| Service | $57.0 | $56.2 | $(0.4) | $1.2 | 2% | 1% |
| Product | 3.4 | 6.1 | 0.1 | (2.8) | (46)% | (44)% |
| Total revenue | 60.4 | 62.3 | (0.3) | (1.6) | (3)% | (3)% |
| Cost of Sales, excluding depreciation and amortization: | ||||||
| Cost of Service | (15.0) | (15.9) | - | 0.9 | 6% | 6% |
| Cost of Product | (2.9) | (4.5) | - | 1.6 | 36% | 36% |
| Staff-related selling, general and administrative expenses | (15.2) | (15.8) | 0.2 | 0.4 | 3% | 4% |
| Non-staff related selling, general and administrative expenses | (12.4) | (13.6) | 0.2 | 1.0 | 7% | 9% |
| Labor costs capitalized | 3.5 | 3.0 | - | 0.5 | 17% | 17% |
| Other segment items: | ||||||
| Stock-based compensation | (1.4) | (2.3) | - | 0.9 | 39% | 39% |
| Depreciation and amortization | (10.6) | (9.8) | - | (0.8) | (8)% | (8)% |
| Other selling, general and administrative expenses | (4.8) | (5.5) | - | 0.7 | 13% | 13% |
| Net operating Income / (Loss) | 1.6 | (2.1) | 0.1 | 3.6 | 171% | 176% |
| Other income (expense) | ||||||
| Interest expense, net | (7.0) | (6.5) | - | (0.5) | (8)% | (8)% |
| Other finance income (expense) | 0.2 | 0.1 | - | 0.1 | 100% | 100% |
| Total other income (expense), net | (6.8) | (6.4) | - | (0.4) | (6)% | (6)% |
| Net Loss from continuing operations before income taxes | (5.2) | (8.5) | 0.1 | 3.2 | 38% | 39% |
| Income tax income (expense) | 5.1 | 2.1 | 0.1 | 2.9 | 138% | 143% |
| Net Loss | $(0.1) | $(6.4) | $0.2 | $6.1 | 95% | 98% |
| Exchange Rate - $ to £ | 1.26 | 1.27 |
See “Segments Results” below for a more detailed explanation of the significant changes in our components of revenue within the individual segment results of operations.
Revenue (for the three-months ended March 31, 2025, compared to the three-months ended March 31, 2024)
Consolidated Reported Revenue by Segment
For the three-month period ended March 31, 2025, revenue on a functional currency (at constant rate) basis decreased by $1.6 million, or 3%.
For the three-month period ended March 31, 2025 Gaming revenue declined by $1.5 million, predominantly due to a decrease in product sales of $2.8 million due to a decline in Product sales as activity is not linear year-on-year. Gaming service revenue increased by $1.3 million, predominantly due to growth in the UK and Greece. Virtual Sports declined by $3.6 million, with $3.3 million of the reduction coming from online sales, while Interactive grew by $4.1 million due to growth driven in the UK and North American markets. Leisure revenue declined by $0.6 million predominantly due to Holiday Parks and Pubs sectors.
Cost of Sales, excluding depreciation and amortization
Cost of sales, excluding depreciation and amortization, for the three-month period ended March 31, 2025, decreased by $2.5 million, or 12%. This was driven by a decrease in cost of service of $0.9 million, mainly driven by seasonal timing of key UK public holidays in Leisure and a $1.6 million decrease in cost of product, predominantly driven by the decreased Video Lottery Terminal sales in Gaming.
Non-staff related selling, general and administrative expenses
Non-Staff related selling, general and administrative expenses for the three-month period ended March 31, 2025 decreased by $1.0 million, or 7%. The decrease in the three-month period was predominantly driven by reductions in Professional Fees of $1.0 million due to timing of activities, favorable realized gain on foreign currency movements of $0.3 million and lower facility costs of $0.2 million partially offset by higher IT costs of $0.5 million.
Stock-based compensation
During the three-month period ended March 31, 2025, the Company recorded expenses of $1.4 million, compared to expenses of $2.3 million, for the three-month period ended March 31, 2024. All expenses related to outstanding awards.
Depreciation and amortization
Depreciation and amortization for the three-month period ended March 31, 2025, increased by $0.8 million, driven mainly by increases in Gaming of $0.5 million and Leisure increase of $0.2 million due to an increase in machine assets, Virtual Sports of $0.4 million for increased software development and intangible assets, offset by a reduction in Interactive of $0.5 million as assets reached full amortization.
Other selling, general and administrative expenses
Other selling, general and administrative expenses for the three-month period ended March 31, 2025 decreased by $0.7 million, or 13%. The decrease in the three-month period was driven primarily by the timing of costs relating to the restatement of previously issued financial statements and expense relating to restructuring costs.
Net operating income / (Loss)
During the three-month period ended March 31, 2025, net operating income was $1.6 million, an increase of $3.6 million, compared to the prior year period. This increase was primarily driven by the increase in gross margin and a decrease in staff and non-staff related selling, general and administrative expenses, along with stock-based compensation and other selling general and administrative expenses, partially offset by an increase in depreciation and amortization.
Net Loss
For the three-month period ended March 31, 2025, net loss was $0.1 million, compared to net loss of $6.4 million in the prior year period. The increase was primarily driven by an increase of income tax income of $5.1 million as the effective tax rate in any given year is influenced by a variety of factors including the level of pre-tax income or loss, the income mix between jurisdictions, and any discrete items that may occur.
Deferred Tax
The Company maintains a valuation allowance related to capital loss carryovers in the United Kingdom, state net operating losses unable to be utilized in the United States, and United States interest expected to be limited under Section 163(j).
Segment Results (for the three-months ended March 31, 2025, compared to the three-months ended March 31, 2024)
Gaming
We generate revenue from our Gaming segment through the delivery of our gaming terminals preloaded with proprietary gaming software, server-based content, as well as services such as terminal repairs, maintenance, software updates and upgrades on a when and if available basis and content development. We receive rental fees for machines, typically in conjunction with long-term contracts, on both a participation and fixed fee basis. Our participation contracts are typically structured to pay us a percentage of net win (defined as net revenue to our operator customers, after deducting player winnings, free bets or plays and any relevant regulatory levies) from gaming terminals placed in our customers’ facilities. Typically, we recognize revenue from these arrangements on a daily basis over the term of the contract.
Revenue growth for our Gaming business is principally driven by changes in (i) the number of operator customers we have, (ii) the number of Gaming machines in operation, (iii) the net win performance of the machines and (iv) the net win percentage that we receive pursuant to our contracts with our customers.
Gaming, Key Performance Indicators
| Gaming | For the Three-Month Period Ended March 31, 2025 | March 31, 2024% | Variance March 31, 2025 vs March 31, 2024 | |
|---|---|---|---|---|
| End of period installed base (# of terminals) (2) | 33,924 | 34,793 | (869) | (2.5)% |
| Total Gaming - Average installed base (# of terminals) (2) | 33,889 | 34,783 | (894) | (2.6)% |
| Participation - Average installed base (# of terminals) (2) | 28,880 | 29,834 | (954) | (3.2)% |
| Fixed Rental - Average installed base (# of terminals) | 8,012 | 4,949 | 3,063 | 61.9% |
| Service Only - Average installed base (# of terminals) | 8,080 | 7,848 | 232 | 3.0% |
| Customer Gross Win per unit per day (1) (2) | £100.2 | £98.8 | £1.4 | 1.4% |
| Customer Net Win per unit per day (1) (2) | £73.1 | £72.2 | £0.9 | 1.2% |
| Inspired Blended Participation Rate | 5.1% | 5.4% | (0.3)% | |
| Inspired Fixed Rental Revenue per Gaming Machine per week | £22.8 | £30.5 | £(7.7) | (25.2)% |
| Inspired Service Rental Revenue per Gaming Machine per week | £7.8 | £5.1 | £2.7 | 52.9% |
| Gaming Long term license amortization (£’m) | £0.5 | £0.5 | £- | -% |
| Number of Machine sales | 313 | 606 | (293) | (48.3)% |
| Average selling price per terminal | £6,192 | £7,171 | £(979) | (13.7)% |
(1) Includes all SBG terminals in which the Company takes a participation revenue share across all territories.
(2) Includes approximately 2,500 lottery terminals where the revenue share is on handle instead of net win.
In the table above:
“End of Period Installed Base” is equal to the number of deployed Gaming terminals at the end of each period that have been placed on a participation or fixed rental basis. Gaming participation revenue, which comprises the majority of Gaming Service revenue, is directly related to the participation terminal installed base. This is the medium by which our customers generate revenue and distribute a revenue share to the Company. To the extent all other KPIs and certain other factors remain constant, the larger the installed base, the higher the Company’s revenue would be for a given period. Management gives careful consideration to this KPI in terms of driving growth across the segment. This does not include Service Only terminals.
Revenue is derived from the performance of the installed base as described by the Gross and Net Win KPIs.
If the End of Period Installed Base is materially different from the Average Installed Base (described below), we believe this gives an indication as to potential future performance. We believe the End of Period Installed Base is particularly useful for assessing new customers or markets, to indicate the progress being made with respect to entering new territories or jurisdictions.
“Total Gaming - Average Installed Base” is the average number of deployed Gaming terminals during the period consisting of both participation terminals and fixed rental terminals. Therefore, it is more closely aligned to revenue in the period. We believe this measure is particularly useful for assessing existing customers or markets to provide comparisons of historical size and performance. This does not include Service Only terminals.
“Participation - Average Installed Base” is the average number of deployed Gaming terminals that generated revenue on a participation basis.
“Fixed Rental - Average Installed Base” is the average number of deployed Gaming terminals that generated revenue on a fixed rental basis.
“Service Only - Average Installed Base” is the average number of terminals that generated revenue on a Service only basis.
“Customer Gross Win per unit per day” is a KPI used by our management to (i) assess impact on the Company’s revenue, (ii) determine changes in the performance of the overall market and (iii) evaluate the impact of regulatory change and our new content releases on our customers. Customer Gross Win per unit per day is the average per unit cash generated across all Gaming terminals in which the Company takes a participation revenue share across all territories in the period, defined as the difference between the amounts staked less winnings to players divided by the Average Installed Base in the period, then divided by the number of days in the period.
Gaming revenue accrued in the period is derived from Customer Gross Win accrued in the period after deducting gaming taxes (defined as a regulatory levy paid by the Customer to government bodies) and applying the Company’s contractual revenue share percentage.
Our management believes Customer Gross Win measures are meaningful because they represent a view of customer operating performance that is unaffected by our revenue share percentage and allow management to (1) readily view operating trends, (2) perform analytical comparisons and benchmarking between customers and (3) identify strategies to improve operating performance in the different markets in which we operate.
“Customer Net Win per unit per day” is Customer Gross Win per unit per day after giving effect to the deduction of gaming taxes.
“Inspired Blended Participation Rate” is the Company’s average revenue share percentage across all participation terminals where revenue is earned on a participation basis, weighted by Customer Net Win per unit per day.
“Inspired Fixed Rental Revenue per Gaming Machine per week” is the Company’s average fixed rental amount across all fixed rental terminals where revenue is generated on a fixed fee basis, per unit per week.
“Inspired Service Rental Revenue per Gaming Machine per week” is the Company’s average service rental amount across all service only rental terminals where revenue is generated on a service only fixed fee basis, per unit per week.
“Gaming Long term license amortization” is the upfront license fee per terminal which is typically spread over the life of the terminal.
Our overall Gaming revenue from terminals placed on a participation basis can therefore be calculated as the product of the Participation - Average Installed Base, the Customer Net Win per unit per day, the number of days in the period, and the Inspired Blended Participation Rate, which is equal to “Participation Revenue”.
“Number of Machine sales” is the number of terminals sold during the period.
“Average selling price per terminal” is the total revenue in GBP of the Gaming terminals sold divided by the “number of Machine sales”.
Gaming, Recurring Revenue
Set forth below is a breakdown of our Gaming recurring revenue. Gaming recurring revenue principally consists of Gaming participation revenue and fixed rental revenue.
| (In £ millions) Gaming Recurring Revenue | For the Three-Month Period Ended March 31, 2025 | March 31, 2024% | Variance March 31, 2025 vs March 31, 2024 | |
|---|---|---|---|---|
| Total Gaming Revenue | £17.2 | £18.4 | £(1.2) | (7)% |
| Gaming Participation Revenue | £9.7 | £10.5 | £(0.8) | (8)% |
| Gaming Project Recurring Revenue | £0.2 | £0.2 | £- | -% |
| Other Fixed Fee Recurring Revenue | £3.2 | £2.5 | £0.7 | 28% |
| Gaming Long-term license amortization | £0.5 | £0.6 | £(0.1) | (17)% |
| Total Gaming Recurring Revenue * | £13.6 | £13.8 | £(0.2) | (1)% |
| Gaming Recurring Revenue as a % of Total Gaming Revenue † | 79% | 75% | 4% |
In the table above:
“Gaming Participation Revenue” includes our share of revenue generated from (i) our Gaming terminals placed in gaming and lottery venues; and (ii) licensing of our game content and intellectual property to third parties.
“Gaming Other Fixed Fee Recurring Revenue” includes service revenue in which the Company earns a periodic fixed fee on a contracted basis.
“Gaming Project Recurring Revenue” relates specifically to a single customer for machine estate upgrades and distribution.
“Gaming Long term license amortization” – see the definition provided above.
“Total Gaming Recurring Revenue” is equal to Gaming Participation Revenue plus Gaming Other Fixed Fee Recurring Revenue.
Gaming, Service Revenue by Region
Set forth below is a breakdown of our Gaming service revenue by geographic region. Gaming Service revenue consists principally of Gaming participation revenue, Gaming other fixed fee revenue, Gaming long-term license amortization and Gaming other non-recurring revenue. See “Gaming Segment Revenue” below for a discussion of gaming service revenue between the periods under review.
(In millions)
| Service Revenue: | For the Three-Month Period Ended March 31, 2025 | March 31, 2024 | Variance March 31, 2025 vs March 31, 2024 | Total Functional Currency % | |
|---|---|---|---|---|---|
| UK LBO | $10.0 | $9.2 | $0.8 | 9% | 10% |
| UK Other | 2.3 | 2.6 | (0.3) | (12)% | (10)% |
| Italy | 0.4 | 0.4 | - | -% | (17)% |
| Greece | 4.6 | 3.9 | 0.7 | 18% | 19% |
| Rest of the World | 0.3 | 0.2 | 0.1 | 50% | 46% |
| Lotteries | 1.3 | 1.4 | (0.1) | (7)% | (5)% |
| Total Service revenue | $18.9 | $17.7 | $1.2 | 7% | 8% |
| Exchange Rate - $ to £ | 1.26 | 1.27 |
Note: Exchange rate in the table is calculated by dividing the USD total service revenue by the GBP total service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
Gaming, Results of Operations
(In millions)
| Revenue: | For the Three-Month Period Ended March 31, 2025 | March 31, 2024 | Variance March 31, 2025 vs March 31, 2024 Variance Attributable to Currency Movement | Variance on a Functional currency basis | Total Functional Currency Variance % | Total Reported Variance % |
|---|---|---|---|---|---|---|
| Service | $18.9 | $17.7 | $(0.1) | $1.3 | 7% | 7% |
| Product | 2.8 | 5.5 | 0.1 | (2.8) | (51)% | (49)% |
| Total revenue | 21.7 | 23.2 | 0.0 | (1.5) | (6)% | (6)% |
| Cost of Sales, excluding depreciation and amortization: | ||||||
| Cost of Service | (5.4) | (5.8) | 0.1 | 0.3 | 5% | 7% |
| Cost of Product | (2.6) | (4.3) | - | 1.7 | 40% | 40% |
| Total cost of sales | (8.0) | (10.1) | 0.1 | 2.0 | 20% | 21% |
| Staff-related selling, general and administrative expenses | (3.4) | (4.7) | - | 1.3 | 28% | 28% |
| Non-staff related selling, general and administrative expenses | (2.9) | (2.9) | - | - | -% | -% |
| Labor costs capitalized | 1.9 | 1.0 | 0.1 | 0.8 | 80% | 90% |
| Other segment items: | ||||||
| Stock-based compensation | (0.2) | (0.2) | - | - | -% | -% |
| Depreciation and amortization | (4.7) | (4.2) | - | (0.5) | (12)% | (12)% |
| Other selling, general and administrative expenses | (0.2) | - | - | (0.2) | -% | -% |
| Net operating Income | $4.2 | $2.1 | $0.2 | $1.9 | 90% | 100% |
| Exchange Rate - $ to £ | 1.26 | 1.27 |
20
Note: Exchange rate in the table is calculated by dividing the USD total revenue by the GBP total revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
All variances discussed in the Gaming results below are on a functional currency (at a constant rate) basis, which excludes the impact of any changes in foreign currency exchange rates.
Gaming Revenue
During the three-month period ended March 31, 2025, Gaming revenue decreased by $1.5 million, or 6% compared to the three-month period ended March 31, 2024. This was driven by a $1.3 million increase in Service revenue offset by a $2.8 million decrease in Product revenue.
The increase in Gaming Service revenue was driven by $0.9 million growth in the UK, predominantly due to the William Hill Vantage® terminal deployment.
The Product revenue decrease was primarily driven by lower Product sales, as the prior year period contained higher volumes of hardware sales which are less predictable in nature.
Gaming Operating / Net Income
Net income for the three-month period ended March 31, 2025 increased by $1.9 million compared to the three-month period ended March 31, 2024. The increase was primarily due to a reduction in staff-related selling, general and administrative expenses of $1.3 million driven by the closure of the Bridgend manufacturing facility in 2024.
Virtual Sports
We generate revenue from our Virtual Sports segment through our on-premise licensing solution and hosting of our products. We primarily receive fees on a participation basis. Our participation contracts are typically structured to pay us a percentage of net win (defined as net revenue to our operator customers, after deducting player winnings, free bets or plays and other promotional costs and any relevant regulatory levies) from Virtual Sports content placed on our customers’ websites or in our customers’ facilities. Typically, we recognize revenue from these arrangements on a daily basis over the term of the contract.
Revenue growth for our Virtual Sports segment is principally driven by the number of customers we have, the net win performance of the games and the net win percentage that we receive pursuant to our contracts with our customers.
Virtual Sports, Key Performance Indicators
| Virtuals | For the Three-Month Period Ended March 31, 2025 | March 31, 2024% | Variance March 31, 2025 vs March 31, 2024 | |
|---|---|---|---|---|
| No. of Live Customers at the end of the period | 57 | 55 | 2 | 3.6% |
| Average No. of Live Customers | 57 | 54 | 3 | 5.6% |
| Total Revenue (£’m) | £6.9 | £9.8 | £(2.9) | (29.6)% |
| Total Revenue £’m - Retail | £2.2 | £2.3 | £(0.1) | (4.3)% |
| Total Revenue £’m - Online Virtuals | £4.7 | £7.5 | £(2.8) | (37.3)% |
In the table above:
“No. of Live Customers at the end of the period” and “Average No. of Live Customers” represent the number of customers from which there is Virtual Sports revenue at the end of the period and the average number of customers from which there is Virtual Sports revenue during the period, respectively.
“Total Revenue (£m)” represents total revenue for the Virtual Sports segment, including recurring and upfront service revenue. Total revenue is also divided between “Total Revenue (£m) – Retail,” which consists of revenue earned through players wagering at Virtual Sports venues, “Total Revenue (£m) – Online Virtuals,” which consists of revenue earned through players wagering on Virtual Sports online.
Virtual Sports, Recurring Revenue
Set forth below is a breakdown of our Virtual Sports recurring revenue, which consists of Retail Virtuals and Online Virtuals recurring revenue as well as long-term license amortization. See “Virtual Sports Segment Revenue” below for a discussion of Virtual Sports Service revenue between the periods under review.
| (In £ millions) Virtual Sports Recurring Revenue | For the Three-Month Period Ended March 31, 2025 | March 31, 2024% | Variance March 31, 2025 vs March 31,2024 | |
|---|---|---|---|---|
| Total Virtual Sports Revenue | £6.9 | £9.8 | £(2.9) | (29.6)% |
| Recurring Revenue - Retail Virtuals | £2.0 | £2.3 | £(0.3) | (13.0)% |
| Recurring Revenue - Online Virtuals | £4.7 | £7.3 | £(2.6) | (35.6)% |
| Total Virtual Sports Long-term license amortization | £0.2 | £0.1 | £0.1 | 100.0% |
| Total Virtual Sports Recurring Revenue | £6.9 | £9.7 | £(2.8) | (28.9)% |
| Virtual Sports Recurring Revenue as a Percentage of Total Virtual Sports Revenue | 100.0% | 99.0% | (1.0)% |
22
“Recurring Revenue” includes our share of revenue generated from (i) our Virtual Sports products placed with operators; (ii) licensing our game content and intellectual property to third parties; and (iii) our games on third-party online gaming platforms that are interoperable with our game servers.
“Virtual Sports Long term license amortization” is the upfront license fee which is typically spread over the life of the contract.
Virtual Sports, Results of Operations
(In millions)
| For the Three-Month Period Ended March 31, 2025 | March 31, 2024 | Variance March 31, 2025 vs March 31, 2024 Variance Attributable to Currency Movement | Variance on a Functional currency basis | Total Functional Currency Variance % | Total Reported Variance % | |
|---|---|---|---|---|---|---|
| Service Revenue | $8.7 | $12.4 | $(0.1) | $(3.6) | (29)% | (30)% |
| Cost of Service | (0.5) | (0.4) | - | (0.1) | (25)% | (25)% |
| Staff-related selling, general and administrative expenses | (2.2) | (2.2) | - | - | -% | -% |
| Non-staff related selling, general and administrative expenses | (0.6) | (0.7) | - | 0.1 | 14% | 14% |
| Labor costs capitalized | 0.9 | 1.3 | (0.1) | (0.3) | (23)% | (31)% |
| Other segment items: | ||||||
| Stock-based compensation | (0.1) | (0.1) | - | - | -% | -% |
| Depreciation and amortization | (1.3) | (0.9) | - | (0.4) | (44)% | (44)% |
| Net operating Income | $4.9 | $9.4 | $(0.2) | $(4.3) | (46)% | (48)% |
| Exchange Rate - $ to £ | 1.26 | 1.27 |
Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
All variances discussed in the Virtual Sports results below are on a functional currency (at constant rate) basis, which excludes the impact of any changes in foreign currency exchange rates.
Virtual Sports revenue
During the three-month period ended March 31, 2025 revenue decreased by $3.6 million, or 29% compared to the three-month period ended March 31, 2024 primarily driven by a major customer optimizing its customer base as well as regulation of the Brazilian market.
Virtual Sports operating income
During the three-month period ended March 31, 2025, net operating income decreased by $4.3 million compared to the three-month period March 31, 2024. This decline was primarily due to the decrease in gross margin of $3.7 million, and an increase in depreciation and amortization of $0.3 million for increased software development and intangible assets.
Interactive
We generate revenue from our Interactive segment through various gaming content made available via third-party aggregation platforms integrated with our remote gaming server or directly on the Company’s remote gaming server platform, and services such as customer support, platform maintenance, updates and upgrades. Typically, we receive fees on a participation basis. Our participation contracts are usually structured to pay us a percentage of net win (defined as net revenue to our operator customers, after deducting player winnings, free bets or plays and other promotional costs and any relevant regulatory levies) from Interactive content placed on our customers’ websites. Typically, we recognize revenue from these arrangements on a daily basis over the term of the contract.
Revenue growth for our Interactive segment is principally driven by the number of customers we have, the number of live games, the net win performance of the games and the net win percentage that we receive pursuant to our contracts with our customers.
Interactive, Key Performance Indicators
| Interactive | For the Three-Month Period Ended March 31, 2025 | March 31, 2024% | Variance March 31, 2025 vs March 31, 2024 | |
|---|---|---|---|---|
| No. of Live Customers at the end of the period | 190 | 155 | 35 | 22.6% |
| Average No. of Live Customers | 183 | 154 | 29 | 18.8% |
| No. of Games available at the end of the period | 323 | 298 | 25 | 8.4% |
| Average No. of Games available | 323 | 296 | 27 | 9.1% |
| No. of Live Games at the end of the period | 299 | 283 | 16 | 5.7% |
| Average No. of Live Games | 299 | 275 | 24 | 8.7% |
| Total Revenue (£’m) | £9.6 | £6.4 | £3.2 | 50.0% |
In the table above:
“No. of Live Customers at the end of the period” and “Average No. of Live Customers” represent the number of customers from which there is Interactive revenue at the end of the period and the average number of customers from which there is Interactive revenue during the period, respectively.
“No. of Games available at the end of the period” and “Average No. of Games available” represents the number of games that are available for operators to deploy at the end of the period (including inactive legacy games still available in inactive new games that are available but have not yet gone live with any operators) and the average number of games that are available for operators to deploy during the period, respectively. This incorporated live games and inactive games.
“No. of Live Games at the end of the period” and “Average No. of Live Games” represents the number of games from which there is Interactive revenue at the end of the period and the average number of games from which there is Interactive revenue during the period, respectively.
“Total Revenue (£m)” represents total revenue for the Interactive segment, including recurring and upfront service revenue.
Interactive, Results of Operations
(In millions)
| For the Three-Month Period Ended March 31, 2025 | March 31, 2024 | Variance March 31, 2025 vs March 31, 2024 Variance Attributable to Currency Movement | Variance on a Functional currency basis | Total Functional Currency Variance % | Total Reported Variance % | |
|---|---|---|---|---|---|---|
| Service Revenue | $12.1 | $8.1 | $(0.1) | $4.1 | 51% | 49% |
| Cost of Service | (0.6) | (0.6) | - | - | - | - |
| Staff-related selling, general and administrative expenses | (2.4) | (2.1) | - | (0.3) | (14)% | (14)% |
| Non-staff related selling, general and administrative expenses | (2.0) | (1.4) | - | (0.6) | (43)% | (43)% |
| Labor costs capitalized | 0.6 | 0.4 | - | 0.2 | 50% | 50% |
| Other segment items: | ||||||
| Stock-based compensation | (0.1) | (0.1) | (0.1) | 0.1 | 100% | -% |
| Depreciation and amortization | (0.7) | (1.2) | - | 0.5 | 42% | 42% |
| Net operating Income | $6.9 | $3.1 | $(0.2) | $4.0 | 129% | 123% |
| Exchange Rate - $ to £ | 1.26 | 1.27 |
Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
All variances discussed in the Interactive results below are on a functional currency (at constant rate) basis, which excludes the impact of any changes in foreign currency exchange rates.
Interactive revenue
During the three-month period ended March 31, 2025 revenue increased by $4.1 million, or 51% compared to the three-month period ended March 31, 2024, driven by recurring revenue growth in the UK and North America due to the launch of new content across the estate and increased promotional activity through exclusive deals with tier-one customers.
Interactive operating income
Operating income for the three-month period ended March 31, 2025 increased by $4.0 million compared to the three-month period ended March 31, 2024. This increase was driven by the increase in gross margin, partially offset by increases in staff related selling, general and administrative expenses of $0.3 million driven by annual salary increases and additional headcount, non-staff related selling, general and administrative expenses of $0.6 million predominantly due to increased IT network costs supporting revenues, partially offset by lower depreciation and amortization of $0.5 million as assets reached full amortization.
Leisure
We typically generate revenue from our Leisure segment through the supply of our gaming and amusement machines. We receive rental fees for machines, typically on a long-term contract basis, on both a participation and fixed fee basis. Our participation contracts are usually structured to pay us a percentage of net win (defined as net revenue to our operator customers, after deducting player winnings, free bets or plays, any relevant regulatory levies and minimum fixed incomes where applicable) from machines placed in our customers’ facilities. We generally recognize revenue from these arrangements on a daily basis over the term of the contract.
Revenue growth for our Leisure segment is principally driven by the number of customers we have, the number of machines in operation, the net win performance of the machines and the net win percentage that we receive pursuant to our contracts with our customers.
Leisure, Key Performance Indicators
| Leisure | For the Three-Month Period Ended March 31, 2025 | March 31, 2024% | Variance March 31, 2025 vs March 31, 2024 | |
|---|---|---|---|---|
| End of period installed base Gaming machines (# of terminals) | 9,808 | 10,675 | (867) | (8.1)% |
| Average installed base Gaming machines (# of terminals) | 9,894 | 10,677 | (783) | (7.3)% |
| End of period installed base Other (# of terminals) | 3,322 | 4,072 | (750) | (18.4)% |
| Average installed base Other (# of terminals) | 3,422 | 4,101 | (679) | (16.6)% |
| Pub Digital Gaming Machines - Average installed base (# of terminals) | 6,130 | 6,308 | (178) | (2.8)% |
| Pub Analogue Gaming Machines - Average installed base (# of terminals) | 78 | 159 | (81) | (50.9)% |
| MSA and Bingo Gaming Machines - Average installed base (# of terminals)(1) | 2,673 | 3,057 | (384) | (12.6)% |
| Inspired Leisure Revenue per Gaming Machine per week | £74.3 | £70.2 | £4.1 | 5.8% |
| Inspired Pub Digital Revenue per Gaming Machine per week | £74.0 | £73.3 | £0.7 | 1.0% |
| Inspired Pub Analogue Revenue per Gaming Machine per week | £24.9 | £31.8 | £(6.9) | (21.7)% |
| Inspired MSA and Bingo Revenue per Gaming Machine per week | £101.1 | £91.6 | £9.5 | 10.4% |
| Inspired Other Revenue per Machine per week | £30.3 | £23.9 | £6.4 | 26.8% |
| Total Holiday Parks Revenue (Gaming and Non Gaming) (£’m) | £2.9 | £3.2 | £(0.3) | (9.4)% |
(1) Motorway Service Area machines
In the table above:
“End of period installed base Gaming” and “Average installed base Gaming” represent the number of gaming machines installed (excluding Holiday Park machines) that are Category B and Category C only (UK Gambling Act 2005 places machines into categories dependent on maximum stake and prize available), from which there is participation or rental revenue at the end of the period or as an average over the period.
“End of period installed base Other” and “Average installed base Other” represent the number of all other category machines installed (excluding Holiday Park machines) from which there is participation or rental revenue at the end of the period or as an average over the period.
“Revenue per machine unit per week” represents the average weekly participation or rental revenue recognized during the period.
Leisure, Results of Operations
(In millions)
| Revenue: | For the Three-Month Period Ended March 31, 2025 | March 31, 2024 | Variance March 31, 2025 vs March 31, 2024 Variance Attributable to Currency Movement | Variance on a Functional currency basis | Total Functional Currency Variance % | Total Reported Variance % |
|---|---|---|---|---|---|---|
| Service | $17.3 | $18.0 | $(0.1) | $(0.6) | (3)% | (4)% |
| Product | 0.6 | 0.6 | - | - | -% | -% |
| Total revenue | 17.9 | 18.6 | (0.1) | (0.6) | (3)% | (4)% |
| Cost of Sales, excluding depreciation and amortization: | ||||||
| Cost of Service | (8.5) | (9.1) | - | 0.6 | 7% | 7% |
| Cost of Product | (0.3) | (0.2) | - | (0.1) | (50)% | (50)% |
| Total cost of sales | (8.8) | (9.3) | - | 0.5 | 5% | 5% |
| Staff-related selling, general and administrative expenses | (4.0) | (4.2) | 0.1 | 0.1 | 2% | 5% |
| Non-staff related selling, general and administrative expenses | (3.5) | (3.6) | - | 0.1 | 3% | 3% |
| Labor costs capitalized | 0.1 | 0.3 | - | (0.2) | (67)% | (67)% |
| Other segment items: | ||||||
| Stock-based compensation | (0.1) | (0.1) | (0.1) | 0.1 | 100% | -% |
| Depreciation and amortization | (3.2) | (3.0) | - | (0.2) | (7)% | (7)% |
| Other selling, general and administrative expenses | (0.1) | - | (0.1) | - | -% | (100)% |
| Net operating Loss | (1.7) | (1.3) | $(0.2) | $(0.2) | (15)% | (31)% |
| Exchange Rate - $ to £ | 1.26 | 1.27 |
Note: Exchange rate in the table is calculated by dividing the USD total revenue by the GBP total revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
All variances discussed in the Leisure results below are on a functional currency (at constant rate) basis, which excludes the impact of any changes in foreign currency exchange rates.
Leisure Revenue
For the three-month period ended March 31, 2025 revenue decreased by $0.6 million or 3% compared to the three-month period ended March 31,2024, which was predominantly due to seasonality in Holiday Parks for the timing of a key public holiday in the UK.
Leisure Operating Income
Operating income for the three-month period ended March 31, 2025 decreased by $0.2 million compared to the three-month period ended March 31, 2024. This was primarily due to lower labor costs capitalized due to the mix of projects completed and higher depreciation and amortization for assets capitalized in previous periods.
Non-GAAP Financial Measures
We use certain non-GAAP financial measures, including EBITDA, to analyze our operating performance. We use these financial measures to manage our business on a day-to-day basis. We believe that these measures are also commonly used in our industry to measure performance. For these reasons, we believe that these non-GAAP financial measures provide expanded insight into our business, in addition to standard U.S. GAAP financial measures. There are no specific rules or regulations for defining and using non-GAAP financial measures, and as a result the measures we use may not be comparable to measures used by other companies, even if they have similar labels. The presentation of non-GAAP financial information should not be considered in isolation from, or as a substitute for, or superior to, financial information prepared and presented in accordance with U.S. GAAP. You should consider our non-GAAP financial measures in conjunction with our U.S. GAAP financial measures.
We define our non-GAAP financial measures as follows:
EBITDA is defined as net income (loss) excluding depreciation and amortization, interest expense, interest income and income tax expense.
Adjusted EBITDA is defined as net income (loss) excluding depreciation and amortization, interest expense, interest income and income tax expense, and other additional exclusions and adjustments (see Adjusted EBITDA reconciliation table). Such additional excluded amounts include stock-based compensation U.S. GAAP charges where the associated liability is expected to be settled in stock, and changes in the value of earnout liabilities and income and expenditure in relation to legacy portions of the business (being those portions where trading no longer occurs) including closed defined benefit pension schemes. Additional adjustments are made for items considered outside the normal course of business, including but not limited to (1) restructuring costs, which include charges attributable to employee severance, impairments, management changes, restructuring, dual running costs, costs related to facility closures and integration costs, (2) merger and acquisition costs and (3) gains or losses not in the ordinary course of business (4) the costs of the restatement of previously issued financial statements.
We believe Adjusted EBITDA, when considered along with other performance measures, is a particularly useful performance measure, because it focuses on certain operating drivers of the business, including sales growth, operating costs, selling and administrative expense and other operating income and expense. We believe Adjusted EBITDA can provide a more complete understanding of our operating results and the trends to which we are subject, and an enhanced overall understanding of our financial performance and prospects for the future. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income or loss, because it does not take into account certain aspects of our operating performance (for example, it excludes non-recurring gains and losses which are not deemed to be a normal part of underlying business activities). Our use of Adjusted EBITDA may not be comparable to the use by other companies of similarly termed measures. Management compensates for these limitations by using Adjusted EBITDA as only one of several measures for evaluating our operating performance. In addition, capital expenditures, which affect depreciation and amortization, interest expense, and income tax benefit (expense), are evaluated separately by management.
Functional Currency at Constant rate. Currency impacts discussed have been calculated as the current-period average GBP: USD rate less the equivalent average rate in the prior period, multiplied by the current period amount in our functional currency (GBP). The remaining difference, referred to as functional currency at constant rate, is calculated as the difference in our functional currency, multiplied by the prior-period average GBP: USD rate, as a proxy for functional currency at constant rate movement.
Currency Movement represents the difference between the results in our reporting currency (USD) and the results on a functional currency (at constant rate) basis.
Reconciliations from net loss, as shown in our Consolidated Statements of Operations and Comprehensive Income (Loss), to Adjusted EBITDA are shown below.
Reconciliation to Adjusted EBITDA by segment for the Three Months Ended March 31, 2025
(In millions)
| Statutory Heading | For the Three-Month Period Ended March 31, 2025 Total | Gaming | Virtual Sports | Interactive | Leisure | Corporate | |
|---|---|---|---|---|---|---|---|
| Net Income/ (loss) | Net Income | $(0.1) | $4.2 | $4.9 | $6.9 | $(1.7) | $(14.4) |
| Pension charges (1) | Staff-related selling, general and administrative expenses | $0.2 | 0.2 | ||||
| Cost of Group Restructure (2) | Other selling, general and administrative expenses | $0.6 | 0.2 | 0.1 | 0.3 | ||
| Cost of Group Restatement (3) | Other selling, general and administrative expenses | $4.0 | 4.0 | ||||
| Stock-based compensation expense (4) | Stock-based compensation expense | $1.4 | 0.2 | 0.1 | 0.1 | 0.1 | 0.9 |
| Depreciation and amortization (4) | Depreciation and amortization | $10.6 | 4.7 | 1.3 | 0.7 | 3.2 | 0.7 |
| Interest expense net (4) | Interest expense net | $7.0 | 7.0 | ||||
| Other finance expenses / (income) (4) | Other finance expenses / (income) | $(0.2) | (0.2) | ||||
| Income Tax (4) | Income Tax | $(5.1) | (5.1) | ||||
| Adjusted EBITDA | $18.4 | $9.3 | $6.3 | $7.7 | $1.7 | $(6.6) | |
| Adjusted EBITDA | £14.6 | £7.3 | £5.0 | £6.2 | £1.5 | £(5.4) | |
| Exchange Rate - $ to £ (6) | 1.26 |
Note: Certain unallocated corporate function costs have not been allocated to the Company’s reportable operating segments because these costs are not allocable and to do so would not be practical; these are shown in the Corporate category.
Reconciliation to Adjusted EBITDA by segment for the Three Months Ended March 31, 2024
(In millions)
| Statutory Heading | For the Three-Month Period Ended March 31, 2024 Total | Gaming | Virtual Sports | Interactive | Leisure | Corporate | |
|---|---|---|---|---|---|---|---|
| Net Income/ (loss) | $(6.4) | $2.1 | $9.4 | $3.1 | $(1.3) | $(19.7) | |
| Pension charges (1) | Staff-related selling, general and administrative expenses | $0.3 | 0.3 | ||||
| Cost of Group Restructure (2) | Other selling, general and administrative expenses | $0.2 | 0.2 | ||||
| Cost of Group Restatement (3) | Other selling, general and administrative expenses | $5.0 | 5.0 | ||||
| Stock-based compensation expense (4) | Stock-based compensation expense | $2.3 | 0.2 | 0.1 | 0.1 | 0.1 | 1.8 |
| Depreciation and amortization (4) | Depreciation and amortization | $9.8 | 4.2 | 0.9 | 1.2 | 3.0 | 0.5 |
| Interest expense net (4) | Interest expense net | $6.5 | 6.5 | ||||
| Other finance expenses / (income) (4) | Other finance expenses / (income) | $(0.1) | (0.1) | ||||
| Income tax (4) | Income tax | $(2.1) | (2.1) | ||||
| Adjusted EBITDA | $15.5 | $6.5 | $10.4 | $4.4 | $1.8 | $(7.6) | |
| Adjusted EBITDA | £12.3 | £5.3 | £8.1 | £3.4 | £1.5 | £(6.0) | |
| Exchange Rate - $ to £ (5) | 1.27 |
Note: Certain unallocated corporate function costs have not been allocated to the Company’s reportable operating segments because these costs are not allocable and to do so would not be practical; these are shown in the Corporate category.
Notes to Adjusted EBITDA reconciliation tables above:
(1) “Pension charges” are profit and loss charges included within selling, general and administrative expenses, relating to a defined benefit scheme which was closed to new entrants in 1999 and to future accrual in 2010. As well as the amortization of net loss, the figure also includes charges relating to the Pension Protection Fund (which were historically borne by the pension scheme) and a small amount of associated professional services expenses. These costs are included within Corporate Functions.
(2) “Cost of Group Restructure” include redundancy costs, payment in lieu of notice costs and any associated employer taxes. To qualify as an adjusting item, costs must be part of a large restructuring project, which will net save ongoing future costs or be in relation to the exit of an Executive.
(3) “Cost of Group Restatement” includes accounting advice and other related costs associated with the restatement of financial statements. It also includes costs relating to the SEC inquiry that was subsequently concluded in January 2025. To qualify as an adjusting item, costs must be specific to the event and be neither normal nor recurring in nature.
30
(4) Stock-based compensation expense, Depreciation and amortization, Total other expense, net and Income tax are as described above in the Results of Operations line item discussions. Total expense, net includes interest income, interest expense, change in fair value of earnout liability, change in fair value of derivative liability and other finance income.
(5) Exchange rate in the table is calculated by dividing the USD Adjusted EBITDA by the GBP Adjusted EBITDA, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
Liquidity and Capital Resources
Three Months Ended March 31, 2025, compared to Three Months Ended March 31, 2024
Cash Flow Summary - A Two Year Comparative
(in millions)
| Three-Months Ended Mar 31, 2025 | Mar 31, 2024 | Variance 2025 to 2024 | |
|---|---|---|---|
| Net loss | $(0.1) | $(6.4) | $6.3 |
| Non-cash interest expense relating to senior debt | 0.5 | 0.2 | 0.3 |
| Change in fair value of derivative liabilities and stock-based compensation expense | 1.4 | 2.3 | (0.9) |
| Deferred income taxes | (1.9) | - | (1.9) |
| Depreciation and amortization (incl RoU assets) | 11.4 | 10.9 | 0.5 |
| Other net cash generated/(utilized) by operating activities | 14.2 | (1.0) | 15.2 |
| Net cash inflow provided by operating activities | 25.5 | 6.0 | 19.5 |
| Net cash used in investing activities | (15.1) | (10.1) | (5.0) |
| Net cash used by financing activities | (1.7) | (0.2) | (1.5) |
| Effect of exchange rates on cash | 1.0) | (0.4) | 1.4 |
| Net increase/(decrease) in cash and cash equivalents | $9.7 | $(4.7) | $14.4 |
Net cash provided by operating activities
For the three-month period ended March 31, 2025, net cash inflow provided by operating activities was $25.5 million, compared to a $6.0 million inflow for the three-month period ended March 31, 2024, representing a $19.5 million increase in cash generation. The increase was driven primarily through improved working capital position with favorable movements in accounts receivable due to the collection in the three-month period ended March 31, 2025 of a number of the machine hardware sales made at the end of 2024 and favorable movements in accounts payable due to timing of payments and varying levels of production activity.
Non-cash interest expense increased by $0.3 million, to $0.5 million, due to the marking to market for short term currency contracts held as of March 31, 2025.
Change in the fair value of derivative liabilities and stock-based compensation expense decreased by $0.9 million from $2.3 million to $1.4 million due to lower stock-based compensation expense.
Depreciation and amortization increased by $0.5 million, to $11.4 million, with increases of $1.1 million in machine depreciation, $0.4 million in amortization of intangible assets and $0.3 million in contract costs amortization. These were offset by a $1.1 million decrease in software development cost amortization and a $0.3 million decrease in right of use asset amortization.
Other net cash generated by operating activities increased by $15.2 million to an inflow of $14.2 million. The relative movements between the three-month period ended March 31, 2025 and the three-month period ended March 31, 2024 resulted in favorable movements of $13.5 million in accounts receivable and $16.8 million in accounts payable and accrued expenses. The favorable movements in accounts receivable was largely due to the collection of receipts from hardware sales made at the end of 2024 and the favorable movements in accounts payable and accrued expenses was largely due to timing of procurement activity and on supplier payments with the prior year including a number of payments for professional fees relating to the restatement exercise. These favorable movements were partly offset by unfavorable movements in prepayments and accrued income of $6.7 million, inventory of $2.4 million and corporate tax and other current taxes of $5.0 million.
Net cash used in investing activities
Net cash utilized in investing activities increased by $5.0 million, to $15.1 million in the three-month period ended March 31, 2025. This was driven by a higher expenditure on plant, property and equipment ($4.9 million increase compared to 2024) and on contract cost additions ($1.4 million increase compared to 2024). These were partly offset by a $1.2 million decrease in capitalized software.
Net cash used by financing activities
During the three-month period ended March 31, 2025, net cash used by financing activities was $1.7 million, $1.5 million higher than the three-month period ended March 31, 2024 related to finance lease expenditure.
Funding Needs and Sources
To fund our obligations, historically we have relied on a combination of cash flows provided by operations and the incurrence of additional debt or the refinancing of existing debt. As of March 31, 2025, we had liquidity consisting of $39.0 million in cash and a further $6.5 million of undrawn revolver facility. This compares to $35.3 million of cash as of March 31, 2024, with a further $6.3 million of revolver facilities undrawn. We had a working capital inflow of $14.2 million for the three-month period ended March 31, 2025, compared to a $1.0 million outflow for the three-month period ended March 31, 2024.
The level of our working capital surplus or deficit varies with the level of machine production we are undertaking and our capitalization as well as the seasonality experienced in some of the businesses. In periods with minimal machine volumes and capital spend, our working capital is typically more stable. In periods where significant numbers of machines are being produced, the levels of inventory and creditors are typically higher and there is a natural timing difference between converting the stock into sellable or capitalized plant and settling payments to suppliers. These factors can result in significant working capital volatility. In periods of low activity, our working capital volatility is reduced. Working capital is reviewed and managed with the aim of ensuring that current liabilities are covered by the level of cash held and the expected level of short-term receipts.
Some of our business operations require cash to be held within the machines. As of March 31, 2025, $6.1 million of our $39.0 million of cash were held as operational floats within the machines. At March 31, 2024, $6.1 million of our $35.3 million of cash were held as operational floats within the machines
Management currently believes that the Company’s cash balances on hand, cash flows expected to be generated from operations, and the ability to control and defer capital projects will be sufficient to fund the Company’s net cash requirements through May 2026.
Long Term and Other Debt
(In millions)
| March 31, 2025 | March 31, 2024 | |||
|---|---|---|---|---|
| Cash held | £30.2 | $39.0 | £28.0 | $35.3 |
| Revolver drawn | (15.0) | (19.4) | (15.0) | (18.9) |
| Original principal senior debt | (235.0) | (303.4) | (235.0) | (296.9) |
| Cash interest accrued | (6.8) | (8.8) | (6.6) | (8.4) |
| Finance lease creditors | (18.1) | (23.4) | (2.7) | (3.4) |
| Total | £(244.7) | $(316.0) | £(231.4) | $(292.3) |
Debt Covenants
Under our debt facilities in place as of March 31, 2025, we are not subject to covenant testing on the Senior Secured Notes. We are, however, subject to covenant testing at the level of Inspired Entertainment Inc., the ultimate holding company, on our Super Senior Revolving Credit Facility which requires the Company to maintain a maximum consolidated senior secured net leverage ratio of 6.25x on the test date for the relevant period ended June 30, 2021, stepping down to 6.0x on March 31, 2022, 5.75x on March 31, 2023 and 5.50x from March 31, 2024 and thereafter (the “RCF Financial Covenant”). The RCF Financial Covenant is calculated as the ratio of consolidated senior secured net debt to consolidated pro forma EBITDA (defined as net loss excluding depreciation and amortization, interest expense, interest income and income tax expense) for the 12-month period preceding the relevant quarterly testing date and is tested quarterly on a rolling basis, subject to the Initial Facility (as defined in the RCF Agreement) being drawn on the relevant test date. The RCF Financial Covenant does not include a minimum interest coverage ratio or other financial covenants. Covenant testing at March 31, 2025 showed covenant compliance.
There were no breaches of the debt covenants in the three-month period ended March 31, 2025 or March 31, 2024.
Liens and Encumbrances
As of March 31, 2025, our senior secured notes were secured by the imposition of a fixed and floating charge in favor of the lender over all the assets of the Company and certain of the Company’s subsidiaries.
Share Repurchases
The Board of Directors has authorized the Company to use up to $25.0 million to repurchase shares of Inspired common stock, subject to repurchases being effected on or before May 10, 2025. Management has discretion as to whether to repurchase shares of the Company and as of March 31, 2025, an aggregate of $12.0 million of our shares of common stock had been repurchased. No shares have been repurchased after September 2023.
Contractual Obligations
As of March 31, 2025, our contractual obligations were as follows:
| Contractual Obligations (in millions) Operating activities | Total | Less than 1 year | 1-2 years | 3-5 years | More than 5 years |
|---|---|---|---|---|---|
| Interest on long term debt | $35.8 | $23.9 | $11.9 | $- | $- |
| Purchase of Vantage machines | 8.8 | 8.8 | - | - | - |
| Financing activities | |||||
| Revolver repayment | 20.3 | 20.3 | - | - | - |
| Senior secured notes - principal repayment | 303.4 | - | 303.4 | - | - |
| Finance lease payments | 23.4 | 4.9 | 4.8 | 13.7 | - |
| Operating lease payments | 16.2 | 5.0 | 3.7 | 4.2 | 3.3 |
| Interest on non-utilization fees | 0.1 | 0.1 | - | - | - |
| Total | $408.0 | $63.0 | $323.8 | $17.9 | $3.3 |
Off-Balance Sheet Arrangements
As of March 31, 2025, there were no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, promulgated by the U.S. Securities and Exchange Commission.
Critical Accounting Estimates
The preparation of our audited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. We exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenue and expenses, and our disclosure of commitments and contingencies at the date of the consolidated financial statements. On an on-going basis, we evaluate our estimates and judgments. We base our estimates and judgments on a variety of factors, including our historical experience, knowledge of our business and industry and current and expected economic conditions, that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.
A description of our critical accounting estimates was provided in item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2024. There were no changes in the determination of these estimates during the first three months of 2025.
Market risk
As filed, 3,018 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Our principal market risks are our exposure to changes in foreign currency exchange rates.
Interest Rate Risk
Following the Company’s refinancing of its debt in May 2021, the external borrowings of £235.0 million ($303.4 million) are provided at a fixed rate. Therefore, movements in rates such as LIBOR do not impact on the current borrowings and the only fluctuation that is expected to be reported will be that solely caused by movements in the exchange rates between the Company’s functional currency and its reporting currency.
Foreign Currency Exchange Rate Risk
Our operations are conducted in various countries around the world, and we receive revenue and pay expenses from these operations in a number of different currencies. As such, our earnings are subject to movements in foreign currency exchange rates when transactions are denominated in (i) currencies other than GBP, which is our functional currency, or (ii) the functional currencies of our subsidiaries, which is not necessarily GBP. To estimate our foreign currency exchange rate risk, we identify material Euro and USD trading and balance sheet amounts and recalculate the result using a 10% movement in the GBP:USD exchange rate. For the trading figures the 10% movement is based on the average exchange rate throughout the reported period and for the balance sheet figures the 10% movement is based on the exchange rate used at March 31, 2025.
Excluding intercompany balances, our Euro functional currency net assets total approximately $23.4 million, and our USD functional currency net assets total approximately $9.0 million. We use a sensitivity analysis model to measure the impact of a 10% adverse movement of foreign currency exchange rates against the USD. A hypothetical 10% adverse change in the value of the Euro and the USD relative to GBP as of March 31, 2025, would result in translation adjustments of approximately $2.2 million favorable and $0.9 million favorable, respectively, recorded in other comprehensive income.
Included within our trading results are earnings outside of our functional currency. Retained gains from Euro based entities earned in Euros and retained losses from USD based entities earned in USD in the three-month period ended March 31, 2025, were €3.9 million and $4.8 million, respectively. A hypothetical 10% adverse change in the value of the Euro and the USD relative to GBP as of March 31, 2025, would result in translation adjustments of approximately $0.4 million favorable and $0.4 million unfavorable, respectively, recorded in trading operations.
The majority of the Company’s trading is in GBP, the functional currency, although the reporting currency of the Company is the USD. As such, changes in the GBP:USD exchange rate have an effect on the Company’s results. A 10% weakening of GBP against the USD would not impact the trading operational results and would result in unfavorable translation adjustments of approximately $3.6 million, recorded in other comprehensive income.
Controls and procedures
As filed, 2,147 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer (together, the “Certifying Officers”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of March 31, 2025, due to the material weaknesses described in Item 9A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 26, 2025. Management is redesigning and implementing existing and additional controls to remediate these material weaknesses.
Notwithstanding the identified material weaknesses and management’s assessment that our disclosure controls and procedures were not effective at the reasonable assurance level as of March 31, 2025, management believes that the interim consolidated financial statements and footnote disclosures included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations, cash flows and disclosures as of and for the periods presented in accordance with generally accepted accounting principles.
Risk factors
As filed, 509 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Our business is subject to a high degree of risk. You should carefully consider the risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for our fiscal year ended December 31, 2024, filed with the SEC on March 26, 2025. Any of these risks could materially and adversely affect our business, operating results, financial condition and prospects, and cause the value of our common stock to decline, which could cause investors in our common stock to lose all or part of their investments.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2025-03-31. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2025-01-01 to 2025-03-31 | $60.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months2025-01-01 to 2025-03-31 | $1.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months2025-01-01 to 2025-03-31 | $7.0m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months2025-01-01 to 2025-03-31 | −$5.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2025-01-01 to 2025-03-31 | −$100.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2025-01-01 to 2025-03-31 | $0.00 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2025-01-01 to 2025-03-31 | $0.00 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2025-01-01 to 2025-03-31 | 28,973,938 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months2025-01-01 to 2025-03-31 | $25.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months2025-01-01 to 2025-03-31 | $9.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | At period end2025-03-31 | $39.0m | us-gaap:Cash |
| Current assets | At period end2025-03-31 | $161.8m | us-gaap:AssetsCurrent |
| Total assets | At period end2025-03-31 | $458.9m | us-gaap:Assets |
| Current liabilities | At period end2025-03-31 | $113.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | At period end2025-03-31 | $461.1m | us-gaap:Liabilities |
| Long-term debt | At period end2025-03-31 | $301.5m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | At period end2025-03-31 | $19.4m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | At period end2025-03-31 | −$2.2m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0001641172-25-009269. Last ingested by Listed: Nov 5, 2026, 19:56 ET. Listed shows no prices and gives no investment advice.