Inspired reports 55% increase in revenue YoY despite global pandemic

Inspired Entertainment reported on Monday financial results for the first quarter ended March 31, 2020.

"The year got off to a strong start, building on the momentum from outstanding organic growth, increased profitability across our businesses and better-than-expected initial results from our transformative acquisition which we realized in the fourth quarter of 2019," said Lorne Weil, Executive Chairman of Inspired. "However, the COVID-19 global pandemic resulted in the temporary closure of the land-based retail businesses of our customers with the continuation of many of the associated expenses, which had a material negative impact on our first-quarter results." 

Total Revenue increased to $52.3 million, from $33.7 million during the first quarter of 2019, primarily driven by $27.4 million in revenue from the recently acquired Novomatic Gaming Technology Group.  However, this increase was significantly offset by the lag in sales and temporary suspension of the Company's land-based business due to the ongoing COVID-19 global pandemic and the decrease in revenue in the UK Licensed Betting Office market primarily caused by the reduction in maximum B2 stakes to £2 implemented on April 1, 2019. 

Adjusted EBITDA decreased to $10.1 million, from $13.7 million during the first quarter of 2019. First-quarter 2020 results included $2.8 million from the Acquired Businesses (in its seasonally weakest quarter as leisure parks are closed in the winter months throughout the UK estate). The impact of the COVID-19 global pandemic was greater on Adjusted EBITDA than it was on Revenue due to the abrupt nature of the closures, which caused the Company to incur significant costs which had no associated revenues.

Weil continued, "We are pleased that our interactive business has shown not only resilience, but also strength during these unprecedented times with sales from our interactive channels helping to compensate for declines in revenue from our land-based retail business.  Our Virtual Sports content has helped to provide content given the lack of live sports content that currently exists and has, in some cases, taken center stage, as witnessed by the successes of the high-profile 'The Kentucky Derby: Triple Crown Showdown' and 'Virtual Grand National'.  These products have helped to drive demand for additional channels from existing customers and an influx of potential new customers.  We have a pipeline of customers ready to launch the new V-Play Plug & Play™, our complete end-to-end online virtual sportsbook product that allows 14 channels of Virtuals with minimal integration effort.  We are encouraged by this strong momentum, particularly in North America, as we look to build upon these opportunities to drive results in the future."

"During these unprecedented times, we are confident we have taken the necessary actions to reduce our expenditures and optimize our cash position," said Stewart Baker, Executive Vice President and Chief Financial Officer of Inspired. "As of May 15, 2020, we had GBP£39.6 million, or $48.4 million3, in cash on the balance sheet and we were able to generate positive Adjusted EBITDA in April based upon our preliminary view of results for the month.  Given our efforts to preserve liquidity, we believe we will be able to manage through this crisis and create stockholder value by executing on our key strategic initiatives and increasing returns on investment through disciplined capital allocation."

"We have benefited from both our product diversity and the aggressive actions our management team has taken.  We will be prepared to relaunch land-based retail operations in each of our markets as soon as conditions permit. We are confident we will emerge from this crisis in a strong position and we remain excited about our long-term growth prospects, where we continue to see upside from North American penetration, accelerated UK Pub and Leisure digitization, additional customers coming onboard in Virtual Sports and Interactive, as well as the benefits of the integration of our recent acquisition," concluded Weil.