Inspired Entertainment, Inc. Q4 FY2024 earnings call

• Adjusted EBITDA for the fourth quarter was $30.9 million, up 22% from last year; full year adjusted EBITDA was $100.1 million. • Received a letter from the SEC informing that the inquiry is closed and no further action will be taken. • Interactive is the star of the show with strong growth, and Virtual Sports has passed an inflection point with new innovations. • Retail-oriented businesses perform well, with Illinois server-based gaming model products doing well. • Over half of profit is digital, over 85% of revenue is contractually recurring, and EBITDA margins are high. • One-time equipment sales are 10% of overall business, causing year-end receivables increase and lower cash than anticipated. • Working on new credit facility to be in place prior to June 2026, likely floating rate and more flexible.

The Interactive segment saw fourth quarter revenue and EBITDA growth of 45% and 105% respectively. Interactive accounted for approximately 22% of overall company EBITDA in the fourth quarter and is expected to reach well over 25% by the end of the first quarter. The Interactive segment grew revenue by over 13% quarter-over-quarter, with adjusted EBITDA margins increasing to 65% for the full year from 55% last year. The Virtual Sports business faced challenges in 2024 due to a revenue reduction from its largest customer but has started to stabilize in the first quarter with the reorganization of the product group and new innovations. The retail-oriented gaming segment had EBITDA growth of 42% year-over-year in the fourth quarter, with Vantage cabinet deployment in William Hill expected to be completed by the end of the first quarter. The Leisure segment had 7% revenue growth year-over-year in Q4, with improved margins from cost improvements and onetime adjustments.

• Expected first quarter cash to be $50 million to $55 million, but likely to be a bit lower due to receivables delay. • Virtual Sports is expected to be in growth mode with new organization, products, and markets like Brazil. • Interactive is expected to continue its growth trajectory, with February being the second highest daily average revenue month in the first quarter. • New credit facility aims to be in place prior to June 2026, likely floating rate and more flexible.

• Significant year-to-year increase in accounts receivable at year end 2024 due to late one-time equipment sales, resulting in lower year-end cash than anticipated. • Virtual Sports business previously struggled due to revenue reduction from the largest customer. • U.K. B3 cabinets restriction may impact one-time sales in the U.K.

Q: On Virtual Sports, could you dive deeper into the challenges that segment is facing?

A: It's driven by one customer, but starting to see stabilization with that customer. The product group has been reorganized and new innovations have been developed and shown to the two biggest customers who are enthusiastic about getting them live. Margins are extremely high over 70% EBITDA margins and still bullish on Virtual Sports going forward.

Q: Have there been any updates to how you're thinking about M&A, either from a buy or a sell side perspective here? Including any thoughts on the strategic review of holiday parks.

A: On the strategic review of holiday parks, seriously exploring sale, cautiously optimistic of favorable conclusion. Beyond that, no intention of divestment as other businesses perform well. Always looking for M&A that makes sense with active program, but nothing on the horizon currently.

Q: Update on where the U.K. white paper sits today and are there any noticeable impact we should expect in the market or for your business in 2025?

A: Stakes limits change is a fact and assumed in budgeting, minimal impact as will innovate from game standpoint. Waiting for liberalization of B3 cabinets which could be good for one-time sales in U.K. but still to be determined.

Q: The cash balance is dipping quarter-on-quarter. Should we still expect 1Q cash of $50 million to $55 million?

A: It's going to be a little bit lower than that due to receivables delay. Directionally right, but likely a bit lower than expected. Also, some supply-related payments for William Hill deployments were accelerated and will be done by the end of March.

Q: Given additional Vantage machines and other retail opportunities, can you just talk about CapEx needs and what that means for cash flow?

A: CapEx for Moto and Welcome Break renewals, pub customer upgrades is planned and budgeted for, roughly the same as in the last couple of years, nothing out of the ordinary.

Q: Can you just talk about where you see the opportunities in 2025 to drive growth or sign new contracts and how should we be thinking about the benefits from the new cloud based lottery system?

A: Planning to hand over customer acceptance testing for the new lottery system by the end of April or beginning of May. Excited about launch of Virtual Sports with Virginia Lottery and Aristocrat at the end of April as first online lottery product in U.S. E-instant development is a viable opportunity, and lottery is a key segment with potential opportunities in next couple of quarters.