Inspired Entertainment, Inc. (INSE)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 revenue fell 27% sequentially to $60.4M but declined just 3% year over year; Adjusted EBITDA was $18.4M (30% margin), down from $30.9M in Q4 but up 19% year over year as Interactive strength offset Virtual Sports and seasonal Leisure headwinds .
• Management highlighted several transitory drags: Brazil regulatory/tax disruption early in the quarter, Easter holiday timing shifting out of Q1 in the UK Leisure business, some product sales slipping to Q2, and ~$1M EBITDA headwind from lease revenue reclassification; underlying performance was described as solid with Interactive margins expanding to ~64% .
• Balance sheet clarity improved with a signed commitment letter for £287.8M in new private credit (incl. £270M 5-year term loan at SONIA + 600 bps), expected to close in early June; management modeled ~$30M interest expense for 2026 and aims to reduce annual CapEx to ~$25M via capital-light strategies and potential Holiday Parks divestiture .
• Key near-term catalysts: Hybrid Dealer expansion (new roulette variants and broader operator rollouts), stabilization and localized content in Brazil for Virtual Sports, and completed William Hill Vantage deployment supporting Gaming segment EBITDA; management expects Virtual Sports to return to year-over-year growth by Q3/2H 2025 .

What Went Well and What Went Wrong

• What Went Well

  • Interactive momentum: revenue +49% y/y with Adjusted EBITDA +75%; margin expanded ~1,000 bps to ~64%, driven by UK and North America; U.S. Interactive grew ~90% y/y vs ~20% market growth on stronger content and account management; management noted “virtually every week since the close of the quarter has recorded a new high” .
  • Hybrid Dealer scaling: Roulette variants live in the UK (bet365, Gamesys) with further rollouts planned (e.g., Loto-Québec in May, bet365 Brazil, BetMGM NJ); “it’s a very busy time … we’ll start sharing metrics later in the year as it settles in” .
  • Gaming efficiency and deployments: Completed rollout of 5,000 Vantage cabinets with William Hill, driving high single-digit y/y growth; Greece terminal rollouts to benefit 2025; Illinois portrait cabinet performance and subscriptions trending strongly .

• What Went Wrong

  • Virtual Sports pressure: revenue -30% y/y with Adjusted EBITDA -39%, primarily from Brazil’s regulatory/tax transition early in the quarter; stabilization emerged later, but quarter-level comps were weak .
  • Leisure seasonality and timing: Leisure performed “as expected in a seasonally slow quarter,” with y/y performance affected by timing of key UK public holidays (Easter moved to Q2) .
  • One-offs and accounting headwind: ~$1M EBITDA impact from lease revenue reclassification; certain product sales slipped from Q1 to Q2, depressing sequential results .

Financial Results

Overall P&L vs prior quarters (USD millions, except per-share and margins)

Year-over-year comparison (Q1 2025 vs Q1 2024)

Segment breakdown (USD millions)

Cash flow and balance sheet KPIs (USD millions)

Notes:

• Management referenced rounding Adjusted EBITDA “about $18.5 million” versus reported $18.4 million .
• Interactive margin cited at ~64% (up ~1,000 bps y/y) .

Guidance Changes

Management does not provide formal numeric guidance; below reflects qualitative/outlook updates and financing terms.

Earnings Call Themes & Trends

Management Commentary

• “Interactive… revenue increasing by 49% year-over-year… Adjusted EBITDA grew 75% as the Adjusted EBITDA margin expanded approximately 1,000 basis points versus prior year to 64%” .
• “We successfully delivered and installed the 5,000 Vantage terminals to the William Hill estate… we’re seeing high single-digit growth from this customer year-over-year” .
• “The data from the last several weeks is indicating that [Virtuals] has essentially stabilized… we expect the business to return to year-over-year growth by the third quarter or certainly the second half of this year” .
• “We have entered into a commitment letter for £287.8 million of private credit facilities… [a] £17.8 million super senior revolving credit facility… and £270.0 million of senior secured term debt… set to mature five years from the closing date… expected to close… early June 2025” .
• Interest expense/outlook: “our going-in rate of 6 points over SONIA is a little over 10%… we’ll comfortably be at about 9.5% by the end of this year… [model] $30 million in interest for 2026” .
• Capital intensity: “Our goal… is to get our annual CapEx to around $25 million, almost all… content related… our rapidly growing and very profitable digital businesses” .

Q&A Highlights

• Tariffs: “not a big issue for us” with minimal exposure; potential Canada opportunity; referenced potential UK-U.S. trade news .
• Virtual Sports stabilization timeline: reiterated stabilization into April/May; expects y/y growth by Q3/2H 2025; Brazil integration and operator onboarding remain pacing factors .
• Refinancing details: SONIA+600 bps; flexibility prioritized (low call protection, floating rate); $30M interest expense modeled for 2026; deleveraging expected to step down spread .
• EBITDA margin target: sale of Holiday Parks and pub model shift “pretty much guarantees… EBITDA margins comfortably over 40%” once executed .
• Hybrid Dealer pipeline: broad Tier 1/Tier 2 adoption; roulette derivatives rolling out; FanDuel bespoke game targeted around 2025 football season .

Estimates Context

• S&P Global consensus estimates for Q1 2025 revenue, EPS, and EBITDA were unavailable at the time of this analysis; therefore, we cannot provide a vs-consensus assessment for the quarter. Values retrieved from S&P Global.
• Management does not issue formal numerical guidance; outlook focuses on mix shift to digital, Hybrid Dealer scaling, Virtual Sports recovery by 2H 2025, reduced CapEx, and deleveraging/interest savings trajectory .

Key Takeaways for Investors

• Digital engine intact: Interactive continues to compound with high incremental margins; Hybrid Dealer expanding across operators and jurisdictions, reinforcing a structurally higher-quality earnings mix .
• Transient drags masked y/y strength: Virtual Sports Brazil disruption, holiday timing, and revenue reclassification weighed on sequential results; underlying trajectory improved with stabilization and localized launches (e.g., V-Play Football Brazil) .
• Balance sheet visibility improved: committed refinancing reduces near-term maturity risk and increases flexibility; deleveraging from asset sale (Holiday Parks) and capex-light pivot likely to lift FCF conversion .
• 2H 2025 setup: Management targets Virtual Sports y/y growth recovery by Q3/2H; Hybrid Dealer KPIs forthcoming; watch U.S. and Brazil rollouts for incremental contribution .
• Gaming steady with selective growth: William Hill Vantage deployment completed; Greece/Illinois initiatives support resilient segment EBITDA despite UK retail softness at some customers .
• Medium-term margin expansion: Digital mix, capital-light model, and potential asset sale underpin pathway to “comfortably over 40%” EBITDA margins post-portfolio actions .
• Stock reaction catalysts: confirmation of Virtual Sports re-acceleration, Hybrid Dealer metrics disclosure, and closing of the refinancing could act as positive catalysts; any Brazil regulatory clarity and additional Tier 1 wins amplify upside narrative .

Additional relevant press in Q1 context:

• Buzz Bingo contract extension: supply of 500 B3/C terminals across 79 venues supports UK Leisure/Gaming footprint .
• Brazil localization: launch of V-Play Football Brazil with Betano and Brasileirão Betano branding deepens localized Virtual Sports content .