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Inspired Entertainment, Inc. (INSE)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue rose to $83.0M; Adjusted EBITDA increased 22% YoY to $30.9M, driven by record Interactive performance (+45% revenue YoY; ~71% segment margin) while Virtual Sports remained pressured by a key customer .
  • GAAP net income surged to $68.0M (diluted EPS $2.33), largely reflecting a deferred tax valuation adjustment; Adjusted net income was $4.7M (adjusted EPS $0.16), highlighting underlying profitability ex non-recurring items .
  • Management expects digital businesses (Interactive + Virtuals) to approach ~60% of company EBITDA by year-end 2025 and confirmed William Hill’s 5,000 Vantage cabinet install is on track to complete by end of Q1 2025, setting up land-based uplift in 2025 .
  • Catalysts: SEC inquiry closed with no action (removes overhang), Brazil Interactive/Virtuals rollout, Hybrid Dealer expansion (Loto-Québec Q2 2025; UK via bet365), and potential Holiday Parks sale; near-term cash balance guide moderated due to AR timing and accelerated supplier payments .

What Went Well and What Went Wrong

What Went Well

  • Interactive strength: Q4 Interactive revenue +45% YoY to $11.6M and Adjusted EBITDA +105% YoY to $8.2M; margin expanded from ~50% to ~71% YoY. “We are pleased to report another quarter of robust performance in our Interactive segment…” — Lorne Weil .
  • Gaming EBITDA growth: Q4 Gaming Adjusted EBITDA +42% YoY to $19.5M; Vantage cabinet rollout with William Hill progressing, targeted completion by end of Q1; cabinets drive consistent double-digit cash box growth .
  • Leisure steady: Q4 Leisure revenue +7% YoY to $22.5M with margin improvement from cost actions; extended MSA contracts (Moto, Welcome Break) and continued pub deployments .

What Went Wrong

  • Virtual Sports headwinds: Q4 segment revenue down 22% YoY to $10.1M due to weakness at a key customer; segment Adjusted EBITDA down 29% YoY to $7.2M .
  • Corporate costs: Corporate Adjusted EBITDA more negative YoY (-$9.2M vs -$5.8M), reflecting restatement costs and restructuring charges .
  • Cash balance caution: Management guided Q1 2025 cash “a little bit lower” than the prior $50–$55M range due to delayed receivables and accelerated supplier payments, moderating near-term liquidity optics .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$75.6 $78.0 $83.0
Net Income ($USD Millions)$2.0 $3.4 $68.0
Diluted EPS ($USD)$0.07 $0.12 $2.33
Adjusted Net Income ($USD Millions)$5.7 $6.0 $4.7
Adjusted EPS ($USD)$0.20 $0.21 $0.16
Adjusted EBITDA ($USD Millions)$25.5 $30.1 $30.9
Adjusted EBITDA Margin (%)34% 39% 37%

Segment Revenue ($USD Millions)

SegmentQ2 2024Q3 2024Q4 2024
Gaming (ex Low-Margin HW)$27.1 $23.3 $38.8
Virtual Sports$11.7 $11.2 $10.1
Interactive$9.4 $10.2 $11.6
Leisure$27.4 $33.3 $22.5
Total (ex Low-Margin HW)$75.6 $78.0 $83.0
Low-Margin Gaming Hardware Sales$0.0 $0.0 $0.0
Total (incl Low-Margin HW)$75.6 $78.0 $83.0

Segment Adjusted EBITDA ($USD Millions)

SegmentQ2 2024Q3 2024Q4 2024
Gaming$10.3 $10.7 $19.5
Virtual Sports$9.6 $8.8 $7.2
Interactive$6.1 $6.9 $8.2
Leisure$6.1 $10.2 $5.2
Corporate($6.6) ($6.5) ($9.2)
Total Company Adjusted EBITDA$25.5 $30.1 $30.9

Segment Contribution to Adjusted EBITDA (%)

SegmentQ3 2024Q4 2024
Gaming29.2% 49.2%
Virtual Sports26.3% 19.8%
Interactive19.9% 22.3%
Leisure24.6% 8.7%

Non-GAAP items: Adjusted EBITDA/Adjusted Net Income exclude restatement and restructuring costs, stock-based comp, legacy pension items, currency effects, and the significant deferred tax valuation adjustment in Q4 2024; reconciliations provided in the release/8-K .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Ending Cash BalanceQ1 2025$50–$55M (Q3 call) “A little bit lower than that” due to receivables timing and accelerated supplier payments Lowered
William Hill Vantage Install CompletionQ1 2025Complete by end of Q1 2025 “On track to be completed by the end of the first quarter” Maintained
Hybrid Dealer – Loto‑Québec Roulette2025Expected Q4 2024 delivery (Q3 PR) Expected launch in Q2 2025 Pushed out
Hybrid Dealer – FanDuel bespoke2025Partnership announced Oct 2024 Target “right before the launch of football season 2025” Timed window specified
Digital EBITDA MixFY 2025—Digital businesses to approach ~60% of EBITDA by year-end 2025 New strategic marker
UK Regulatory – Stake limits2025AnticipatedExpected in April; minimal impact anticipated; pursuing B3 liberalization opportunity Regulatory update
Lottery Cloud System (Dominican Republic + broader)H1 2025Deploy/start marketing in 2025 (Q3) Customer acceptance testing handover by late Mar/early Apr; viewed as most advanced system More detail; on track

Earnings Call Themes & Trends

TopicQ2 2024 (Prev Mentions)Q3 2024 (Prev Mentions)Q4 2024 (Current Period)Trend
Hybrid Dealer rolloutNew roulette variants planned; demand exceeding capacity Loto‑Québec Q4 2024 expected; FanDuel bespoke announced Live with BetMGM, bet365, Caesars; Loto‑Québec Roulette expected Q2 2025; FanDuel targeted pre‑NFL 2025 Building pipeline; timelines extended as scope expands
Interactive growth/marginsRecord performance; high-60s margins ALL-time highs; margin 67.6%; broadening studios/geos Revenue +45% YoY; margin ~71% in Q4; pipeline robust; Brazil launch started Scaling and margin expansion
Virtual Sports trajectoryHeadwinds at largest customer; H2 recovery expected Inflection “approaching”; broader base +11% YoY, online strong; licensing (NHL) Stabilizing Q1-to-date; Brazil ramp; >70% margins; product org unified to accelerate innovation Stabilization underway; medium-term rebuild
Land-based Vantage cabinetsWilliam Hill 5,000 units signed; double-digit uplift historically First conversions in Oct; biggest impact Q1 2025 On track to complete by end of Q1; >10% cash box growth observed Execution into Q1 2025
UK regulation—Greece soft market; U.K. growth/mix improved Stake limits in April; potential B3 cabinet liberalization could aid sales Manageable impact; upside optionality
Lottery/cloud systemsSG Content Hub partnership; DR contract noted Cloud system deploy 2025; lottery seen as growth vector Acceptance testing handover late Mar/early Apr; Virginia Lottery online Virtuals via Aristocrat end of April Execution milestones imminent
Capital structure/liquidityCash rebuild; buybacks later Q1 2025 cash guide $50–$55M Cash guide slightly lower; refinance targeted before Jun 2026 maturity Proactive refinancing; temporary working capital effects
SEC inquiry/restatementRestatement costs impacted H1 cash —SEC inquiry closed; 10‑K timing update (by Mar 21, 2025) Overhang removed

Management Commentary

  • “We are pleased to report another quarter of robust performance in our Interactive segment… our fourth quarter Adjusted EBITDA margin in interactive expanded from 50% to 71% year over year, showcasing the scalability of our digital operations.” — Lorne Weil, Executive Chairman .
  • “In our Gaming segment… 42% growth in segment Adjusted EBITDA… installation of 5,000 new Vantage cabinets, on track to be completed by the end of the first quarter.” — Lorne Weil .
  • “While our Virtual Sports segment faced challenges… we have initiated strategic measures to streamline… unifying product and platform teams… margins of over 70%… growth initiatives in Brazil… NHL license… Aristocrat Interactive [Virginia Lottery].” — Lorne Weil .
  • “We… received a letter from the SEC… inquiry is now closed and… no further action.” — Lorne Weil .
  • “Over half our profit… is digital. Over 85% of our revenue is contractually recurring. Our EBITDA margins are high and our leverage quite comfortable.” — Lorne Weil .

Q&A Highlights

  • Virtual Sports stabilization: Management cited real-time Q1 data showing stabilization; Brazil’s licensing reset softened January but February recovered; expects Brazil to become the largest market with bet365/Betano anchors .
  • M&A and Holiday Parks: Company is “seriously exploring” sale of Holiday Parks; broader divestments not contemplated; buybacks considered subject to cash trajectory; no incremental debt for buybacks .
  • UK regulation: Stake limits effective April; minimal impact expected due to game innovation; awaiting potential B3 cabinet liberalization to drive onetime sales .
  • Cash guidance and working capital: Q1 2025 cash expected “a little bit lower” than prior $50–$55M due to receivables timing and accelerated supplier payments (landfill/Vantage deployments) .
  • Hybrid Dealer timelines: Loto‑Québec Roulette now expected Q2 2025; FanDuel bespoke targeted before 2025 NFL season launch .
  • CapEx/lottery: 2025 CapEx roughly in line with recent years (pub upgrades, MSA renewals); cloud lottery system ready for customer acceptance by end Mar/early Apr; Virginia Lottery online Virtual Sports targeted end of April via Aristocrat/NeoPollard .

Estimates Context

  • S&P Global/Capital IQ quarterly consensus for INSE was unavailable for the relevant periods; therefore, formal “vs. estimates” comparisons cannot be provided at this time. Management stated results were “in line with expectations” .
  • Given the mix shift and execution timelines (Hybrid Dealer, Vantage rollout, Brazil ramp), we expect near-term sell-side models to adjust mix assumptions (higher Interactive/Hybrid contribution; Gaming uplift from Q2/Q3 2025) once external consensus becomes available.

Key Takeaways for Investors

  • Interactive momentum is the core engine: sustained top-line growth and structurally expanding margins (~71% in Q4), with Hybrid Dealer diversifying and deepening digital revenue streams across geographies .
  • Land-based uplift in 2025 looks tangible: William Hill’s 5,000 Vantage install completion by end of Q1 should drive double-digit cash box performance; Illinois subscription model is scaling recurring content revenue .
  • Virtual Sports is stabilizing and poised for product-led rebuild: unification under central product/tech, new innovations (parlay-like mechanics), and Brazil/NHL licensing should support recovery; margins remain >70% .
  • Liquidity and capital structure are actively managed: near-term cash lower than prior guide due to AR timing and accelerated supplier payments; refinancing targeted before Jun 2026 maturity, likely floating-rate and more flexible .
  • Event overhang removed: SEC inquiry closure reduces headline risk; 10‑K timing clarified for late Mar 2025 .
  • Near-term setup: Expect narrative catalysts from Brazil momentum, Hybrid Dealer launches (Loto‑Québec Q2 2025; FanDuel pre‑NFL), Virginia Lottery online Virtuals go-live by end of April, and completion of Vantage deployments .
  • Monitor Holiday Parks process: Sale could streamline focus to higher-margin digital businesses and support long-term margin ambition (>40% consolidated), per management’s strategic commentary .