Release Date: May 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record levels of equipment sales backlog, indicating strong future revenue potential.
- Interactive business recorded a strong quarter with revenue up 31% year-over-year on a functional currency basis and EBITDA up 38%.
- Anticipated dramatic improvement in EBITDA in the second quarter, with a possible 50% sequential increase.
- Successful launch of new products in the Interactive segment and expansion into new markets like Latin America.
- Operational restructuring underway expected to generate significant company-wide margin improvement starting mostly in 2025.
Negative Points
- Incurred over $10 million in expenses related to accounting restatement, impacting EBITDA and cash flow.
- Delivery dates for equipment sales backlog moved to the second half of the year, delaying revenue recognition.
- Virtual Sports business experienced a pullback, although it has begun to stabilize.
- Loss of a service contract for SSBTs and delayed rollout of Vantage cabinet impacted the gaming segment.
- Additional charges expected in Q2 related to ongoing remediation efforts around material weaknesses.
Q & A Highlights
Q: Can you provide more details on the early performance of the Hybrid Dealer and any comparisons to the live dealer product?
A: (Brooks Pierce - President, Inspired Entertainment Inc) The Hybrid Dealer is still in its early stages, currently with one product in one market in New Jersey. The performance has shown steady growth with occasional spikes from big plays. Comparisons to the live dealer product will be more relevant once the Roulette game is launched and the product is available in more markets.
Q: Are you still comfortable with the full-year consensus given the expected significant increase in EBITDA from Q1 to Q2?
A: (A. Lorne Weil - Executive Chairman, Inspired Entertainment Inc) The expectation is a 50% increase in EBITDA from Q1 to Q2, with further improvements expected in Q3, which is typically the peak quarter. The fourth quarter should also see benefits from a backlog of equipment sales. Overall, the company remains comfortable with the consensus, with minor possible deviations.
Q: What are the trends and expectations for the Virtual Sports segment, especially with new products like the NBA and NFL games?
A: (Brooks Pierce - President, Inspired Entertainment Inc) The Virtual Sports segment is seeing stabilization and growth, particularly with the new NBA and NFL games. The segment is expected to grow with new products and expansion into new geographies like Brazil. Early data from new markets and products are promising for continued growth.
Q: How does the consolidation in the U.S. slot supplier market affect your company's strategy or market share opportunities?
A: (Brooks Pierce - President, Inspired Entertainment Inc) The consolidation could present opportunities for Inspired Entertainment to expand or gain market share, especially as the company is not directly affected by the disruptions in Class II or Class III markets. The recent validation from WCLC and the focus on regulated VLT markets are seen as positive indicators for growth.
Q: Can you discuss the impact of the accounting issues mentioned at the beginning of the call and any expected future impacts?
A: (Marilyn Jentzen - Interim CFO, Inspired Entertainment Inc) The company incurred about $5 million in costs related to accounting issues in Q1. While some additional costs are expected in Q2 for ongoing remediation, they are anticipated to be significantly lower than in Q1.
Q: What are the prospects for market share growth in the Interactive business, particularly in the UK and North America?
A: (Brooks Pierce - President, Inspired Entertainment Inc) The Interactive business has seen substantial market share growth in the UK, currently at about 7%, with significant potential for further growth. In North America, the market share stands between 2% and 3%, indicating substantial room for expansion, especially given the ongoing focus on delivering high-quality games.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
