Higher non-operating costs sees net loss widen at Inspired in H1
Revenue for the six months to 30 June amounted to $64.3m, down 5.3% from $67.9m in the corresponding period last year.
Services remained by far the primary source of income for Inspired, with revenue totalling $54.6m, down 6.0% year-on-year, while products sales revenue remained relatively level at $9.7m for the half.
In terms of product, gaming led the way with $27.0m in revenue, ahead of virtual sports on $14.5m, interactive with $11.0m and leisure on $11.8m.
Turning to spending and while both service and product sale costs were reduced, selling, general and administrative expenses were up 6.1% to $43.7m, while acquisition and integration costs reached $1.5m and depreciation and amortisation $25.0m.
This meant Inspired ended the first half with an operating loss of $21.9m, slightly higher than $21.1m last year, while adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) edged down 1.7% to $11.9m.
Inspired also noted $30.8m in interest expenses, more than double the amount last year, as well as $13.5m in change in fair value of warrant liability, which left additional expenses of $39.0m.
Taking this into account, pre-tax loss amounted to $60.9m, compared to $35.7m. Inspired paid $400,000 and despite benefitting from $5.8m in other income, including $5.5m from actuarial gains on its pension plan, comprehensive loss for the half jumped from $38.4m in 2020 to $54.7m.
Looking at the second quarter, revenue in the three months to 30 June reached $41.5m, up 166.0% on last year, with service revenue hiking 145.1% to $37.5m and product sales 1,233.3% to $4.0m.
Breaking this down by product, gaming revenue reached $16.2m, helped by the reopening of retail locations after novel coronavirus (Covid-19) closures, virtual sports revenue hit $8.2m, interactive revenue $5.8m and leisure revenue, also boosted by retail, $11.3m.
Last year’s closure periods meant service and product sales costs were up, while Inspired also saw selling, general and administrative expenses more than double from $12.2m to $28.5m.
Acquisition and integration costs were just $100,000 and depreciation and amortisation $11.9m, meaning operating loss improved from $13.9m to $9.7m and adjusted EBITDA jumped 289.3% to $8.0m.
However, after accounting for $33.8m in other costs, including $22.2m in interest expense and $10.5m in change in fair value of warrant liability, loss before tax widened from $26.2m last year to $43.8m.
Inspired paid $300,000 in income tax and while it received $1.2m in other income, it ended the quarter with a comprehensive loss of $42.6m, compared to $35.0m in 2020.
Executive chairman Lorne Weil said despite the loss, Inspired was pleased with its second-quarter performance, adding that the reopening of retail will help the business moving forward.
“We are pleased with our second quarter results as the majority of our retail businesses steadily reopened throughout the quarter and our interactive business built upon its momentum coming into the quarter to continue its rapid growth trajectory,” Weil said.
“From what we have seen in July and so far in August, this momentum in the interactive business has continued—leading to record-level revenues in July, notwithstanding the reopening of retail customers during the quarter—while our retail businesses appear to have rebounded quickly to roughly pre-Covid levels, as we had forecasted.”
Weil also referenced Inspired’s advancements in North America, saying this area of the business remains a “key driver of growth opportunities”.
“We see the North American online gaming and betting markets as significant opportunities, and we believe we are well positioned in these markets,” Weil said. “We launched our first games into Michigan in the second quarter and North America has now become our second largest Interactive market, with further opportunities as we continue to reach full deployment across Michigan and New Jersey and seek to benefit from opportunities with several additional states.”