Interactive growth helps Inspired to FY2023 revenues of $323.0m

Inspired filed its Q4 and full-year results on Monday (15 April), much later than it was initially expected to do so, having been warned by Nasdaq about the late filing.

Nasdaq had already given Inspired a warning for delays to its Q3 results, stating the late filing was a breach of its rules.

Inspired put the new delay down to a review of accounting policies during Q4. After finding errors in financial statements from 1 January 2021 onwards, the company announced it was planning to restate previously issued financial statements.

iGB has contacted Inspired for further clarity on the restated financial statements.

Inspired revenue for 2023

According to Inspired’s restated financials, revenue was up 14.7% on its previous year of FY2022, where it generated $281.6m. Product sales increased by 86.1% year-on-year from $33.2m to $61.8m, while service revenue went up to $261.2m from $248.4m.

Total company adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), meanwhile, edged up to $100.5m from $99.0m in 2022.

However, despite the rise in revenue, Inspired’s net income for the year stood at $7.6m, a drop of 63.1% from 2022’s figure of $20.6m.

This was largely down to increased expenses, with selling, general and administrative expenses jumping from $101.9m in 2022 to $115.5m in 2023. Cost of product sales also rocketed from $21.9m to $52.6m year-on-year.

Net income per basic share for FY2023 dropped 63.0% year-on-year to $0.27 a share from $0.73, while net operating income also fell to $39.9 from $46.0m.

Additionally, adjusted EBITDA margin was 31%, compared to 35% last year. On the investors’ call following the release of the results, the company’s president and chief executive officer, Brooks Pierce, revealed the business was targeting an adjusted EBITDA margin of 40%.

With revenues and EBITDA reaching record levels in 2023, Inspired’s executive chairman Lorne Weil believes the company is well-placed to continue on its upwards growth trajectory in the coming years.

“As the global online betting and gaming ecosystem continues evolving, with some new markets opening and consumer adoption increasing, we see opportunities for continued growth,” Weil said.

“We are excited about the opportunities ahead as we seek to capitalise on the expanding online betting and gaming markets globally.”

Inspired interactive growth alleviates stagnation fears

While Inspired’s gaming, virtual sports and leisure sectors grew by just 1%, 4% and 1% respectively in terms of year-on-year revenue, its interactive sector generated $27.9m in total revenue, up 35.4% on FY2022’s figure of $20.6m.

The interactive segment’s adjusted EBITDA also increased to $15.4m from $11.3m. Gaming’s adjusted EBITDA went up just 0.7% to $44.0m, while virtual sports also only saw a 6.2% jump from $44.9m to $47.7m.

The interactive sector enjoyed a particularly strong Q4, with its revenue for the final quarter of the year at $8.0m, a 48.1% year-on-year increase, while its adjusted EBITDA also shot up to $4.0m from $2.8m in the same period last year.

Weil praised the company’s interactive segment’s Q4 performance, declaring: “Our fourth quarter performance capped off a strong year, fuelled by our successful strategic focus on scaling our higher-margin digital verticals alongside steady growth in our land-based operations.

“Our digital business fourth quarter results continue to be led by the interactive segment, where revenue and adjusted EBITDA increased approximately 41% and 39% year-over-year on a constant currency basis, respectively, as we continue to increase our footprint through new customer launches and benefit from the growth of our existing customer base.”

Increased costs a theme of Inspired’s Q4

While Inspired’s Q4 revenues went up 6.0% to $81.2m from $76.6m in the same quarter last year, increases in costs meant the company’s net operating income dropped to $9.3m from $11.6m in Q4 FY2022.

Cost of product sales in Q4 edged up to $10.8m from $10.7m, while cost of service also jumped from $16.5m to $18.2m. The biggest rise was in selling, general and administrative expenses, which were up 18.0% at $32.8m from $27.8m in the same quarter last year.

Inspired’s Q4 results also included $5.0m in costs related to its accounting restatements. Across the whole year, Inspired’s corporate sector reported a loss of $77.9m, as well as an adjusted EBITDA loss of $26.0m.

Additionally, other total net expenses increased from $6.4m to $7.1m, while Inspired paid $2.2m in Q4 income tax, meaning Inspired recorded a net income of zero for Q4.

Gaming still performing well

While gaming revenues only went up by $700,000 year-on-year during FY2023, the segment is still vital for Inspired. The sector accounted for $111.3m in total revenue, 39.6% of Inspired’s total yearly revenue, while it accumulated $43.7m in adjusted EBITDA, 34.1% of the company’s FY2023 figure.

Virtual sports are also performing well, with the segment’s $54.2m in total FY2023 revenue making up for 19.2% of the business’ total revenues for the year. It’s also outperforming gaming in terms of its contribution to adjusted EBITDA, with the sector responsible for 40.4% of the yearly figure.

While the interactive segment showed stark growth in FY2022, it was still only responsible for 7.3% of Inspired’s total yearly revenues and 9.6% of its adjusted EBITDA total.

The future for Inspired

Notably, Inspired doesn’t publish guidance as one of its policies. However, on the investors’ call, Weil says the company is comfortable with where the full-year consensus is, which is “modestly up” from FY2023’s numbers.

Weil also stated he was expecting its FY2024 results to be weighted towards the back end of the financial year, with virtual sports starting to pick up following its prior decline. This he said, will reflect the time needed before the company’s initiatives fully take effect.

Additionally, Weil pointed to the “lingering unusual” aspects relating to the accounting restatements, as well as a backlog on product sales towards the end of the year, as potentially having an impact on the company’s 2024 financial year.