Inspired hails digital growth as revenue rises 8.9% in Q1

Inspired experienced double-digit growth within its interactive and virtual sports businesses in the three months to 31 March. Both of these operate as part of its digital umbrella.

Inspired also praised the ongoing “resilience” of its land-based operations, with revenue from gaming having increased, but leisure revenue down year-on-year.

Executive chairman Lorne Weil said that, based on the performance of the business as a whole in Q1, Inspired is well positioned to pursue further growth across both digital and land-based operations in the remainder of 2023.

“The year is off to a strong start as we continue to deliver double-digit growth in our high-margin, capital-efficient digital businesses, while positioning the land-based businesses for steady growth and capital efficiency to increase cash flow,” Weil said.

“To say we are excited about the future is an understatement. Our land-based business provides us steady growth and substantial cash generation. Our digital business provides a unique combination of strengths in the industry today, specifically high growth, high levels of profitability and modest capital investment required.  

“We think this combination produces high quality earnings and is unmatched among our peers. In our view the outlook is bright and we remain focused on delivering value to our shareholders for a long time to come.”

Q1

Total revenue for the first quarter amounted to $66.0m (£52.3m/€60.1m), up from $60.0m in the opening three months of 2022. This comprised $58.3m in service revenue and $7.7m worth of product sales revenue.

Breaking down performance by segment, land-based gaming led the way with $27.4m worth of revenue, up 18.1%. Inspired said this was driven by product revenue increases in the UK and mainland Europe. It also noted that service revenue was impacted by the absence of VAT-related revenue in the quarter.

Land-based leisure revenue fell 12.8% to $17.1m as the result of the structured withdrawal of non-core low-margin amusement and prize vend machines, which was recognised in Q3 of 2022. Inspired also referenced a reduction in the number of gaming machines following a contract renewal with a pub customer.

Turning to digital, virtual sports revenue increased 28.5% to $14.9m. This was driven by growth from existing online customers along with expanding jurisdictions. In addition, interactive revenue climbed 24.5% to $6.6m, helped by growth within the UK, US and Canada.

In terms of spending, selling, general and administrative expenses were the main outgoing at $34.4m, up 15.9% year-on-year. Cost of sales reached $16.7m and depreciation and amortisation $8.9m.

After accounting for $6.2m in net financial costs, Inspired had a pre-tax loss of $100,000. This is compared to a $1.6m profit in Q1 of 2022. The group paid $100,000 in income tax, which resulted in a net loss of $200,000. This is in contrast to the $1.5m net profit last year.

However, when also including a negative impact of $1.7m from foreign currency translation, as well as a $200,000 gain from the reclassification of loss on the hedging instrument to comprehensive income and a $2.0m gain on pension plan, net profit was $500,000, down 84.9% year-on-year.

In addition, Inspired said total adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was 5.0% higher at $21.1m.