Inspired Q2: digital leads the way as higher costs offset revenue growth

Revenue was higher year-on-year in all Inspired business lines during the three months to 30 June. This included its core gaming segment, where revenue jumped 23.5% to $31.5m, as well as record performances in interactive and virtual sports.

However, the revenue increase was accompanied by a rise in expenses across the board. As such, net profit was down, but importantly Inspired remained in the black heading into Q3.

Looking at the quarter, executive chairman Lorne Weil said that revenue growth – particularly in digital – reflects the group’s “solid” underlying fundamentals.

“Revenue grew in each of our business lines during the second quarter reflecting solid underlying fundamentals,” Weil said. “The digital businesses once again generated record reported quarterly revenue and are steadily contributing a greater proportion of our earnings and cash flow.”

Weil added that new products and developments will drive further growth in Q3, the second half and beyond.

“It is also worth mentioning that we successfully negotiated long-term extensions for our virtual sports strategic partnerships with both Bet365 and Paddy Power.

“We also have an exciting pipeline of new products and further enhancements across our businesses. Most significant is that we are on target to deliver our new National Football League product in time for the start of the upcoming season.”

Digital leads the way in Q2

Taking a closer look at Weil’s comments about digital success in Q2, Inspired’s results more than back these up.

Virtual sports revenue climbed 7.1% to $15.0m, a record figure that was driven by growth from existing online customers and an increase in retail virtuals. 

Inspired Q2 revenue from interactive operations also increased 27.6% to $7.4m. Inspired put this record amount down to growth within its existing customer base in the UK, US and Canada. This, it said, was helped by the steady introduction of new content and new customer launches.

Gaming and leisure revenue rise

Away from digital-specific results, gaming revenue amounted to $31.5m and remained the group’s primary source of Inspired Q2 revenue. Taking out low-margin gaming hardware sales, revenue for this area was still 6.3% higher at $27.1m.

Inspired said gaming growth came as a result of a rise in UK product revenue and an increase in both North American and UK service revenue. However, this was partially offset by lower revenue in Greece, driven by the reduction of long-term licence revenue as existing software licences for terminals installed in 2018 expired.

Finally, leisure revenue edged up 1.9% to $26.5m, mainly due to an increase in holiday parks, following the addition of new venues. However, this was also partly offset by a drop in pubs revenue.

In terms of total Inspired Q2 revenue, group service revenue climbed 5.1% to $68.1m and product sales revenue 89.2% to $12.3m.

Inspired keeps in the black

As to the issue of costs, spending was higher across all areas including service, product sales and selling, general and administrative. The latter remained the main outgoing at $34.4m for the quarter.

Inspired also noted $72.m in net finance costs, leaving a pre-tax profit of 5.2m, down 29.7% on last year. The group paid $1.1m in tax, meaning net profit settled at $4.1m, a 43.1% year-on-year decline.

After accounting for $1.6m in foreign currency translation loss and losses on pension plan, this impacted bottom line. As such, comprehensive net profit was $2.3m, down 85.4% on last year. However, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) edged up from $26.1m to $26.2m.

Revenue also rises in H1

The story was more or less the same in the first half. Revenue for the six months to 30 June was $146.4m, up 11.0% year-on-year. 

Inspired did not publish a full breakdown of each segment’s performance in H1. However, it did state that it achieved $126.4m in service revenue and $20.0m of product sales revenue.

Turning to costs, spending was higher year-on-year in almost all areas and enough to offset revenue growth. As such, pre-tax profit fell 41.4% to $5.1m.

After paying $1.2m in tax, net profit reached $3.9m, down 53.6%. Inspired also took into account foreign currency translation loss and pension plan losses and, as such, bottom line net profit was down 87.2% to $2.6m.

Optimism for growth

“The long-term fundamentals and health of the business remain very strong,” Weil said. “We are optimistic about the compelling growth dynamics in our digital markets as a wider audience engages with online betting and gaming and new jurisdictions continue to open up. 

“Combined with a resilient land-based business and retail customer base, our diversification and proven ability to expand our business will enable us to deliver further progress against our omnichannel strategy combining our high-margin, capital efficient digital businesses with our steady land-based businesses.”