Inspired Entertainment’s 2023 Numbers Show Major Revenue Bump For Interactive Segment

Inspired Entertainment reported net income of $7.6 million on $323 million in revenue for 2023, highlighting growth in its interactive offerings even as virtual sports numbers lag.

The company’s interactive segment, which offers gaming operators, including iLottery operators, online and mobile games hosted on Inspired’s servers, saw revenue jump 35% to $27.9 million for 2023. Adjusted EBITDA for the segment rose 36% to $15.4 million.

That’s thanks in part to new gaming content, including holiday games that saw strong numbers in the fourth quarter, said Executive Chairman Lorne Weil in the company’s Monday morning earnings call. Interactive revenue for the fourth quarter was $8 million, up 49% over the same quarter in 2022.

“At the same time, somewhat paradoxically, growth in virtual sports moderated over the course of the year,” Weil said.

Reasons for optimism

Fourth-quarter revenue in the virtual sports segment declined 12% year-over-year to $12.9 million, with total 2023 virtual sports revenue rising 4% to $56.2 million. Growth in Inspired’s virtual sports offerings has generally leveled off after substantial increases during the COVID-19 pandemic, according to the company, though officials are optimistic about licensing deals with the NBA and NFL announced last year and potential growth in Latin America.

“We’re also extremely excited by the early developments with operators in Brazil and expect that to be a key market for us going forward,” said CEO Brooks Pierce during the earnings call. “A market of over 200 million people that are so passionate for soccer doesn’t come along very often.”

Inspired expects to roll out its NFL-licensed game with more U.S. operators throughout the year and sees the NBA game — expected to launch in the second quarter of 2024 — performing particularly well in the Greek market with operating partner OPAP.

“We’re bullish on the pipeline of licenses, products, and geographies, and expect that by the second half of the year we should be back in growth mode in virtual sports,” Pierce said.

At the same time, Inspired is taking steps to cut costs and improve margins across the business, he said.

“We’ve recently initiated a program to improve our cost base across the business and have a dedicated team working across all aspects of the business to find savings and synergies to drive an increase in our EBITDA margins to closer to our internal target of 40 percent and look forward to reporting on the progress of the initiative as we go throughout the year,” Pierce said.

Inspired going hybrid

The company is also anticipating good performance from its new Hybrid Dealer product, which offers randomized interactive games featuring recorded footage of human dealers. The technology launched last year in New Jersey with BetMGM’s MGM Bonus City game. It’s expected to expand to new markets and operators, and appear in a hybrid roulette game, in 2024.

“We’re anxious to get this product out in more markets with both MGM and then later in the year with Caesars and other customers,” Pierce said. 

Inspired also saw $30.6 million in revenue from “low margin gaming hardware sales,” as it continues to roll out its Vantage gaming hardware in locations like pubs and retail betting shops. “We’ve seen low double-digit growth from two of our largest betting shop operators in the U.K.,” said Pierce. “And Vantage is now the highest-performing cabinet in the pub sector.”

Overall total company adjusted EBITDA rose 2% to $100.5 million.

Inspired announced it had resolved issues delaying its 2023 annual report, or 10-K, which was slated for publication by noon ET Monday. The report was delayed due to a review in accounting procedures following errors in previously issued financial statements. Inspired’s tardy SEC filing had resulted in a formal notice from Nasdaq that the company’s stock could be delisted, though Inspired had always emphasized it had until at least June to file or submit a plan to get back into compliance with exchange rules.

Update: On Monday afternoon the 10-K filing did appear on the SEC website and noted under legal proceedings:

Securities Matters Arising From the Company’s Restated Financial Statements and Related Matters

On March 12, 2024, the Company received a subpoena from the SEC seeking documents concerning, among other things, the Company’s recently restated financial statements. The Company intends to comply with the subpoena and is cooperating with the SEC’s inquiry.