Inspired Entertainment Q1 Earnings Call Highlights

Key Points

• After 2025 portfolio moves (holiday park sale and pub restructuring) that cut headcount by about a third and reduced annual capex, continuing revenue rose 15% YoY, driven by Interactive (about 38% revenue growth), with reported EBITDA up 29% and margins expanding ~1,100 bps.
• Inspired generated roughly $60 million of free cash flow in Q1, used ~$13 million to pay down debt and repurchased close to 400,000 shares, bringing leverage down to about 3x and keeping debt reduction and buybacks as top capital-allocation priorities.
• Interactive momentum remains strong—North America now accounts for over 30% of Interactive GGR and April U.K. GGR was >40% higher YoY despite the U.K. tax rise to 40%—while Virtual Sports has stabilized but faces Brazil and U.S. regulatory headwinds, with growth catalysts expected from lotteries, the World Cup and a Playtech-related rollout into H2/2026–2027.

Inspired Entertainment NASDAQ: INSE executives said first-quarter results reflected the benefits of portfolio changes made in 2025, highlighting strong Interactive growth, margin expansion, and improved cash generation that supported both debt reduction and share repurchases.

Executive Chairman A. Lorne Weil said the company continued to see the payoff from two major actions taken last year: the sale of its holiday park business and a restructuring of its pubs business intended to reduce capital and labor requirements. Weil said overall headcount has been reduced by about a third, from more than 1,500 to around 950, and annualized capital spending has been cut from the “mid-$40 million” range to the “low $30 million” range.

Revenue and profitability trends

Weil said that after adjusting for one-time impacts related to the holiday park sale and pub restructuring, “continuing revenue grew by 15% year-to-year,” driven primarily by Interactive. He cited “38% revenue growth in Interactive” and said first-quarter reported EBITDA increased 29% year over year, with EBITDA margin expanding by 1,100 basis points.

Using company slides to illustrate the shift, Weil said the holiday parks and pub actions together reduced first-quarter 2025 revenue by about $10 million (from roughly $60 million to $50 million). He said that continuing revenue of about $50 million in the year-ago quarter grew 15% to “a little more than $57 million” in the first quarter of 2026.

Brooks Pierce, President and CEO, said the company’s performance is being driven by a content-first strategy—developing games and distributing them “wherever it’s consumed, including retail, online, or in any number of geographies worldwide.” Pierce said North America now represents “over 30% of our Interactive GGR overall and continuing to grow.” He also noted Inspired has climbed to fourth place in the April Eilers U.S. online report, up from eighth a year earlier.

Interactive: content, placements, and U.K. tax changes

Pierce attributed share gains not only to content, but also to a “consistent roadmap of high-performing new game releases,” plus an expanded account management approach aimed at securing prominent placements and supporting promotional activity for exclusive content.

He said performance trends continued into April, with the company posting its “highest ever single day total value played” during the month. Pierce said Inspired plans to bring “an additional studio online in the second half of the year” to increase game output.

In the U.K., Pierce addressed the increase in the Interactive tax rate that took effect April 1, rising from 21% to 40%. With just over a month of data, he said the impact “tracks exactly with what we had forecast.” He added that despite the higher tax, the company’s U.K. Interactive revenue grew in April due to share gains, noting that April U.K. GGR was “more than 40% higher than a year ago,” helping revenue increase “by more than 10%” net of the tax change.

Weil echoed that point in closing remarks, saying U.K. tax had been a concern, but “at least so far in the second quarter, we’ve been able to more than offset the impact of the tax by our growth in gaming revenue in the U.K.”

Retail solutions: U.K., Greece, and North America

Pierce said the retail solutions segment is benefiting from content strength and machine rollouts across customers and geographies. In the U.K., he cited positive momentum in the company’s LBO business, including William Hill. He also said Inspired added two new customers—Jenningsbet and Corbetts—and signed a multiyear contract extension with Paddy Power early in the second quarter.

In Greece, Pierce said win per unit per day increased 11%, led by the company’s Valor Slant Top machine. He said upgrades will continue “over the rest of 2026 and into 2027,” and management expects the refresh cycle to continue supporting retail solutions growth.

In North America, Pierce said the company is “cautiously optimistic” about expansion into Chicago and views the broader Illinois market as an opportunity over the next 12 to 18 months. He also pointed to a growing footprint in multiple Canadian provinces, which he said is beginning to provide needed scale.

Virtual Sports: stabilization, Brazil headwinds, and potential catalysts

Pierce said Virtual Sports has stabilized overall, though Brazil remains a headwind. “Unfortunately, growth we are seeing in other regions is currently being offset by performance in Brazil,” he said. Still, Pierce said management sees a “clear path to growth” supported by new customers, product releases, and a tailwind from the World Cup.

During Q&A, Pierce said Virtual Sports penetration assumptions may need recalibration, suggesting that a mid-teens share of online sports betting handle may have been aggressive and that “maybe mid to high single digits is probably the right number to think about.” He also pointed to regulatory limits in the U.S., noting that while online sports betting is active in 39 states, Inspired is “technically only allowed to go in a couple of states” for Virtual Sports today.

Weil added that the opportunity for Virtual Sports in North America may extend beyond traditional online sports betting into lotteries, saying the company is seeing “very interesting developments” with “some of the most important lotteries in North America” and expects “a couple of very meaningful developments” this year.

Asked about the timing of a Playtech-related opportunity alongside the World Cup, Pierce said the integration is “much more of a second half, and going into 2027, opportunity,” though he said the first customer should go live shortly.

Cash flow, leverage, and capital allocation

Weil said Inspired paid down $13 million in debt during the quarter and repurchased close to 400,000 shares. On profitability mix, he said digital accounted for about 60% of EBITDA and leverage declined to 3x by the end of the quarter.

He also highlighted first-quarter cash generation, saying the company generated about $60 million in free cash flow, which it used for both debt repayment and share repurchases. Weil cautioned that the same level of free cash flow will not occur every quarter because the company makes semi-annual cash interest payments every other quarter. He said annual cash interest is in the “mid-30s and declining as we deleverage,” and he described leverage-free cash flow conversion as “comfortably in the 20s and hopefully growing” as a percentage of EBITDA.

Looking ahead, Weil said the company expects “steady sequential growth in EBITDA from Q1 onward” now that much of the seasonality has been reduced following the holiday park sale. He also said Inspired is targeting strong cash flow conversion and declining leverage, with capital allocation continuing to focus on debt repayment and share repurchases.

On broader conditions, Pierce told analysts the company is monitoring macro and geopolitical risks closely but said it is “not seeing the impact of it thus far.”

In closing, Weil said management feels “very positive” about the company’s trajectory, citing improving margins, declining leverage, and ongoing share repurchases as key objectives that are being met.

About Inspired Entertainment NASDAQ: INSE

Inspired Entertainment, Inc NASDAQ: INSE is a business-to-business provider of digital gaming content and technology solutions for the global gaming industry. The company's offerings include server-based gaming modules, virtual sports simulations, digital interactive content and mobile sports betting platforms. Inspired designs proprietary games and software that integrate with lotteries, casino operators, retail betting shops and online platforms, emphasizing reliable performance, rapid deployment and engaging player experiences.

At the core of Inspired's product suite is its Virtual Sports catalog, which simulates sporting events using advanced algorithms and randomized outcomes.

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