Inspired Entertainment NASDAQ: INSE said second-quarter revenue totaled $61 million and EBITDA reached $27 million, with EBITDA slightly ahead of consensus expectations, as the company continued to shift toward a more digital-led and less capital-intensive business model.
Executive Chairman A. Lorne Weil said comparisons with the prior-year quarter were affected by the sale of the Holiday Parks business and a restructuring of the company’s pub segment. Sequentially, however, second-quarter revenue increased 6% from the first quarter and EBITDA rose 14%, despite the April implementation of a higher U.K. Remote Gaming Duty.
The company’s EBITDA margin expanded by 1,000 basis points year over year to 45%. Year to date, Inspired retired $23 million of debt, repurchased more than 700,000 shares and reduced net leverage to three times.
Guidance and Cash Flow
Inspired reaffirmed its 2026 EBITDA target of $112 million to $118 million and its reported free-cash-flow conversion target of more than 20% of EBITDA. Weil said the company expects pro forma free cash flow to exceed 25% of EBITDA for the year after adjusting for a one-time cash outflow related to the pub restructuring.
The company recorded approximately $7 million of nonrecurring working-capital cash outflows in the first half tied to contractual adjustments associated with the pub business restructuring. Weil said that adjusting for the item would raise expected full-year free cash flow from $23 million to about $30 million.
Looking further ahead, management’s plan through 2027 calls for EBITDA at the midpoint of $130 million, a 47% EBITDA margin, leverage below 2.5 times and free-cash-flow conversion between 25% and 30%.
U.K. Gaming Tax Weighs on Interactive Margins
Interactive revenue increased 15% year over year in the second quarter, while adjusted EBITDA rose about 13%. Management said the growth rates reflected the effect of the U.K. Remote Gaming Duty, which nearly doubled to 40% from 21% on April 1.
Inspired’s U.K. gross gaming revenue increased 40% year over year during the quarter. However, Weil said the combination of higher gross gaming revenue and the higher duty rate increased the company’s absolute tax impact by roughly 2.5 times from the prior year, limiting margin expansion.
“The underlying business is growing like crazy,” Weil said in response to an analyst question, describing the second quarter as a trough caused by the tax change. Since the higher tax was fully reflected in the second quarter, management expects the third and fourth quarters to show the business’s historical sequential operating leverage as revenue grows without another tax-rate increase.
President and CEO Brooks Pierce said Inspired continued to gain U.K. market share and was expanding in North America, led by its Cash Bank game family. Pierce said the company’s U.K. interactive share has grown from roughly 3% to 4% several years ago to more than 11%, approaching 12%.
Management also said it was monitoring potential additional U.K. gaming-tax proposals. Pierce said industry participants have become more aligned in opposition to major tax increases after the higher online gaming duty took effect, though he said future policy decisions remain difficult to predict.
Retail, Content and New-Market Initiatives
Retail Solutions delivered EBITDA margins before corporate allocation of more than 50% for the first time, supported by cash-box growth across U.K. licensed betting offices, MSAs, pubs, adult gaming centers and bingo locations.
William Hill closed more than 200 shops during the quarter, primarily lower-performing locations. Pierce said the closures improved the performance of the remaining estate, while Inspired redeployed removed terminals across its broader network.
In Greece, the company reported year-over-year cash-box growth and market-share gains. Allwyn placed an order for more than 2,000 replacement machines, with deliveries expected to begin in the fourth quarter. About 32% of Inspired’s 9,000 Greek terminals have yet to be refreshed, management said.
Inspired installed 125 terminals for Alberta Gaming, Liquor and Cannabis during the quarter. It also sold subscription game packs to AGLC and to more than 92% of its Illinois terminal base, which Pierce said produced the market’s best performance to date. The company highlighted Wolf It Up! as a successful title that has translated from online gaming into retail markets in the U.K. and North America.
Inspired is also building a content studio in Manchester. Its Bee Reel Games studio is expected to launch its first game by year-end and ultimately add one game per month, with an emphasis on market-specific content.
Virtual Sports and Capital Allocation
Virtual sports revenue increased 3% sequentially. BetMGM’s integrated sportsbook offering in New Jersey and Ontario contributed to a 50% increase in turnover from the first quarter to the second quarter, while early July results continued to show growth, according to management. Inspired also launched with BetMGM and other operators, including Bet365, in Alberta’s newly regulated market.
The company said its Soccer 4.0 product, including a bet-builder feature, generated a 6% turnover increase for certain customers during the World Cup period. In Latin America, its Altenar partnership produced a 55% increase in turnover and a 61% increase in gross gaming revenue from the first quarter to the second quarter.
Management expects a third-quarter launch with the Massachusetts Lottery through its Aristocrat Interactive partnership, which would bring Inspired live in four lottery states. The company also said it is investing in iLottery capabilities and expects to begin delivering games into that category next year.
On capital allocation, Weil said the company expects to use excess cash for debt repayment and share repurchases, with the balance varying by quarter. He added that acquisitions remain possible if opportunities offer significant synergies and immediate accretion.
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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