What Inspired Entertainment (INSE) Said on Its Q3 Earnings Call

Key Points

• Brazil’s online gaming shutdown was the main reason Q3 EBITDA missed consensus, prompting Inspired to lower the bottom end of its full-year guidance to $109 million. If the shutdown persists, management expects the company’s growth trajectory to be delayed by about a year.
• Q3 EBITDA margin climbed to 46%, up 900 basis points year over year, as Inspired restructured lower-margin operations and expanded digital. Interactive EBITDA grew 20% before the U.K. tax impact, with U.S. gross gaming revenue up more than 30% year over year.
• U.K. gaming duty increases are expected to affect results, including an estimated $2 million to $3 million annual impact from the machine duty rise beginning in April 2027; management expects to mitigate it over time.

Inspired Entertainment NASDAQ: INSE said regulatory changes in Brazil and the United Kingdom are weighing on its outlook, even as growth in its digital business helped lift third-quarter margins.

Executive Chairman Lorne Weil said the shutdown of online gaming in Brazil was the primary reason the company’s quarterly EBITDA came in below consensus. Inspired lowered the bottom end of its full-year guidance to $109 million because of the shutdown.

The company reported a third-quarter EBITDA margin of 46%, up 900 basis points from a year earlier. Weil said the margin rose from 35% in the second quarter of 2025 as Inspired divested and restructured lower-margin businesses and expanded its higher-margin digital operations.

Year-to-date free cash flow was $17.6 million, or about 22% of EBITDA. Weil said the company would lower its previous 2026 free cash flow conversion target of 20% slightly because of Brazil’s impact.

Brazil shutdown shifts growth targets

Management’s projections assume Brazil remains shut, an outcome that Weil said would push the company’s growth trajectory back by about a year. He expects 2027 results to rise only modestly from 2026 under that assumption, as Inspired first replaces the lost Brazil business.

CEO Brooks Pierce said the shutdown primarily affects virtual sports, while the company’s iGaming business in Brazil was relatively small. Inspired has ways to reduce costs if the ban remains in place, he said.

Pierce said the situation remains fluid and that a possible reopening for sports betting, while online casino gaming remains banned, could potentially benefit virtual sports. He expects a decision by the first quarter, though he characterized that timing as his own view.

In the U.K., Machine Games Duty is scheduled to rise from 20% to 25% in April 2027, following a doubling of Remote Gaming Duty in April 2026. Pierce estimated the machine duty increase would have a $2 million to $3 million impact on Inspired starting in April and said the company expects to mitigate it over time through game development and other measures.

Digital growth and new products

Pierce said interactive segment EBITDA grew 20% before the impact of the U.K. tax increase. He described third-quarter monthly performance as mixed, with a September rebound followed by a record October.

The U.S. was the largest contributor to interactive growth, with gross gaming revenue up more than 30% year over year in the third quarter, Pierce said. Italy was the company’s fastest-growing market, with growth exceeding 50% year to date.

Inspired has launched virtual sports with FanDuel, although Pierce said it was too early to assess player engagement. The product had gone live within the preceding week or two and was still in a technical testing phase, with migration to the sportsbook expected shortly. FanDuel plans to launch with five sports, compared with three currently offered through BetMGM, he said.

The company also launched its horse racing product in Massachusetts, its fourth U.S. lottery market, and expects to introduce additional e-instant games for iLottery in 2027. Pierce said Inspired received its first order for an expansion into the Chicago video lottery terminal market.

At the Bee Reel Games studio, the first game was out for regulatory approval and a second was nearly complete. Once fully operational, the studio is expected to add capacity of about one game per month, Pierce said.

Debt and capital allocation

Weil said senior secured net leverage stood at about 2.8 times at the end of the third quarter, below the company’s covenant limit of five times. That provided more than $46 million of covenant EBITDA headroom, he said.

Inspired can repay its private credit facility without a prepayment penalty from June 2027, ahead of its June 2030 maturity. Weil said the company would examine refinancing and expects the first interest-rate step-down on the facility in the first half of 2027.

Asked about capital allocation, Weil said Inspired considers debt repayment and acquisitions, but that its “overwhelming emphasis” in the immediate and intermediate future would be share repurchases. He said the company was looking carefully at potential acquisitions as well.

About Inspired Entertainment (NASDAQ:INSE)

Inspired Entertainment, Inc is a business-to-business gaming technology company that develops and supplies content, software, hardware and related services for regulated gaming, betting and leisure markets. Its customers include bookmakers, casinos, gaming operators, lotteries and other entertainment venues.

The company's offerings include gaming terminals and server-based gaming systems, digital casino games, virtual sports and other simulated sporting events, as well as interactive gaming solutions for online and mobile platforms.

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