Inspired Entertainment (INSE) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was $78.0 million, down 20% year-over-year due to lower low-margin hardware sales, but Interactive revenue surged 40% and EBITDA rose 13% to $30.1 million, with net income flat at $3.4 million.

• Interactive segment delivered robust growth, with strong performance in the UK, North America, and new markets like Italy, and further expansion planned in Peru and South Africa.

• Appointed James Richardson as CFO effective January 2025; interim CFO Marilyn Jentzen to remain as transformation officer through mid-2025.

• Strategic partnerships and product launches in North America and Europe, including FanDuel, Loto-Québec, and OPAP in Greece.

• Cash balance increased to $36.5 million at quarter-end, with liquidity supported by $6.7 million in undrawn revolver.

Financial highlights

• Q3 2024 adjusted EBITDA was $30.1 million, with margins expanding to 39% (excluding low-margin hardware sales), and net income per diluted share was $0.12, flat year-over-year.

• Revenue (excluding low-margin hardware) grew 4% year-over-year; including hardware, revenue declined 20%.

• Adjusted net income was $6.0 million, up 22% year-over-year; adjusted net income per diluted share was $0.21, up 24%.

• Recurring revenue as a percentage of total gaming revenue (excluding low-margin sales) was 84% for Q3 2024.

• Gross margin improved due to the reduction in low-margin sales, offset by higher SG&A and depreciation.

Outlook and guidance

• Management expects sufficient liquidity through November 2025, with cash balance projected to reach $50–$55 million by end of Q1 2025.

• Projected free cash flow of at least $5 million from the holiday parks business in 2025.

• Management is comfortable with consensus expectations for 2025, citing multiple growth levers including product launches and margin improvements.

• A significant portion of the deferred tax asset valuation allowance may be released within six months if positive earnings trends continue.

• No plans to incur incremental debt for share buybacks; acquisitions can be comfortably debt-financed.