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Inspired Gaming reports strong 2018 results10 December 2018(PRESS RELEASE) -- Inspired Entertainment, Inc. today reported financial results for its fiscal year ended 30 September 2018. Fiscal 2018 revenue and adjusted EBITDA increased 15.4% and 32.9% year over year, to $141.4 million and $54.1 million, respectively. Revenue growth was achieved across both business segments primarily driven by the continued rollout of terminals in Greece, new customer revenue in Interactive and Virtual Sports, and an increase in revenue from new channels offered to existing customers. Adjusted EBITDA margin increased to 39.5%, from 34.7% in the prior year, primarily as a result of a more profitable revenue mix, more effective business processes, and operating leverage in the cost structure. Revenue and Adjusted EBITDA for the fourth quarter of fiscal 2018 were $35.6 million and $16.3 million, respectively. Fourth quarter of fiscal 2017 had significant nil margin sales of $1.0 million and hardware sales to Colombia of $2.9 million. Excluding these sales, revenue and Adjusted EBITDA grew 14.0% and 37.2% for the quarter, respectively, illustrating the revenue momentum and operating leverage inherent in the recurring revenue business model. "In all measures, we are pleased with our performance in fiscal year 2018. Both of our segments delivered revenue growth and we were able to increase our Adjusted EBITDA margin by 475 basis points, leading us to report Adjusted EBITDA of $54.1 million, up 32.9% from $40.7 million last year," said Lorne Weil, Executive Chairman of Inspired. Mr. Weil continued, "While we continue to focus on maintaining that growth, we are also intentionally targeting growth across our businesses in North America. I am optimistic that we can execute on this strategy much as we have done in Greece, where, in less than two years, we have grown the Virtual Sports business exponentially, recently adding another channel of content, and have become the largest supplier of terminals in the marketplace." Mr. Weil added, "We believe North America will ramp up and become a larger part of our business. We recently launched Virtual Sports for our first major US lottery customer and we received a warm reception and positive feedback on our products at the G2E tradeshow in Las Vegas. North American lottery and gaming operators are looking for innovative new products that have proven performance, and with Greece as an example, we believe our products will scale." Fiscal 2018 and Recent Highlights Server Based Gaming ("SBG")
- Over 400 retail venues with Fortuna in Poland - Both retail and online channels of Veikkaus, Finland's National Lottery
Management outlook and commentary Recently it was announced that the reduction in the maximum FOBT betting stake mandated by the Triennial Review would be accelerated from October 2019 to April 2019. This does not change the Company's estimate of the projected impact of the reduction in stake on our Adjusted EBITDA, after taking into account multiple moving pieces, of approximately $10 million to $11 million annually on a steady state basis. However, the acceleration in start date alters the timing of many of these pieces, including the benefits of the mitigation action to be taken by the Company's LBO customers, and therefore Management is not comfortable providing calendar 2019 guidance at this time. Overview of consolidated full year results Total revenue for the year ended 30 September 2018 increased by $18.8 million year over year, or 15.4%, to $141.4 million on a reported basis. Favorable currency movements accounted for $7.8 million of the increase, which was partly offset by a $1.6 million decrease due to six fewer days in the 2018 period. On a like-for-like basis, revenue increased by $12.6 million, or 10.4%. SBG revenue increased by $9.9 million, or 11.3%, on a like-or-like basis, comprised of growth in service revenue of $15.1 million offset by a reduction in hardware sales of $5.2 million. SBG service revenue increased by $15.1 million, or 20.7%, on a like-for-like basis, primarily due to Greece driving total incremental revenue of $14.3 million, which included $6.8 million of additional participation revenue, $2.3 million of other recurring revenue and $5.2 million of additional revenue from software license sales. The decrease in SBG hardware revenue was driven by lower hardware sales into Greece and Colombia of $5.4 million and $3.5 million, respectively. This was partly offset by SBG terminal sales in the UK of $2.1 million and Electronic Table Games ("ETG") sales of $1.3 million. Virtual Sports revenue increased by $2.7 million, or 8.1%, on a like-for-like basis, to $37.8 million, driven by new customer revenue in Interactive and new Virtual Sports customers in Greece, Ireland, Finland and Poland, as well as an increase in revenue from existing customers, due in part to additional channels offered. Growth was negatively affected by $1.7 million due to a reduction in revenue from long-term Virtual Sports licenses that have now come to an end, $0.7 million due to a timing difference in the 2018 contract renewal of a major customer and $0.5 million due to the recognition of revenues previously unreported to us in 2017. Excluding these items, underlying Virtual Sports revenue increased by $5.4 million, or 20.8%, with Virtual Sports land-based and online customers accounting for $4.2 million of the increase and $1.2 million from Interactive. Cost of sales, excluding depreciation and amortization, which includes machine cost of sales, consumables, content royalties and connectivity costs, increased by $4.1 million, or 15.4%, on a reported basis, to $30.8 million. On a like-for-like basis, cost of sales increased by $2.5 million, or 9.6%. Cost of service increased by $5.7 million, or 36.9%, on a like-for-like basis, mainly due to an increase in Greece SBG service costs of $3.5 million and an increase to service U.K. SBG terminals of $2.1 million. Cost of hardware decreased by $3.2 million, or 29.6%, on a like-for-like basis, due to lower nil margin hardware sales in Greece and lower hardware sales in Colombia. This was partly offset by higher nil margin sales of the Flex 4k™ product terminal and other hardware sales in the UK, ETG and Italian markets. SG&A expenses increased by $1.8 million, or 3.1%, on a reported basis, to $60.1 million. On a like-for-like basis, SG&A expenses decreased by $0.7 million, or 1.3%. This decrease was driven by staff related cost savings of $4.4 million, offset by additional public company costs of $1.8 million due to the prior period containing only nine months of post-Business Combination transaction expenses, as well as a decrease in labor capitalization of $1.1 million due to the mix of projects and incremental group restructuring costs of $0.5 million. During the period, the company incurred an impairment expense, considered to be outside the normal course of business, of $7.7 million, following a review of key strategic areas whereas the carrying value of these assets were deemed to be in excess of their current fair value. Of the total impairment, $4.9 million was related to intangible fixed assets, $0.6 million to accrued income, $1.9 million to prepayments and $0.3 million to trade and other debtors. Depreciation and amortization increased by $8.0 million, or 23.7%, on a reported basis, to $41.8 million. On a like-for-like basis, depreciation and amortization increased by $6.2 million, or 18.6%. This increase was driven by additional machine and machine related depreciation on SBG of $1.7 million and additional amortization in connection with new platforms and games going live on SBG ($4.5 million) and Virtual Sports ($0.4 million). This increase was partly offset by a reduction of non-market specific depreciation and amortization of $0.4 million. On a reported basis, net operating result improved from a loss of $11.9 million in 2017 to a loss of $7.3 million in 2018. On a like-for-like basis, net operating loss improved by $4.7 million, mainly due to an increase in revenue and reduction in transaction expenses, partly offset by higher cost of sales, depreciation and amortization, impairment expense and stock-based compensation. Adjusted EBITDA, which the company considers an important underlying business performance measure, increased by 32.9% year over year to $54.1 million before adjusting for foreign currency impact. After adjusting for foreign currency impact, Adjusted EBITDA increased 26.0%. Adjusted EBITDA is a non-GAAP financial measure. Our definition of the measure and its reconciliation to net loss are provided later in this release.
Inspired Gaming reports strong 2018 results
is republished from CasinoVendors.com.
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