Inspired Entertainment Inc has reported its unaudited financial results for the three-month period and fiscal year ended December 31, 2020.
Inspired generated $71.7m in total revenue in Q4 2020, an 8% improvement on the previous year (2019: $66.4m) and an adjusted EBITDA of $34.9m, an increase of 96.9% from last year’s figures (2019: $17.7m).
These results include a payment from a UK LBO customer related to its contractual revenue share of their value-added tax rebate, which positively impacted revenue by $32.5m and adjusted EBITDA by $31.7m (in conjunction with third party fees).
Executive Chairman, Lorne Weil, said: “October was a stellar month and indicated how quickly we could recover before our land-based businesses went back into lockdown in November and December.
“Our October monthly revenue of $21.2m and adjusted EBITDA of $6.8m, or 32% of total revenue, was nearly 20% above October 2019 and the highest monthly levels we experienced in 2020, excluding the VAT-related income.
“This follows the general pattern we saw of sequential monthly growth throughout the third quarter of 2020 following the second quarter lockdown. Importantly, year to year growth in October occurred despite the fact that October performance was impacted by pub curfews in early October and the introduction of tiered closures in the second half of the month.”
Inspired noted that its revenue and adjusted EBITDA were negatively impacted in November and December by COVID-19 closures of its land-based customers’ venues and the tiered lockdown system in the UK where many of its land-based customers’ venues were open but restricted, limiting revenue while incurring near-full service costs.
The company’s aggregate business across its online virtuals and interactive channels showed strength in the quarter, with revenues increasing sequentially from $3.0m in October to $3.3m in November to $4.2m in December. This reflects year-over-year growth of 89%, 95% and 99% respectively, over $1.6m, $1.7m and $2.1m in the same months in 2019, demonstrating the growing presence and popularity of the company’s online offerings.
Weil continued: “While the UK is expected to remain on lockdown through the first quarter 2021, based on the UK Prime Minister’s public statement on February 22nd, and assuming achievement of key goalposts, the UK will ease lockdown restrictions in stages with LBOs reopening in April, pubs and holiday parks reopening in May and an end of the lockdown by June 21st.
“By the end of the second quarter 2021, assuming the UK ends its lockdown, we would expect our UK business to be on a run rate similar to where we were in the third quarter 2020 when we generated $17.1m in adjusted EBITDA, excluding VAT-related income, at current exchange rates.
“Furthermore, by the third quarter 2021, we expect to have the added benefit of our online business having grown substantially year over year with continuing expectations for growth from that higher starting point due to a strong business development pipeline, including new commercial agreements in existing territories, jurisdictional expansion in North America, Europe and South America and continued strong product development across both Interactive and Online Virtual Sports. We also expect to have our holiday park business back to pre-pandemic levels, which was not the case in the third quarter 2020 given local restrictions.”
He concluded: “We’re confident that, as we did last time, we will recover quickly once lockdowns are lifted to emerge from this pandemic even stronger than before with a lower cost structure, improved liquidity, a larger customer base and increased growth opportunities.”
Stewart Baker, Executive Vice President and CFO, commented: “As we look ahead, we believe we are well situated to navigate our business through short-term challenges and over the long term. We have established a strong liquidity position, successfully improved our overall cost structure, including non-COVID-19 related improvements, and streamlined our operations, including increased synergies from the NTG acquisition.
“We are using this opportunity to reclassify our financial segments to better mirror the way we evaluate our business and allocate resources and capital spending. Going forward, we remain focused on executing our strategic plan to drive margin expansion, deliver profitable growth, increase cashflows and maximise shareholder value.”
