Inspired Entertainment yesterday reported financial results for the three-month period ended September 30, 2019.
Total revenue for the three months was $26.6m, a year-over-year decrease of $9m, or 25.3 per cent, on a reported basis, and $7.5m, or 21.0 per cent, on a functional currency (£) at constant rate basis.
Adjusted EBITDA for the three months was $8.7m, a year-over-year decrease of 46.5 per cent on a reported basis and 43.4 per cent on a functional currency (£) at constant rate basis.
The company’s revenue and adjusted EBITDA were negatively impacted by the reduction in maximum B2 stakes to £2 in the UK LBO market implemented on April 1, 2019. The company completed its acquisition of Novomatic’s Gaming Technology Group on October 1 and third quarter results are not reflective of the acquisition.
“Results for the third quarter were in line with our expectations, considering the negative impact from the stakes reduction. Additionally, we are seeing a considerable improvement in trend in the UK in the fourth quarter,” said Lorne Weil, executive chairman of Inspired.
“As stated previously, a large part of our mitigation efforts will be driven by shop closures. Since the September 30 closing of 700 shops within our estate, our revenue appears to be tracking higher than we initially anticipated, prior to the stake reduction, with a significant improvement in the observed decline in gross win per unit per day to 24.5 per cent in October from 44.1 per cent in April and 37.9 per cent in August.
“This trend illustrates, in practice, our previously outlined thesis that a substantial portion of revenue lost due to shop closures would be recovered throughout our remaining estate.
“Additionally, because our costs are generally aligned with our total machine count, the overall industry restructuring and consolidation is likely to assist our cost mitigation efforts going forward due to the benefits of supporting a smaller, more profitable estate.
“We’re now quite confident that the projected adverse impact on adjusted EBITDA will be at the lower end of the guidance range of approximately $10m to $11m annually on a steady state basis.”