Inspired Entertainment, Inc.

Good morning everyone and welcome to the Inspired Entertainment second quarter 2025 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Please note today's event is being recorded. Please refer to the company safe harbor statement that appears in the second quarter 2025 earnings press release, which is also available in the investors section of the company's website at .inseinc.com. This safe harbor statement also applies to today's conference call as the company's management will be making certain statements that will be considered forward under securities laws and rules of the SEC. These statements are based on management's current expectations or beliefs and are subject to risks, uncertainties, and changes in circumstances. In addition, please note that the company will discuss both gap and non-gap financial measures. A reconciliation is included in the earnings press release. With that completed, I would now like to turn the conference call over to Lorne Will, the company's executive chairman. Mr. Will, please go ahead.

Thank you, operator. Good morning and thanks everyone for joining our second quarter earnings call. With me today as usual are CEO Brooks Pierce, CFO James Richardson, and VP of corporate development Eric Herrera. Also today, as you may have seen in a press release we issued I guess last night, investor relations specialist Amy Remy rejoins us following the two year IR assignment with one of the world's leading B2C gaming enterprises and needless to say we're to have Amy back. We were quite pleased with the quarter in terms of headline numbers. EBITDA of $28.4 million was up 15% over Q2 2024 and well ahead of consensus. EBITDA margins improved from 33% to 35% in the same period. A primary growth driver was once again the interactive business which grew EBITDA by nearly 50% in the second quarter year over year. Interestingly, only about half, excuse me, interestingly about half the growth in EBITDA was contributed by North America which represented less than a third of interactive EBITDA a year ago. We believe that superior game content and intense focus on account management were the underlying drivers of the North American performance. At the present time, less than 10% of the population of the United States is in jurisdictions that offer iGaming compared to sports betting which covers at least 70% of the population. Yet in those major states that offer both sports betting and iGaming, particularly Pennsylvania, New Jersey, and Michigan, iGaming is four to five times larger than sports betting. So despite the remarkable growth that we've been experiencing recently, our feeling is that the interactive business is still in its infancy. In other part of our digital business, virtual sports, excuse me, there are similarly interesting dynamics at play. While second quarter virtual sports EBITDA declined year to year, the quarter to quarter sequential curve had been steadily flattening and indeed in the second quarter we experienced both revenue and EBITDA increases from the first quarter to the second. In a moment, Brooks will discuss in some detail the range of product and market developmental opportunities taking place in virtual sports but we're cautiously optimistic that the sequential upswing we saw in the second quarter will continue and that by the end of this year we will once again be seeing quarterly year over year growth. This of course has a dramatic impact mathematically on our overall company growth rate. Our gaming business had a very strong quarter both operationally and developmentally. Gaming EBITDA was up 35% year to year, driven importantly by William Hill whose team has done an extraordinary job managing the new machine estate. Perhaps in part aided by the William Hill performance, we were recently awarded a contract to supply 100% of the gaming machines for Jennings Bet, the best performing and largest independent bookmaker chain in the UK, independent meaning not owned by Flutter, William Hill, Betfred or Intain. This was a very busy and very productive quarter for inspired in other respects. During the quarter as mentioned in the June when the facility would otherwise have gone current and despite the very choppy credit environment at that time we were pretty happy with the result. Following the refinancing we are in the final stages of arranging a swap of the floating rate sterling facility into fixed rate debt thereby both lowering our current effective rate and simultaneously capping it as insurance against rates going back up. At the same time we still have two step down opportunities to lower our spread over the sterling benchmark as we de-leverage with the first anticipated in connection with the expected completion of the holiday park sale subject to the customary grace period. In connection with the holiday park sale I can say that we have now reached an agreement in principle with the strategic buyer we have been working with for several months and we expected to sign the definitive agreement this month and close by the end of the year. The combination of cash at closing and ongoing platform and content fees will put us well within our liquidity target and our cash position will benefit further from having owned the business through the peak cash training generating period that we're in at the present time. The sale of the business will have number of important benefits our overall company even without margin will approach our target of 40% company-wide cash conversion percent will improve significantly and our mix of business will swing further towards digital with concomitant benefits relating to margins capital intensity and growth and with that I'll hand it over to Brooks.

Okay thank you Lauren and I'll give a little bit more detail on our strong results in the quarter by segment and we believe is building momentum as we move into the second half of the year. A big part of that confidence is based on the results in the second quarter for our interactive segment and what we're already seeing thus far in Q3. To put it in context we had the single best day in our history in the segment last week and it's broad-based across our key markets in the UK, North America and Greece but we're also starting to see growth in other key markets like Brazil as we get launched with additional operators and start delivering bespoke content to that market alongside a very strong roadmap of gains for the second half of the year. Q2 saw our eighth consecutive quarter of more than 40% -over-year adjusted EBITDA growth and a further expansion of our adjusted EBITDA margin by 200 basis points to 67% which we believe clearly demonstrates the scalability and operating leverage from this part of the business. We're seeing the benefits of the investments we've made in studio expansions as well as a deeper base of account management talent delivering on this investment but we feel we have considerable room for further growth as our wallet share and our key markets are still in the single digits but growing quarter by quarter. The other part of the interactive segment that we remain bullish on is the hybrid dealer category. Like the interactive segment, the key to success in this part of the business is getting your product out across a wide swath of both operators and aggregators across multiple geographies with differentiated content that resonates with players. Using those metrics as a benchmark we're happy with the progress we are seeing in hybrid dealer but still feel it's very early in its development. We're now deployed with multiple versions of our roulette game and our game show themed wheel games and are starting to see the possibilities as we expand our product offerings across our key markets. A good example of that will be the game we'll be introducing with FanDuel in September that we're very excited about and think will appeal to a good cross-section of both casino players as well as sports bettors. Won't give any more details about that but we'll look forward to reporting on its progress in our third quarter call. Virtual sports segment as we've talked about frequently has stabilized and even showed modest growth in the second quarter. The segment of the business has strong EBITDA margins 72% in the second quarter and strong cash contribution due to the nature and maturity of the business but we'll also be introducing some product innovations in the third and fourth quarter that we believe will resonate with players in key markets like Brazil, Greece, and the UK. Our bespoke soccer game for the Brazil market is resonating with our two biggest customers in that market and we are in the midst of rolling our virtual sports content out to other key operators in that market including PetMGM and EstrelaBet and again we'll update in our third quarter call as we'll be adding several additional operators yet this quarter. We launched our virtual sports content in the lottery vertical with the Virginia lottery and although it's early we're seeing the business build up as lottery players are introduced to it. Our horse racing game in particular is currently seeing the most activity but we're confident that as we move into the football and basketball seasons those sports will only grow. We think the lottery segment is a key and underappreciated vertical for us and we'll be reporting on our progress in that segment further throughout the year. We continue to believe that we'll see demonstrable improvements in this segment in the second half versus the first half as we're live in more markets and we'll continue to introduce our latest innovations. Gaming segment had a strong second quarter with adjusted EBITDA increasing 35% year over year due in large part to the improvement in the results with William Hills we've talked about for months now and we see these coming through. We're also starting to see the early benefits of our new cabinets being deployed in Greece and that will only accelerate and continue in the second half and into 2026. The quarter also benefited from a sale to the Alberta Gaming and Lottery Group, a key customer as we expand our VLT offerings across multiple provinces in Canada as well as our footprint and subscription sales growing in our key market in Illinois and as we've introduced the valiant cabinet to that market. We're also very pleased to be awarded a new contract with Jenningsbet, the largest independent bookmaker in the UK and we'll start to see the benefit of that by the end of the year but mostly as we move into 2026. We're confident that our VLT cabinets and content are working across multiple geographies and that our server-based offering appeals to operators and markets where customers frequent venues multiple times a week and need the appeal of refreshing content on a regular basis and we believe there are many more markets for us to target to leverage the success we're seeing in the UK, Greece and North America. The leisure segment performed as expected and is in the process of a structural transformation as we complete the anticipated sale of the holiday parks part of the leisure segment and also move our pubs business to a more capital light and less labor intensive model. We believe that this aligns with what we've accomplished in the gaming segment and will offer us the opportunity to deploy our capital in the higher growth and a higher margin digital segments of our business while still capitalizing on our key strengths of development and deployment of content as well as innovative new cabinets. Lastly, we're seeing the benefits of some of our cost improvements and efficiencies coming through with our EBITDA margin increasing by 200 basis points for the overall business year over year but are confident that once we complete the leisure segment initiatives mentioned previously that we'll be comfortably ahead of our target EBITDA margins of 40 percent. Special thanks to our team for all their hard work and we feel positively that the results are reflecting that. With that I'll hand it back over to Lauren.