Inspired Entertainment, Inc.

Good morning, everyone, and welcome to the Inspired Entertainment fourth quarter and full year 2025 conference call. All participant lines have been placed on mute to prevent any background noise. After the speaker's remarks, we will open the call for a question and answer session. Please note that today's event is being recorded. Before we begin, please refer to the company's forward-looking statements that appear in the fourth quarter 2025 earnings press release and in the accompanying slide presentation. both of which are available in the investor section of the company's website at www.inseinc.com. These also apply to today's conference call. Management will be making forward-looking statements within the meeting of the United States Securities Laws. These statements are based on the management's current expectations and beliefs and are subject to various risks, uncertainties, and other factors that may cause actual results that differ materially from those expressed or implied in such statements. For discussion of these risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission. During today's call, the company will discuss both GAAP and non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in today's earnings release and slide presentation, which are both available on the website. With that, I would now like to turn the call over to Lorne Wheel, the company executive chairman. Mr. Wheel, please go ahead.

Thank You operator good morning everyone and thank you for participating in our year-end conference call as it happens Brooks and I are doing this call from the major lottery conference in Florida where there is a lot of buzz about the things we have going on in the lottery space including the amazing cloud-based lottery platform we launched a few weeks ago that you may have read about in a recent press release We won't have much more to say about lottery today in our prepared remarks, but we're happy to elaborate in the Q&A, and we certainly expect to be talking more about it in the coming quarters. That said, I'll begin the call today with a few introductory remarks, considering the fourth quarter of the full year, and then hand it over to Brooks to discuss the quarter in detail. Beginning with slide three, I think we can look at the quarter as an important milestone in the steady transformation that's been occurring in the company. As we've discussed previously, hopefully not ad nauseum, the transformation continues to be led by the interactive business, which grew revenue in EBITDA by 53% and 60% respectively in the fourth quarter. In a moment, Brooks will discuss the nature of the tremendous resilience we have built into this business, together with the steps we're taking to ensure that at the same time we continue to drive growth. These kinds of growth rates were mildly interesting a few years ago when we were growing off a base of a couple of million dollars, but on a base upwards of $50 million at present, it's a whole other story, obviously. In our last conference call, we talked about targeting to get our company-wide EBITDA margin into the mid-40s. Our margin for the full year 2025 was 37%, but in the fourth quarter it reached 42%, a record for any single quarter in our company's history. As noted in the slide, we're comfortable with 2026 EBITDA guidance of 112 million to 118 million, with the midpoint of 115 million representing low double-digit growth over 2025. if we exclude the divestment holiday part even off. This would put our full year company-wide margin squarely into the mid-40s. And as I'll touch on at the end of the program, we're comfortable that this momentum for the company as a whole will continue through into 2027. While the interactive business follows its growth trajectory, our equipment businesses are continuing to move in an asset-like direction. And these together are positively impacting free cash flow. As noted in the slide, we expect to be deleveraging through 2026, targeting to be a two and a half to three times net leverage by year end. This will lead in turn to a step down in our interest rate and perhaps other financing options as well. And on that note, I'll turn things over to Brooks.

Okay, thanks, Lorne. So moving to slide four, we're gratified to see the results in the fourth quarter justify the key premise that we've been discussing over the course of the year, that is that the combination of the mix of our business becoming more and more digital, and particularly with the strong growth in our interactive segment, and also the disposal of the lower margin holiday parks business, both the combination of that would drive our EBITDA margins over 40% and our fourth quarter results strongly validate that thesis. Moving to slide five. So this slide visually depicts the progress we've made in our mix and its impact on our EBITDA margins, but it goes beyond that. We've made a conscious decision to focus on CapEx light business. Combining this with our significantly reduced headcount discussed last quarter will prove to materially improve the cash flow of the business on a going forward basis. We expect these trends to continue throughout 2026, and we're targeting EBITDA margins in the mid-40s with significant improvement in cash flow. Moving to slide six. It's important as well to note that our focus is not solely on improving the EBITDA margins and cash flow, but also in growing each of the segments of the business. More than 80% of our revenue is recurring, so along with growth, we need to continue to renew contracts with our key customers, and we are very proud of the long-term relationships we've had with customers like Bet365 and Entane and the faith they put in us to continue to innovate our products and enhance player engagement. I've discussed on previous calls the importance I place on getting access to the North American market for our virtual business and having the product fully integrated in the sportsbook section of the site rather than in the casino section. I'm excited to announce the successful launch with BetMGM as our first tier one customer to have launched with three sports, including our NFL license game, now live in New Jersey and hopefully going live in additional states in the near term. We've had success with BetMGM in Ontario and have worked with their team on this development. I believe this will be the start of utilizing some of the key licenses we have with the NFL, the NBA, and the NHL and getting broader distribution in the North American market. We're in discussions with several other sports betting operators, but BetMGM has the market to themselves for now. Getting this launched in time for the World Cup is ideal, and we believe this will provide a good proof point for other operators. Moving on to slide seven. So we've now had 10 quarters in a row of more than 40% EBITDA growth in our interactive segment. and that shows no sign of slowing down. We just had the single highest day and the single highest weekend of GGR in this segment over the last weekend in February. I'm also happy to announce just based on this morning's results that we had the best week we've ever had last week. We're laser focused on keeping this performance going and are expanding our brands, our unique game mechanics, and adding studio capacity that will come online in the second half of the year and increase the output of titles to support this high growth segment. Alongside this organic growth, we have several opportunities to expand our footprint geographically and we still believe that it's a matter of when and not if that additional states will legalize iGaming in their states as we've seen with Maine and progress in other larger states like we're seeing in Virginia. Although it's difficult to forecast when this will happen and which states will add this capability, We do believe that it's an underappreciated potential step change for Inspired. The sub-side is not limited to interactive either as we are excited to see the growth potential for our North American gaming machine sales with recent changes in Illinois to expand into Chicago. We're now indexing at our highest levels since we went into the market and have strong relationships with key customers like J&J and Accel. We're confident that we'll grow our footprint over the next 12 to 18 months in Illinois substantially, and believe that the Illinois model can be replicated in other states. Distributed gaming is in our DNA. It's where content is the key differentiator, and that's what we do best. Moving on to slide eight. We prepared slide eight just to show that our iGaming performance isn't driven by just recent momentum or one-hit wonders. This graph shows how our games produced even earlier than 2022 continue to generate a consistent base of revenue year over year. Each year's new games simply build on top of that foundation. So we're not starting from zero every year. We continue to grow and sustain that growth by building on brands and game families that resonate with players as well as unique game mechanics. The key is to continue to innovate and add capacity on top of that foundation. And moving on to slide nine, our proprietary game titles and mechanics create multiple important advantages. Firstly, they build strong brand recognition and loyalty with players. Players know and trust brands like Wolf It Up, which allows us to do multiple iterations and extensions faster and more cost efficiently. We're using this to expand our hybrid dealer portfolio as well and are looking forward to the release of our Wolf It Up roulette game to build on the momentum we're seeing in hybrid dealer, where turnover is up 51% quarter over quarter and 39% increase in customers live. We just went live yesterday with the Flutter brands, like Paddy Power and Betfair in the UK, and we'll be adding both DraftKings and Betfred in the next quarter. These proprietary brands strengthen our relationships with our operator customers. When they know our game families and mechanics will consistently perform well, they place the games in the most desirable positions on their sites and keep them there longer. This benefits everyone in the ecosystem and creates opportunities for us to do creative commercial arrangements with key operators for exclusivity and promotions. A true win-win for all. Moving on to slide 10. As noted in the past few slides and then on slide 10, this is really all about building a scalable and sustainable interactive business. Typically, adding more gains comes at the expense of revenue per title, but as the portfolio grows, performance per gain often declines, but that's not the case with our interactive portfolio. We've been able to expand the number of gains while also increasing revenue per title. That's why we've been able to deliver the kind of growth that you've seen in the segment improving overall digital mix for Inspired and ultimately higher EBITDA margins. And of course, that's why we're adding another high quality studio to our network. Moving on to slide 10. So whether it's interactive, whether it's virtuals or gaming machines, we've consistently stated that content drives everything we do at Inspired. Our recent success in the rollout of the Vantage cabinet to the William Hill estate and our improvement and leading position in Greece which we've maintained for years now, is a testament to not only the content, but also leveraging our industrial design to build high performing cabinets at a fraction of the cost that you would see for a class three casino floor in North America. And we're proving that we can replicate our success in the UK and Greece further in North America with our performance in Illinois, as well as our continuing share gain in key PLC markets in Canada. And moving to slide 12. Finally, slide 12 gives some of the latest data on the size and scale of iGaming compared to sports betting, TGR. In states where they go head-to-head with sports betting, iGaming is more than three times the size of sports betting. Extrapolating that to other states is a big off-size opportunity for us that we don't include in our forecast but believe that it is inevitable and would be transformative for Inspired as the flow-through margins and cash contribution would be very significant. So with that, I'll hand it back over to Lorne.