UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  March 11, 2021

 

Inspired Entertainment, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   001-36689   47-1025534
(State or other jurisdiction
of incorporation)
  (Commission
File Number)
  (IRS Employer
Identification No.)

 

250 West 57th Street, Suite 415

New York, New York

  10107
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code:  (646) 565-3861

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation to the registrant under any of the following provisions:

 

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
         
Common stock, par value $0.0001 per share   INSE   The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On March 11, 2021, Inspired Entertainment, Inc. issued a press release announcing results for the fiscal year ended December 31, 2020. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

Item 7.01 Regulation FD Disclosure.

 

Attached as Exhibit 99.2 to this Current Report on Form 8-K is the investor presentation of Inspired Entertainment, Inc., which may be used at meetings with investors, analysts or others, in whole or in part and possibly with modifications from time to time.

 

The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01. Financial Statements and Exhibits.

 

Exhibit Number   Exhibit Description
     
99.1   Press Release issued by Inspired Entertainment, Inc. on March 11, 2021
99.2   Investor Presentation

 

 

1

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

March 11, 2021 Inspired Entertainment, Inc.
     
  By:  /s/ Carys Damon
    Name: Carys Damon
    Title: General Counsel

 

2

 

 

 

 

 

Exhibit 99.1

 

 

INSPIRED REPORTS FOURTH QUARTER AND FULL YEAR 2020 RESULTS

 

Peak 2020 Monthly Revenue and Adjusted EBITDA, excluding VAT-related income, in October, continuing sequential monthly growth trend from third quarter 2020 before COVID-19-related closures in November and December (“COVID-19 Closures”)

 

Liquidity position remains strong with cash of approximately $47.1 million and fully undrawn revolver availability of approximately $27.4 million at year end1

 

Integration of the Gaming Technology Group of Novomatic UK Ltd. (“NTG”) acquisition substantially completed with realized synergies exceeding previously communicated guidance

 

Fourth Quarter Revenue of $71.7 million, including $32.5 million of VAT-related revenue

 

Fourth Quarter Aggregate Online Revenue2 nearly doubled year-over-year; strong forward pipeline of existing opportunities in North America, Europe and South America, including a new online provisional license for Michigan iGaming

 

Fourth Quarter Adjusted EBITDA3 of $34.9 million, including $31.7 million of VAT-related income

 

Company completes financial segment reclassification – New segments are Gaming, Virtual Sports, Interactive and Leisure

 

New York, New York, March 11, 2020 - Inspired Entertainment, Inc. (“Inspired”) (NASDAQ: INSE) today reported unaudited financial results4 for the three-month period and fiscal year ended December 31, 2020.

 

The Company generated Total Revenue of $71.7 million and Adjusted EBITDA of $34.9 million in the fourth quarter 2020 on a reported basis5. These results include a payment from a UK LBO customer related to our contractual revenue share of their value-added tax rebate, which positively impacted Revenue by $32.5 million and Adjusted EBITDA by $31.7 million (in conjunction with third party fees).

 

“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.” said Lorne Weil, Executive Chairman of Inspired. “Our October monthly Revenue of $21.2 million6 and Adjusted EBITDA of $6.8 million6, 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 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.”

  

 

1 Assuming GBP:USD exchange rate of 1.37 at December 31, 2020.
2 Aggregate Online Revenue includes revenue derived from Online Virtual Sports and Interactive online.
3 “Adjusted EBITDA” and “Adjusted EBITDA Margin” are non-GAAP financial measures defined below under “Non-GAAP Financial Measures” and reconciled to the most directly comparable GAAP measures in the accompanying supplemental table. Adjusted EBITDA Margin is calculated as a percent of Revenue.
4 Please see supplemental disclosures at the end of the release.
5 Currency movements in the quarter did not materially affect the reported results.
6 Assuming GBP:USD exchange rate of 1.39 as of March 10, 2021.

 

 

 

 

Revenue and Adjusted EBITDA were negatively impacted in November and December by the COVID-19 Closures. In November, most of our land-based customers’ venues were closed. In December the UK had a tiered lockdown system whereby many of our land-based customers’ venues were open but restricted, limiting revenue while incurring near-full service costs. This tiered system is not expected to return in England.

 

The Company’s aggregate business across its Online Virtuals and Interactive channels showed strength in the quarter with revenues increasing sequentially from $3.0 million in October to $3.3 million in November to $4.2 million in December. This reflects year-over-year growth of 89%, 95% and 99%, respectively, over $1.6 million, $1.7 million and $2.1 million 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 $17.1 million6 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. 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,” concluded Weil.

 

Summary of Consolidated Fourth Quarter and Fiscal Year 2020 Financial Results (unaudited)

 

    Quarter Ended           Year Ended        
    December 31,     Change     December 31,     Change  
    2020     2019     (%)     2020     2019     (%)  
(In $ millions, except per share figures)                                    
GAAP Measures:                                    
Revenue   $ 71.7     $ 66.4       8.0 %   $ 199.8     $ 153.4       30.2 %
Net operating income (loss)   $ 19.3     $ (2.1 )     NM2     $ 6.4     $ (13.0 )     NM2  
Net income (loss)   $ 12.4     $ (12.8 )                NM2     $ (29.2 )   $ (37.0 )           NM2  
Net income (loss) per share - basic   $ 0.55     $ (0.58 )                NM2     $ (1.30 )   $ (1.69 )            NM2  
Ne income (loss) per share - diluted   $ 0.49     $ (0.58 )              NM2     $ (1.30 )   $ (1.69 )            NM2  
Non-GAAP Measures:                                                
Adjusted EBITDA1   $ 34.9     $ 17.7       96.9 %   $ 72.1     $ 49.0       47.2 %

 

1 Reconciliation to US GAAP shown below.
2 Percentage change is not meaningful

 

2

 

 

With the filing of its Form 10-K for fiscal year 2020, the Company expects to have comprehensively realigned its segments into Gaming, Virtual Sports, Interactive and Leisure7, as represented below.

 

Gaming: Gaming machines located in UK licensed betting offices (“LBOs”), casinos, gaming halls and high street adult gaming centers (“AGCs”)

 

Virtual Sports: Retail and Online Virtual Sports

 

Interactive: Slot and table game offerings from our Gaming segment as well as interactive-only content via our remote gaming servers

 

Leisure: Digital and analog gaming and amusement machines located in UK pubs, bowling alleys, motorway service areas (“MSAs”), bingo halls and leisure parks.

 

The restatements do not change any 2019 or 2020 reported results at the consolidated Inspired level.

 

“As we look ahead, we believe we are well situated to navigate our business through short-term challenges and over the long term,” said Stewart Baker, Executive Vice President and Chief Financial Officer of Inspired. “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 maximize shareholder value.”

 

Recent Highlights (as of March 11, 2021)

 

Gaming

 

58 North American Valor™ Sales in the Fourth Quarter – This brings total Valor terminal sales since launch to 429. The Company has commitments for 30 additional units thus far in the first quarter 2021.

 

Paddy Power contract renewal – Signed new two-year contract in the fourth quarter requiring no further significant capital expenditure.

 

$32.5 Million Payment on Backdated VAT Tax Rebate Inspired received $32.5 million from one of our SBG customers in the fourth quarter 2020 related to our contractual revenue share of their UK VAT rebate. We have received $42.2 million of total VAT-related revenue in 2020 with an incremental $3.1 million in recoveries received in the first quarter 2021.

 

Agreement with Sisal to Convert Games in Italy - Inspired sold 774 existing installed VLTs to Sisal in the fourth quarter 2020 with a further 850 existing installed VLTs to be sold in 2021 as part of our strategy to focus on technology and games in Italy rather than on hardware operations.

 

Virtual Sports

 

New Retail and Online Virtual Sports Agreements – In the first quarter 2021, Inspired signed new agreements to provide Virtual Sports across online and retail Virtuals product sets to Snaitech in Italy, The CAGE Companies in the Caribbean and Entain for all of their brands, including Ladbrokes, Coral, BetMGM, bwin, Sportingbet, partypoker, Gala and Foxy Bingo.

 

Online Virtual Sports Launches – Online Virtual Sports were launched with Fortuna-owned brand Casa Pariurilor, a major online brand in Romania, in the fourth quarter 2020, and are expected to launch with Stoiximan in the second quarter 2021. Stoiximan is a leading Greek online gaming site owned by OPAP S.A.

  

 

7 Inspired has provided restated 2019 and 2020 figures to reflect the adoption of this new segment reporting structure in an accompanying supplemental table as well as in the “Inspired Segment Reclassification” disclosure presentation found on the Company’s website.

 

3

 

 

Land-based Virtuals Developments – In the fourth quarter, the Company signed with Intralot to make the Washington DC Lottery the latest North American lottery to launch our land-based Virtual Sports. The Pennsylvania Lottery’s 2020 full year sales from its Virtual Sports grew 255% year over year even with sports bars in Pennsylvania closed for a large part of the year and also after normalizing for promotions.

 

Virtual Plug & Play™ (“VPP”) –The Company has signed agreements with Caesars and BetMGM to launch our new complete end-to-end Online Virtual Sports offering in New Jersey.

 

High-Profile Virtual EventsDuring the fourth quarter, Inspired held the virtual Lexus Melbourne Cup and the Greatest Ever Cox Plate, which were both televised in Australia.

 

Interactive

 

New CustomersInteractive content launched with 16 new customers during the quarter across Germany, Belgium, Greece, Italy, New Jersey and the UK in the quarter, including OPAP, Skill on Net and Unibet in New Jersey.

 

Expanded Portfolio of Interactive AggregatorsLaunched a selection of premium slots on Scientific Games, Everymatrix, Microgaming, Relax, SBTech, Playtech and Pariplay content aggregation platforms during the fourth quarter.

 

New Jurisdictions – Granted a provisional license to supply online games by the Michigan Gaming Control Board in the first quarter 2021 with games expected to launch in early 2021. Also granted a supplier license by the West Virginia Lottery Commission in the fourth quarter 2020, with commitments to distribute content in 2021.

 

New Content Eight games launched during the quarter including our very successful holiday trio of Santa King Megaways™, Santa Stacked Free Spins™ and Christmas Cash Pots™. Content from the NTG acquisition has proven to be extremely popular and outperformed internal expectations.

 

Germany Deployment - Delivered 10 games to the German market for its opening in the fourth quarter 2020. All new Inspired games will be compliant with German regulations.

 

Leisure

 

MOTO Long-Term Contract Extension – Inspired will continue to provide its gaming machines and services to MOTO, the UK’s largest motorway service operator.

 

Overview of Fourth Quarter Results Versus Prior Year Fourth Quarter on a Reported Basis

 

Gaming Revenue was $50.5 million, an increase of 52.3% from $33.2 million in the fourth quarter 2019, in part due to $32.5 million in VAT-related revenue. Gaming Service Revenue was $44.3 million, an increase of 102.1% from $21.9 million in the fourth quarter 2019. Gaming service revenue was favorably impacted by the VAT-related revenue, which was offset by COVID-19 Closures in the UK ($6.8 million), Greece ($2.3 million) and Italy ($1.7 million). Gaming Product Revenue declined to $6.2 million from $11.3 million in the fourth quarter 2019. Revenue during the quarter consisted of the sale of Valor™ terminals ($1.4 million), Sabre Hydra™ electronic table games and machine sales in Italy ($0.9 million).

 

Virtual Sports Revenue, which no longer includes Interactive but does include Online Virtual Sports, increased 1.8% to $8.7 million from $8.5 million in the fourth quarter 2019. Due to the COVID-19 Closures and resulting growing migration to gaming online, Online Virtual Sports increased $3.0 million year-over-year while retail revenue declined $2.8 million.

 

4

 

 

Interactive Revenue increased 99.5% to $4.2 million from $2.1 million in the fourth quarter 2019. The revenue growth came primarily from our existing customer base in Europe, reflecting the growing migration of end users to online platforms, an increase in the volume and popularity of the Company’s new proprietary content, significantly improved game quality and strong account management. Additionally, Inspired launched with over 42 new online customers in 2020 throughout the UK, New Jersey, Canada, Greece, Mexico, Germany, Belgium, Italy and Sweden and further expanded its base of interactive aggregators.

 

Leisure Service Revenue was $7.7 million in the fourth quarter 2020 compared to $21.8 million in the prior year period. Revenue from pubs, leisure parks and MSAs was lower than the prior year as a result of the COVID-19 Closures. Revenue generated from pub customers was $2.8 million, compared to $10.5 million in the prior year period; leisure park customers was $2.6 million, compared to $5.9 million in the prior year period; and MSA customers was $1.8 million, compared to $4.2 million in the prior year period. Leisure Product Revenue was $0.6 million in the fourth quarter 2020 versus $0.8 million in the prior year period.

 

Total Company SG&A expenses decreased by $7.2 million, or 23.0%, on a reported basis, to $24.1 million. This decrease was driven by staff cost savings of $3.7 million due to the furlough scheme and synergies achieved, a cost savings on facility costs of $1.0 million, $1.0 million reduction in professional fees and $0.7 million of lower travel and expense costs due to the COVID-19 pandemic. Italian tax-related costs decreased by $0.4 million (excluded from Adjusted EBITDA) and costs of group restructure decreased by $0.2 million (excluded from Adjusted EBITDA).

 

Total Company Net Cash Provided by Operating Activities Less Capital Expenditures during the quarter increased to an inflow of $13.4 million from an outflow of $2.6 million in the prior year period representing a $16.0 million increase in cash generation. This was helped by a $31.7 million VAT-related income payment and partly offset by a $12.6 million bi-annual interest payment.

 

Segment Reporting Reclassification

 

In prior years, and up to and including the interim period nine months ended September 30, 2020, the Company operated its business along three operating segments: Server Based Gaming, Virtual Sports (which included Interactive) and Acquired Businesses. During the period subsequent to September 30, 2020, the Company has completed the process of changing its internal structure, which has been ongoing since the NTG Acquisition, and as a result has changed the composition of its operating segments. The Company now operates its business along four operating segments, which are segregated based on the basis of revenue stream: Gaming, Virtual Sports, Interactive and Leisure. The Company believes this method of segment reporting reflects both the way its business segments are now managed and the way the performance of each segment is now evaluated.

 

As part of the recharacterization exercise, certain items of Revenue, Cost of Sales and Selling and Administrative Expenses have been recharacterized to ensure consistency with similar items across the Group. The revenue recharacterizations are to ensure spares and similar items are reflected with other items of hardware (Product Sales). The recharacterization has no impact on the previously reported Company Revenue, Adjusted EBITDA, Net Operating Loss, Net Loss or Net Comprehensive Loss for the year ended December 31, 2019.

 

The Company has provided reclassified 2019 and 2020 reported results to reflect the adoption of this new segment reporting structure in an accompanying supplemental table as well as in the “Inspired New Segment Reporting” disclosure presentation found on the Company’s website.

 

5

 

 

Non-GAAP Financial Measures

 

We use certain non-GAAP financial measures, including EBITDA and Adjusted EBITDA, to analyze our operating performance. We use these financial measures to manage our business on a day-to-day basis. We believe that these measures are also commonly used in our industry to measure performance. For these reasons, we believe that these non-GAAP financial measures provide expanded insight into our business, in addition to standard U.S. GAAP financial measures. There are no specific rules or regulations for defining and using non-GAAP financial measures, and as a result the measures we use may not be comparable to measures used by other companies, even if they have similar labels. The presentation of non-GAAP financial information should not be considered in isolation from, or as a substitute for, or superior to, financial information prepared and presented in accordance with U.S. GAAP. You should consider our non-GAAP financial measures in conjunction with our U.S. GAAP financial measures.

 

We define our non-GAAP financial measures as follows:

 

EBITDA is defined as net loss excluding depreciation and amortization, interest expense, interest income and income tax expense.

 

Adjusted EBITDA is defined as net loss excluding depreciation and amortization, interest expense, interest income and income tax expense, and other additional exclusions and adjustments. Such additional excluded amounts include stock-based compensation U.S. GAAP charges where the associated liability is expected to be settled in stock, and changes in the value of earnout liabilities and income and expenditure in relation to legacy portions of the business (being those portions where trading no longer occurs) including closed defined benefit pension schemes. Additional adjustments are made for items considered outside the normal course of business, including (1) restructuring costs, which include charges attributable to employee severance, management changes, restructuring, dual running costs, costs related to facility closures and integration costs, (2) merger and acquisition costs and (3) gains or losses not in the ordinary course of business. This does not include any adjustments related to COVID-19.

 

We believe Adjusted EBITDA, when considered along with other performance measures, is a particularly useful performance measure, because it focuses on certain operating drivers of the business, including sales growth, operating costs, selling and administrative expense and other operating income and expense. We believe Adjusted EBITDA can provide a more complete understanding of our operating results and the trends to which we are subject, and an enhanced overall understanding of our financial performance and prospects for the future. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income or loss, because it does not take into account certain aspects of our operating performance (for example, it excludes non-recurring gains and losses which are not deemed to be a normal part of underlying business activities). Our use of Adjusted EBITDA may not be comparable to the use by other companies of similarly termed measures. Management compensates for these limitations by using Adjusted EBITDA as only one of several measures for evaluating our operating performance. In addition, capital expenditures, which affect depreciation and amortization, interest expense, and income tax benefit (expense), are evaluated separately by management.

 

Functional Currency at Constant rate. Currency impacts shown have been calculated as the current-period average GBP: USD rate less the equivalent average rate in the prior period, multiplied by the current period amount in our functional currency (GBP). The remaining difference, referred to as functional currency at constant rate, is calculated as the difference in our functional currency, multiplied by the prior-period average GBP: USD rate, as a proxy for functional currency at constant rate movement.

 

Currency Movement represents the difference between the results in our reporting currency (USD) and the results on a functional currency at constant rate basis.

 

6

 

 

Pro Forma financial information is intended to illustrate the combined impact of the Company’s Acquired Businesses by showing how the specific transaction might have affected historical financial statements had the acquisition occurred at the beginning of the acquirer’s most recently completed fiscal year.

 

Reconciliations from net loss, as shown in our Consolidated Statements of Operations and Comprehensive Loss, to Adjusted EBITDA are shown below. The 2019/2020 EBITDA comparison does not include the Acquired Businesses in the 2019 results.

 

Supplemental Disclosure

 

Inspired’s audit of its 2020 annual consolidated financial statements is not yet complete and accordingly all financial amounts referred to in this news release are unaudited and represent management’s estimates. These amounts are subject to audit and may be subject to change as a result. The Company intends to file its consolidated financial results for the year ended December 31, 2020, together with its Management’s Discussion and Analysis for the corresponding period on the Company’s website at www.inseinc.com.

 

Conference Call and Webcast

 

Inspired management will host a conference call and simultaneous webcast at 9:00 a.m. ET / 2:00 p.m. UK on Thursday, March 11, 2021 to discuss the financial results and general business trends.

 

Telephone: The dial-in number to access the call live is 1-844-746-0725 (US) or 1-412-317-5264 (International). Participants should ask to be joined into the Inspired Entertainment call.

 

Webcast: A live audio-only webcast of the call can be accessed through the “Events and Presentations” page of the Company’s website at www.inseinc.com under the Investors link. Please follow the registration prompts.

 

Replay of the call: A telephone replay of the call will be available one hour after the conclusion of the call until March 18, 2021 by dialing 1-877-344-7529 (US) or 1-412-317-0088 (International), via replay access code 10152597. A replay of the webcast will also be available on the Company’s website at www.inseinc.com.

 

About Inspired Entertainment, Inc.

 

Inspired offers an expanding portfolio of content, technology, hardware and services for regulated gaming, betting, lottery, social and leisure operators across land-based and mobile channels around the world. The Company’s gaming, virtual sports, interactive and leisure products appeal to a wide variety of players, creating new opportunities for operators to grow their revenue. The Company operates in approximately 35 jurisdictions worldwide, supplying gaming systems with associated terminals and content for more than 50,000 gaming machines located in betting shops, pubs, gaming halls and other route operations; virtual sports products through more than 44,000 land-based channels; interactive games for 100+ websites; and a variety of amusement entertainment solutions with a total installed base of more than 19,000 devices.  Additional information can be found at www.inseinc.com.

 

7

 

 

Forward Looking Statements

 

This news release may contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “anticipate,” “believe,” “expect,” “estimate,” “plan,” “will,” “would” and “project” and other similar expressions that indicate future events or trends or are not statements of historical matters. These statements are based on Inspired’s management’s current expectations and beliefs, as well as a number of assumptions concerning future events.

 

Forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside of Inspired’s control and all of which could cause actual results to differ materially from the results discussed in the forward-looking statements. Accordingly, forward-looking statements should not be relied upon as representing Inspired’s views as of any subsequent date, and Inspired does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as required by law. You are advised to review carefully the “Risk Factors” section of Inspired’s annual report on Form 10-K for the fiscal year ended December 31, 2019 and in Inspired’s subsequent quarterly reports on Form 10-Q, which are available, free of charge, on the U.S. Securities and Exchange Commission’s website at www.sec.gov. In addition, the statements made by the Company with respect to the potential future impact of COVID-19 on the Company’s business and operations, and the Company’s expected responses thereto, are forward-looking statements. The Company encourages investors to visit its website from time to time, as information is updated and new information is posted. The Company does not undertake to update its forward-looking statements, except as may be required by law.

 

Contact:

For Investors

Aimee Remey

aimee.remey@inseinc.com

+1 646 565-6938

 

For Press and Sales

inspiredsales@inseinc.com

 

8

 

 

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

 

    December 31,
2020
    December 31,
2019
 
Assets            
Cash   $ 47.1     $ 29.1  
Accounts receivable, net     27.5       24.2  
Inventory, net     17.6       18.8  
Prepaid expenses and other current assets     16.8       23.2  
Total current assets     109.0       95.3  
                 
Property and equipment, net     65.5       79.3  
Software development costs, net     42.4       46.9  
Other acquired intangible assets subject to amortization, net     7.7       9.9  
Goodwill     83.7       80.9  
Right of use asset     12.5       9.4  
Investment           0.6  
Other assets     3.3       5.1  
Total assets   $ 324.1     $ 327.4  
                 
Liabilities and Stockholders’ Deficit                
Current liabilities                
Accounts payable   $ 17.9     $ 22.2  
Accrued expenses     31.4       31.2  
Corporate tax and other current taxes payable     14.4       6.6  
Deferred revenue, current     11.5       10.1  
Operating lease liabilities     3.6       3.6  
Other current liabilities     2.5       1.9  
Current portion of long-term debt           2.6  
Current portion of finance lease liabilities     0.6       0.1  
Total current liabilities     81.9       78.3  
                 
Long-term debt     297.5       270.5  
Finance lease liabilities, net of current portion     0.2        
Deferred revenue, net of current portion     11.4       17.7  
Derivative liability     1.7        
Operating lease liabilities     9.2       5.2  
Other long-term liabilities     10.9       5.2  
Total liabilities     412.8       376.9  
                 
Commitments and contingencies                
                 
Stockholders’ deficit                
Preferred stock; $0.0001 par value; 1,000,000 shares authorized            
Series A Junior Participating Preferred stock; $0.0001 par value; 1,000,000 shares authorized; 49,000 shares designated; no shares issued and outstanding at December 31, 2020 and December 31, 2019            
Common stock; $0.0001 par value; 49,000,000 shares authorized; 22,430,475 shares and 22,230,768 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively            
Additional paid in capital     350.6       346.6  
Accumulated other comprehensive income     31.1       45.1  
Accumulated deficit     (470.4 )     (441.2 )
Total stockholders’ deficit     (88.7 )     (49.5 )
Total liabilities and stockholders’ deficit   $ 324.1     $ 327.4  

 

9

 

 

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in millions, except share data)

(Unaudited)

 

    Three Months Ended
December 31
    Twelve Months Ended
December 31,
 
    2020     2019     2020     2019  
Revenue:                        
Service   $ 64.9     $ 54.3     $ 178.7     $ 134.5  
Product     6.8       12.1       21.1       18.9  
Total revenue     71.7       66.4       199.8       153.4  
                                 
Cost of sales, excluding depreciation and amortization:                                
Cost of service     (8.3 )     (10.1 )     (30.1 )     (25.4 )
Cost of product     (4.5 )     (8.0 )     (14.4 )     (12.9 )
Selling, general and administrative expenses     (24.1 )     (31.3 )     (84.8 )     (70.4 )
Stock-based compensation expense     (1.7 )     (2.4 )     (4.8 )     (9.0 )
Acquisition and integration related transaction expenses     (1.4 )     (1.8 )     (7.0 )     (6.7 )
Depreciation and amortization     (12.4 )     (14.9 )     (52.3 )     (42.0 )
Net operating income (loss)     19.3       (2.1 )     6.4       (13.0 )
                                 
Other income (expense)                                
Interest income     0.1             0.6       0.1  
Interest expense     (8.1 )     (14.9 )     (30.6 )     (27.8 )
Change in fair value of earnout liability                       (2.3 )
Change in fair value of derivative liability           0.2             3.0  
Loss from equity method investee           (0.1 )     (0.5 )     (0.1 )
Other finance income (expense)     1.2       4.1       (4.7 )     3.2  
                                 
Total other expense, net     (6.8 )     (10.7 )     (35.2 )     (23.9 )
                                 
Income (loss) before income taxes     12.5       (12.8 )     (28.8 )     (36.9 )
Income tax expense     (0.1 )           (0.4 )     (0.1 )
Net income (loss)     12.4       (12.8 )     (29.2 )     (37.0 )
                                 
Other comprehensive loss:                                
Foreign currency translation (loss) gain     (4.7 )     (3.1 )     (5.4 )     (2.4 )
Change in fair value of hedging instrument     (0.2 )     (0.5 )     (2.9 )     2.9  
Reclassification of loss (gain) on hedging instrument to comprehensive income     0.5       0.1       1.5       (4.4 )
Actuarial losses on pension plan     (2.6 )     (2.7 )     (7.2 )     (6.9 )
Other comprehensive loss     (7.0 )     (6.2 )     (14.0 )     (10.8 )
                                 
Comprehensive loss   $ 5.4     $ (19.0 )   $ (43.2 )   $ (47.8 )
Net income (loss) per common share – basic   $ 0.55     $ (0.58 )   $ (1.30 )   $ (1.69 )
                                 
Net income (loss) per common share –diluted   $ 0.49     $ (0.58 )   $ (1.30 )   $ (1.69 )
                                 
Weighted average number of shares outstanding during the period – basic and diluted     22,407,307       22,197,191       22,399,333       21,892,964  
                                 
Weighted average number of shares outstanding during the period –diluted     25,073,435       22,197,191       22,399,333       21,892,964  

 

10

 

 

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions) (Unaudited)

 

    Year Ended
December 31,
2020
    Year Ended
December 31,
2019
 
Cash flows from operating activities:            
Net loss   $ (29.2 )   $ (37.0 )
Adjustments to reconcile net loss to net cash provided by operating activities:                
Depreciation and amortization     52.3       42.0  
Amortization of right of use asset     3.6       1.0  
Stock-based compensation expense     4.8       9.0  
Change in fair value of derivative liability           (3.0 )
Change in fair value of earnout liability           2.3  
Impairment of investment in equity method investee     0.7        
Foreign currency translation on senior bank debt     5.6       0.8  
Foreign currency translation on cross currency swaps           (3.6 )
Reclassification of loss on hedging instrument to comprehensive income     0.9        
Non-cash interest expense relating to senior debt     3.4       9.0  
Changes in assets and liabilities:                
Accounts receivable     (2.9 )     3.3  
Inventory     1.3       2.0  
Prepaid expenses and other assets     8.8       3.3  
Corporate tax and other current taxes payable     6.6       (3.6 )
Accounts payable     (4.8 )     6.9  
Deferred revenues and customer prepayment     (5.7 )     (9.5 )
Accrued expenses     10.9       7.2  
Operating lease liabilities     (2.8 )     (1.3 )
Other long-term liabilities     (0.6 )     1.9  
Net cash provided by operating activities     52.9       30.7  
                 
Cash flows from investing activities:                
Purchases of property and equipment     (15.4 )     (10.5 )
Cash paid for NTG Acquisition           (105.9 )
Purchases of capital software     (14.5 )     (17.0 )
Net cash used in investing activities     (29.9 )     (133.4 )
                 
Cash flows from financing activities:                
Proceeds from issuance of long-term debt           270.6  
Proceeds from issuance of revolver           2.8  
Repayments of revolver and long-term debt, including exit premium     (4.2 )     (144.2 )
Payment of financing costs           (15.2 )
Debt fees incurred     (3.1 )      
Repayments of finance leases     (0.9 )     (0.5 )
Net cash (used in) provided by financing activities     (8.2 )     113.5  
                 
Effect of exchange rate changes on cash     3.2       2.3  
Net increase in cash     18.0       13.1  
Cash, beginning of period     29.1       16.0  
Cash, end of period   $ 47.1     $ 29.1  
                 
Supplemental cash flow disclosures                
Cash paid during the period for interest   $ 13.3     $ 12.6  
Cash paid during the period for income taxes   $ 0.2     $  
Cash paid during the period for operating leases   $ 3.3     $ 2.2  
                 
Supplemental disclosure of noncash investing and financing activities                
Additional paid in capital from net settlement of RSUs   $ (0.7 )   $ (0.9 )
Lease liabilities arising from obtaining right of use assets   $ (6.8 )   $ (9.6 )
Adjustment to goodwill arising from adjustment to fair value of assets acquired   $ (0.2 )   $  
Property and equipment acquired through finance lease   $ 1.5     $  
Capitalized interest payments   $ 10.6     $  
Assets arising from asset retirement obligations   $ 1.0     $  
Additional paid in capital reclassified from derivative liability   $     $ 0.8  

 

11

 

 

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Unaudited)

 

    For the Three-Month
Period ended
    For the Twelve-Month
Period ended
 
    Unaudited     Unaudited     Unaudited     Unaudited  
    Dec 31,     Dec 31,     Dec 31,     Dec 31,  
(In millions)   2020     2019     2020     2019  
Net gain (loss)   $ 12.4     $ (12.8 )   $ (29.2 )   $ (37.0 )
Items Relating to Discontinued Activities:                                
Pension charges     0.1       0.2       0.6       0.6  
                                 
Items outside the normal course of business:                                
Costs of group restructure           0.1       0.8       3.3  
Acquisition and integration related transaction expenses     1.4       1.8       7.0       6.7  
Impairment on interest in equity method investee                 0.7        
Italian tax related costs relating to prior years           0.4             0.4  
                                 
Stock-based compensation expense     1.7       2.4       4.8       9.0  
                                 
Depreciation and amortization     12.4       14.9       52.3       42.0  
Total other expense, net     6.8       10.6       34.7       23.9  
Income tax     0.1             0.4       0.1  
Adjusted EBITDA   $ 34.9     $ 17.7     $ 72.1     $ 49.0  
                                 
Adjusted EBITDA   £ 26.6     £ 13.8     £ 55.5     £ 38.2  
                                 
Exchange Rate - $ to £     1.32       1.29       1.29       1.28  

 

Scheduled Online Virtual Sports and Interactive Total Pro Forma Revenue

 

    Three Months
Ended
          Twelve Months
Ended
       
    31-Dec     Change     31-Dec     Change  
(In millions of GBP)   2020     2019     %     2020     2019     %  
                                     
Total Revenue £'m - Scheduled Online Virtuals   £ 4.6     £ 2.4       89.7 %   £ 15.7     £ 10.0       57.7 %
Total Revenue £'m – Interactive(1)   £ 3.2     £ 1.6       94.4 %   £ 10.3     £ 3.7       180.6 %
Pro Forma Total Revenue £'m - Scheduled Online Virtuals and Interactive   £ 7.8     £ 4.1       91.6 %   £ 26.1     £ 13.7       90.9 %
                                                 
in millions of USD   $ 10.3     $ 5.3       94.3 %   $ 33.7     $ 17.5       92.6 %
                                                 
Exchange Rate - $ to £     1.32       1.29               1.29       1.28          

 

(1) For 2019 periods, Interactive revenue is shown on a pro forma basis.

 

12

 

 

ADJUSTED EBITDA RECONCILIATION BY SEGMENT

(Unaudited)

 

Three Months Ended December 31, 2020

    Gaming    

Virtual

Sports

    Interactive     Leisure     Corporate     Total  
(In millions)                                                
Net gain (loss)   $ 28.3     $ 5.1     $ 1.4     $ (5.6 )   $ (16.8 )   $ 12.4  
Items Relating to Discontinued Activities                                                
Pension charges                             0.1       0.1  
                                                 
Items outside the normal course of business:                                                
Acquisition and integration related transaction expenses                             1.4       1.4  
                                                 
Stock-based compensation expense     0.3       0.1       0.1       0.1       1.1       1.7  
                                                 
Depreciation and amortization     6.6       1.1       0.6       3.7       0.4       12.4  
Total other expense (net)                             6.8       6.8  
Income tax                             0.1       0.1  
Adjusted EBITDA   $ 35.2     $ 6.3     $ 2.1     $ (1.8 )   $ (6.9 )   $ 34.9  
                                                 
Adjusted EBITDA   £ 26.5     £ 4.9     £ 1.6     £ (1.3 )   £ (5.1 )   £ 26.6  
                                                 
Exchange rate - $ to £                                             1.32  

 

Three Months Ended December 31, 2019

 

    Gaming    

Virtual

Sports

    Interactive     Leisure     Corporate     Total  
(In millions)                                    
Net gain (loss)   $ 1.6     $ 5.4     $     $ 1.6     $ (21.5 )   $ (12.8 )
Items Relating to Discontinued Activities                                                
Pension charges                             0.2       0.2  
                                                 
Items outside the normal course of business:                                                
Costs of group restructure                                    
Acquisition and integration related transaction expenses                             1.9       1.9  
Italian tax related costs relating to prior years           0.4                         0.4  
                                                 
 Stock-based compensation expense     0.3       0.2       0.1             1.8       2.4  
                                                 
Depreciation and amortization     8.6       0.6       0.7       3.8       1.2       14.9  
Total other expense (net)                                     10.6       10.6  
Income tax                                    
Adjusted EBITDA   $ 10.5     $ 6.6     $ 0.8     $ 5.5     $ (5.7 )   $ 17.7  
                                                 
Adjusted EBITDA   £ 8.1     £ 5.1     £ 0.6     £ 4.3     £ (4.3 )   £ 13.8  
                                                 
Exchange rate - $ to £                                             1.29  

 

13

 

 

Twelve Months Ended December 31, 2020

 

    Gaming    

Virtual

Sports

    Interactive     Leisure     Corporate     Total  
(In millions)                                    
Net gain (loss)   $ 29.5     $ 21.0     $ 4.9     $ (15.8 )   $ (68.8 )   $ (29.2 )
Items Relating to Discontinued Activities                                                
Pension charges                             0.6       0.6  
                                                 
Items outside the normal course of business:                                                
Costs of group restructure                             0.8       0.8  
Acquisition and integration related transaction expenses                             7.0       7.0  
Impairment on interest in equity method investee                                     0.7       0.7  
                                                 
Stock-based compensation expense     0.8       0.4       0.3       0.1       3.2       4.8  
                                                 
Depreciation and amortization     27.6       3.7       2.3       16.9       1.8       52.3  
Total other expense (net)                             34.7       34.7  
Income tax                             0.4       0.4  
                                                 
Adjusted EBITDA   $ 57.9     $ 25.1     $ 7.5     $ 1.3     $ (19.7 )   $ 72.1  
                                                 
Adjusted EBITDA   £ 44.3     £ 19.6     £ 5.9     £ 0.9     £ (15.2 )   £ 55.5  
                                                 
Exchange rate - $ to £                                             1.29  

 

Twelve Months Ended December 31, 2019

 

    Gaming    

Virtual

Sports

    Interactive     Leisure     Corporate     Total  
(In millions)                                    
Net gain (loss)   $ 0.3     $ 21.5     $ (3.0 )   $ 2.3     $ (58.1 )   $ (37.0 )
Items Relating to Discontinued Activities                                                
Pension charges                             0.6       0.6  
                                                 
Items outside the normal course of business:                                                
Costs of group restructure     1.1             0.1             2.0       3.3  
Acquisition and integration related transaction expenses                             6.7       6.7  
Italian tax related costs relating to prior years           0.4                         0.4  
                                                 
Stock-based compensation expense     1.0       0.6       0.2       0.1       7.1       9.0  
                                                 
Depreciation and amortization     30.4       2.6       2.9       3.8       2.4       42.0  
Total other expense (net)                             23.9       23.9  
Income tax                             0.1       0.1  
Adjusted EBITDA   $ 33.0     $ 25.2     $ 0.1     $ 6.1     $ (15.4 )   $ 49.0  
                                                 
Adjusted EBITDA   £ 25.5     £ 19.7     £ 0.1     £ 4.8     £ (11.9 )   £ 38.2  
                                                 
Exchange rate - $ to £                                             1.28  

 

14

 

 

INSPIRED ENTERTAINMENT, INC. SEGMENT PERFORMANCE

(Unaudited)

 

Three Months Ended December 31, 2020

 

    Gaming    

Virtual

Sports

    Interactive     Leisure     Corporate     Total  
    (in millions)        
Revenue:                                    
Service   $ 44.3     $ 8.7     $ 4.2     $ 7.7     $     $ 64.9  
Product     6.2                   0.6             6.8  
Total revenue     50.5       8.7       4.2       8.3             71.7  
Cost of sales, excluding depreciation and amortization:                                                
Cost of service     (4.7 )     (0.7 )     (0.8 )     (2.1 )           (8.3 )
Cost of product     (4.0 )                 (0.5 )           (4.5 )
Selling, general and administrative expenses     (6.7 )     (1.7 )     (1.3 )     (7.5 )     (6.9 )     (24.1 )
Stock-based compensation expense     (0.3 )     (0.1 )     (0.1 )     (0.1 )     (1.1 )     (1.7 )
Acquisition and integration related transaction expenses                             (1.4 )     (1.4 )
Depreciation and amortization     (6.6 )     (1.1 )     (0.6 )     (3.7 )     (0.4 )     (12.4 )
Segment operating income (loss)     28.3       5.1       1.4       (5.6 )     (9.9 )     19.3  
                                                 
Net operating income (loss)                                           $ 19.3  
                                                 
Total capital expenditures for the three months ended December 31, 2020   $ 3.5     $ 1.2     $ 0.9     $ 2.1     $ 0.4     $ 8.1  

 

Three Months Ended December 31, 2019

 

    Gaming    

Virtual

Sports

    Interactive     Leisure     Corporate     Total  
    (in millions)        
Revenue:                                    
Service   $ 21.9     $ 8.5     $ 2.1     $ 21.8     $     $ 54.3  
Product     11.3                   0.8             12.1  
Total revenue     33.2       8.5       2.1       22.6             66.4  
Cost of sales, excluding depreciation and amortization:                                                
Cost of service     (5.4 )     (0.5 )     (0.3 )     (3.9 )           (10.1 )
Cost of product     (7.4 )                 (0.6 )           (8.0 )
Selling, general and administrative expenses     (9.9 )     (1.8 )     (1.0 )     (12.7 )     (5.9 )     (31.3 )
Stock-based compensation expense     (0.3 )     (0.2 )     (0.1 )           (1.8 )     (2.4 )
Acquisition and integration related transaction expenses                             (1.8 )     (1.8 )
Depreciation and amortization     (8.6 )     (0.6 )     (0.7 )     (3.8 )     (1.2 )     (14.9 )
Segment operating income (loss)     1.6       5.4             1.6       (10.7 )     (2.1 )
                                                 
Net operating income (loss)                                           $ (2.1 )
                                                 
Total capital expenditures for the three months ended December 31, 2019   $ 5.3     $ 1.2     $ 0.3     $ 2.7     $ 1.6     $ 11.1  

 

15

 

 

Twelve Months Ended December 31, 2020

 

    Gaming    

Virtual

Sports

    Interactive     Leisure     Corporate     Total  
    (in millions)        
Revenue:                                                
Service   $ 92.2     $ 32.4     $ 13.3     $ 40.8     $     $ 178.7  
Product     18.3                   2.8             21.1  
Total revenue     110.5       32.4       13.3       43.6             199.8  
Cost of sales, excluding depreciation and amortization:                                                
Cost of service     (15.7 )     (2.9 )     (1.9 )     (9.6 )           (30.1 )
Cost of product     (12.4 )                 (2.0 )           (14.4 )
Selling, general and administrative expenses     (24.5 )     (4.4 )     (3.9 )     (30.8 )     (21.2 )     (84.8 )
Stock-based compensation expense     (0.8 )     (0.4 )     (0.3 )     (0.1 )     (3.2 )     (4.8 )
Acquisition and integration related transaction expenses                             (7.0 )     (7.0 )
Depreciation and amortization     (27.6 )     (3.7 )     (2.3 )     (16.9 )     (1.8 )     (52.3 )
Segment operating income (loss)     29.5       21.0       4.9       (15.8 )     (33.2 )     6.4  
                                                 
Net operating income (loss)                                           $ 6.4  

 

Twelve Months Ended December 31, 2019

 

    Gaming    

Virtual

Sports

    Interactive     Leisure     Corporate     Total  
    (in millions)        
Revenue:                                    
Service   $ 73.8     $ 33.4     $ 4.7     $ 22.6     $     $ 134.5  
Product     17.7                   1.2             18.9  
Total revenue     91.5       33.4       4.7       23.8             153.4  
Cost of sales, excluding depreciation and amortization:                                                
Cost of service     (18.1 )     (2.6 )     (0.7 )     (4.0 )           (25.4 )
Cost of product     (12.0 )                 (0.9 )           (12.9 )
Selling, general and administrative expenses     (29.7 )     (6.0 )     (4.0 )     (12.7 )     (18.0 )     (70.4 )
Stock-based compensation expense     (1.0 )     (0.6 )     (0.2 )     (0.1 )     (7.1 )     (9.0 )
Acquisition and integration related transaction expenses                             (6.7 )     (6.7 )
Depreciation and amortization     (30.4 )     (2.6 )     (2.9 )     (3.8 )     (2.3 )     (42.0 )
Segment operating income (loss)     0.3       21.6       (3.1 )     2.3       (34.1 )     (13.0 )
                                                 
Net operating income (loss)                                           $ (13.0 )

 

 

16

 

Exhibit 99.2

 

1 NEW SEGMENT REPORTING Quarterly Reclassification March 11, 2021

 

 

Safe Harbor / Non - GAAP Financial Disclosures Forward - Looking Statements This presentation includes forward - looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 . These forward - looking statements include, but are not limited to, statements regarding our business strategy, plans and object ives and our expected or contemplated future operations, results, financial condition, beliefs and intentions. In addition, any statem ent s that refer to projections, forecasts or other characterizations or predictions of future events or circumstances, including an y underlying assumptions on which such statements are expressly or implicitly based, are forward - looking statements. The words “anticipate”, “believe”, “continue”, “can”, “could”, “estimate”, “expect”, “intend”, “may”, “might”, “plan”, “possible”, “potential”, “pred ict ”, “project”, “scheduled”, “seek”, “should”, “will”, “would” and similar expressions, among others, and negative expressions inc lud ing such words, may identify forward - looking statements. These forward - looking statements reflect our current expectations about our future results, performance, liquidity, financial condition, prospects and opportunities, and are based upon information curr ent ly available to us, our interpretation of what we believe to be significant factors affecting our business and many assumptio ns regarding future events. Actual results, performance, liquidity, financial condition, prospects and opportunities could differ material ly from those expressed in, or implied by, our forward - looking statements. This could occur as a result of various risks and uncert ainties, including the following: our ability to compete effectively in our industries; the effect of evolving technology on our busin ess ; our ability to renew long - term contracts and retain customers, and secure new contracts and customers; our ability to maintain relationships with suppliers; our ability to protect our intellectual property; government regulation of our industries; inco me trends with respect to B2/B3 gaming machines in the United Kingdom (“UK”) following a substantial reduction of maximum permit ted bets, which came into effect on April 1, 2019; our ability to attract and retain key members of our management team; our need for w ork ing capital; our ability to secure capital for growth and expansion; changing consumer, technology and other trends in our in dus tries; our ability to successfully operate across multiple jurisdictions and markets around the world; changes in local, regional an d g lobal economic and political conditions; our ability to effectively integrate the operations of businesses we acquire, and to gr ow and expand such operations, the potential effect of the Coronavirus pandemic, and other factors described in our Annual Report on Form 1 0 - K for the year ended December 31, 2019, our Quarterly Report on Form 10 - Q for the period ended September 30, 2020 and our other filings with the SEC. In light of these risks and uncertainties, there can be no assurance that any matters covered by our fo rwa rd - looking statements will develop as predicted, expected or implied. Readers should not place undue reliance on any forward - loo king statements. Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or rev ise any forward - looking statements, whether as a result of new information, future events, changed circumstances or any other reaso n. We advise you to carefully review the reports and documents we file from time to time with the SEC. Financial Information and Non - GAAP Financial Measures All years represented in this presentation are fiscal years unless otherwise indicated. For 2019, presentation is shown on a cal endar year basis to conform to our current fiscal year ending December 31, which was changed from September 30 commencing in 201 9. All information presented for quarterly periods is unaudited. We were formed in Delaware on May 30, 2014 under the name Hydra In dustries Acquisition Corp. (“Hydra”) as a “blank check company” for the purpose of acquiring one or more operating businesses or assets. On December 23, 2016, we consummated our initial business combination by acquiring the Inspired Gaming Group. Such a cqu isition and related transactions are referred to collectively as the “Business Combination” or the “Merger”. We changed our n ame from Hydra Industries Acquisition Corp. to Inspired Entertainment, Inc. upon consummation of the Business Combination. This presentation contains certain financial measures that have not been prepared in accordance with United States generally acc epted accounting principles (“non - GAAP”). A “non - GAAP financial measure” is defined as a numerical measure of a company’s financ ial performance that excludes or includes amounts that are different than the most directly comparable measure calculated and pre sen ted in accordance with United States generally accepted accounting principles (“GAAP”) in the statements of income, balance s hee ts or statements of cash flow of the company. These measures are presented as supplemental disclosures because we use such measu res to analyze our operating performance and because certain of the measures are widely used measures of performance in our industry. See the Appendix for a reconciliation of our non - GAAP financial measures to the most comparable GAAP measures. EBITDA is defined as earnings before interest expense, provision for income taxes and depreciation and amortization. Adjusted EBITDA adjusts EBITDA to remove the effects of certain stock - based compensation charges, certain changes related to legacy portions of the business and items considered outside the normal course of business, including restructuring costs, merger and acquisitio n c osts and gains or losses not in the ordinary course of business. Adjusted Revenue (also Revenue Excluding Nil Margin Hardware Sale s) is defined as revenue excluding for hardware sales that are sold at nil margin with the intention of securing longer term rec urr ing revenue streams. The disclosure of EBITDA, Adjusted EBITDA, Adjusted Revenue and other non - GAAP financial measures may not be co mparable to similarly titled measures reported by other companies. Such non - GAAP financial measures should be considered in addition to, and not in isolation from, as a substitute for, or superior to, net income, operating income, cash flows, revenu e, and other measures of financial performance prepared in accordance with GAAP. Our results are translated from the British pou nd (GBP), our functional currency, into US dollars (USD), our reporting currency. In order to isolate the effect of translation exchang e r ate differences between periods, we also present results on a Constant Currency basis, which is a non - GAAP financial measure tha t assumes a constant translation exchange rate between periods. The currency impact has been calculated as the current period GBP:USD r ate less the equivalent average rate in the prior period, multiplied by the current period amount in the functional currency (GBP ). The remaining difference, referred to as constant currency, is calculated as the difference in the functional currency, multiplie d b y the prior period average GBP:USD rate, as a proxy for constant currency movement. Certain of the trademarks used herein are tr ademarks of third parties. 2

 

 

New Segment Reporting from October 1, 2020 • T he Company has completed the process of changing its internal structure, which has been ongoing since the NTG Acquisition, and as a result has changed the composition of its operating segments . • The previous segments were : Gaming, Virtual Sports and Acquired Businesses • The new segments are : Gaming, Virtual Sports, Interactive and Leisure • The Company believes this method of segment reporting reflects both the way its business segments are now managed and the way the performance of each segment is now evaluated . • As part of this exercise, certain items of Revenue, Cost of Sales and Selling and Administrative Expenses have been recharacterized to ensure consistency with similar items across the Group. The revenue recharacterizations are to ensure spares and similar items are reflected with other items of hardware (Product Sales). • There is no change to the reported revenue or profit in any period, only movements between segments . • This document provides comparative reclassified segment data on revenue, operating income, Adjusted EBITDA and key performance indicators for the relevant 2019 and 2020 reported results to reflect the adoption of this new segment reporting structure . 3

 

 

New Segments Retail and Online Virtual Sports Slot and table game offerings from our Gaming segment as well as interactive - only content via our remote gaming servers Digital and analog gaming and amusement machines located in UK pubs, bowling alleys, motorway service areas, bingo halls and leisure parks SEGMENT COMPONENTS % OF 2020 REVENUE Gaming machines located in UK licensed betting offices, casinos, gaming halls and high - street adult gaming centers 4

 

 

Quarterly Segment Revenue Breakdown Unaudited, $ in millions Impact from Reclassified As reported Reclassification Segments Gaming $ 25.0 8.2 $ 33.2 Gaming Virtual Sports 9.5 (1.0) 8.5 Virtual Sports - 2.1 2.1 Interactive Acq Businesses 32.9 (10.3) 22.6 Leisure Eliminations (1.0) 1.0 - Consolidated Inspired $ 66.4 - $ 66.4 Consolidated Inspired Q4 2019 Impact from Reclassified As reported Reclassification Segments Gaming $ 16.7 $ 8.2 $ 24.9 Gaming Virtual Sports 9.0 (1.2) 7.8 Virtual Sports - 2.1 2.1 Interactive Acq Businesses 27.4 (9.9) 17.5 Leisure Eliminations (0.8) 0.8 - Consolidated Inspired $ 52.3 - $ 52.3 Consolidated Inspired Q1 2020 Impact from Reclassified As reported Reclassification Segments Gaming $ 4.0 $ 0.2 $ 4.2 Gaming Virtual Sports 9.8 (2.2) 7.6 Virtual Sports - 3.4 3.4 Interactive Acq Businesses 1.8 (1.4) 0.4 Leisure Eliminations - - - Consolidated Inspired $ 15.6 - $ 15.6 Consolidated Inspired Q2 2020 Impact from Reclassified As reported Reclassification Segments Gaming $ 25.5 $ 5.4 $ 30.9 Gaming Virtual Sports 10.9 (2.6) 8.3 Virtual Sports - 3.5 3.5 Interactive Acq Businesses 24.3 (6.9) 17.4 Leisure Eliminations (0.6) 0.6 - Consolidated Inspired $ 60.1 - $ 60.1 Consolidated Inspired Q3 2020 Note: Q4 2020 Revenue, Costs and Operating Income were reported under the new method of segment reporting. Financials are not pro forma for the NTG acquisition. Exchange rate in the table is calculated by dividing the USD service re ven ue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions. 5

 

 

Quarterly Revenue and Cost Breakdown Unaudited, $ in millions Note: Q4 2020 Revenue, Costs and Operating Income were reported under the new method of segment reporting. Financials are not pro forma for the NTG acquisition. Exchange rate in the table is calculated by dividing the USD service re ven ue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions. Impact from Reclassified As reported Reclassification Segments Service Revenue $ 54.7 $ (0.4) $ 54.3 Service Revenue Hardware Revenue 11.7 0.4 12.1 Product Revenue Cost of Service (8.1) (2.0) (10.1) Cost of Service Cost of Hardware (7.7) (0.3) (8.0) Cost of Product SG&A (33.6) 2.3 (31.3) SG&A Total $ 17.0 - $ 17.0 Total Q4 2019 Impact from Reclassified As reported Reclassification Segments Service Revenue $ 43.2 $ (0.4) $ 42.8 Service Revenue Hardware Revenue 9.1 0.4 9.5 Product Revenue Cost of Service (6.6) (1.8) (8.4) Cost of Service Cost of Hardware (7.0) 0.8 (6.2) Cost of Product SG&A (29.1) 1.0 (28.0) SG&A Total $ 9.6 - $ 9.6 Total Q1 2020 Impact from Reclassified As reported Reclassification Segments Service Revenue $ 15.2 $ 0.1 $ 15.3 Service Revenue Hardware Revenue 0.4 (0.1) 0.3 Product Revenue Cost of Service (3.1) 0.6 (2.5) Cost of Service Cost of Hardware (0.3) - (0.3) Cost of Product SG&A (10.6) (0.6) (11.2) SG&A Total $ 1.6 - $ 1.6 Total Q2 2020 Impact from Reclassified As reported Reclassification Segments Service Revenue $ 56.4 $ (0.8) $ 55.6 Service Revenue Hardware Revenue 3.7 0.8 4.5 Product Revenue Cost of Service (11.2) 0.4 (10.8) Cost of Service Cost of Hardware (2.5) (0.8) (3.3) Cost of Product SG&A (21.9) 0.4 (21.5) SG&A Total $ 24.5 - $ 24.5 Total Q3 2020 6

 

 

Quarterly Segment Operating Income Breakdown Unaudited, $ in millions Impact from Reclassified As reported Reclassification Segments Gaming $ (0.1) $ (1.1) $ (1.2) Gaming Virtual Sports 4.9 0.1 5.0 Virtual Sports - 0.1 0.1 Interactive Acq Business (2.2) 1.2 (1.0) Leisure Eliminations (0.2) 0.2 - Corporate (9.6) (0.5) (10.1) Corporate Consolidated Inspired $ (7.2) - $ (7.2) Consolidated Inspired Q1 2020 Impact from Reclassified As reported Reclassification Segments Gaming $ (5.4) $ (1.7) $ (7.1) Gaming Virtual Sports 6.0 (0.9) 5.1 Virtual Sports - 1.7 1.7 Interactive Acq Business (8.3) 1.3 (7.0) Leisure Eliminations - - - Corporate (6.2) (0.4) (6.6) Corporate Consolidated Inspired $ (13.9) - $ (13.9) Consolidated Inspired Q2 2020 Impact from Reclassified As reported Reclassification Segments Gaming $ 9.5 $ 0.1 $ 9.6 Gaming Virtual Sports 6.6 (0.9) 5.7 Virtual Sports - 1.6 1.6 Interactive Acq Business (1.8) (0.3) (2.1) Leisure Eliminations - - - Corporate (6.1) (0.5) (6.6) Corporate Consolidated Inspired $ 8.2 - $ 8.2 Consolidated Inspired Q3 2020 Note: Q4 2020 Revenue and Operating Income were reported under the new method of segment reporting. Financials are not pro forma for the NTG acquisition. Exchange rate in the table is calculated by dividing the USD service r eve nue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions. Impact from Reclassified As reported Reclassification Segments Gaming $ 3.0 $ (1.4) $ 1.6 Gaming Virtual Sports 4.6 0.8 5.4 Virtual Sports - - - Interactive Acq Businesses (0.4) 2.0 1.6 Leisure Eliminations - - - Corporate (9.3) (1.4) (10.7) Corporate Consolidated Inspired $ (2.1) - $ (2.1) Consolidated Inspired Q4 2019 7

 

 

Quarterly Segment Adjusted EBITDA Unaudited, $ in millions Reconciliation to US GAAP shown in appendix Note: The Company is introducing Adjusted EBITDA by segment. There is no change to the reported Total Adjusted EBITDA. Resul ts are not pro forma for the NTG acquisition. 8 Q4 2019 FY 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Gaming $ 10.5 $ 32.8 $ 6.3 $ - $ 16.4 $ 35.2 $ 57.9 Virtual Sports 6.6 25.2 5.9 6.1 6.8 6.3 25.1 Interactive 0.8 0.1 0.7 2.4 2.2 2.1 7.5 Leisure 5.5 6.2 2.4 (2.6) 3.3 (1.8) 1.3 Corporate (5.7) (15.3) (5.2) (3.8) (3.7) (6.9) (19.7) Consolidated Adjusted EBITDA $ 17.7 $ 49.0 $ 10.1 $ 2.1 $ 25.0 $ 34.9 $ 72.1

 

 

Appendix 9

 

 

Segment Performance – FY 2020 Unaudited , ($ in millions) Gaming Virtual Sports Interactive Leisure Corporate Total Revenue: Service $ 92.2 $ 32.4 $ 13.3 $ 40.8 $ — $ 178.7 Product 18.3 — — 2.8 — 21.1 Total revenue 110.5 32.4 13.3 43.6 — 199.8 Cost of sales, excluding depreciation and amortization: Cost of service (15.7 ) (2.9 ) (1.9 ) (9.6 ) — (30.1 ) Cost of product (12.4 ) — — (2.0 ) — (14.4 ) Selling, general and administrative expenses (24.5 ) (4.4 ) (3.9 ) (30.8 ) (21.2 ) (84.8 ) Stock - based compensation expense (0.8 ) (0.4 ) (0.3 ) (0.1 ) (3.2 ) (4.8 ) Acquisition and integration related transaction expenses — — — — (7.0 ) (7.0 ) Depreciation and amortization (27.6 ) (3.7 ) (2.3 ) (16.9 ) (1.8 ) (52.3 ) Segment operating income (loss) 29.5 21.0 4.9 (15.8 ) (33.2 ) 6.4 Net operating income (loss) $ 6.4 Three Months Ended December 31, 2020 Note: Results are not pro forma for the NTG acquisition. Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions. 10

 

 

Segment Performance – Q4 2020 Unaudited , ($ in millions) Gaming Virtual Sports Interactive Leisure Corporate Total Revenue: Service $ 44.3 $ 8.7 $ 4.2 $ 7.7 $ — $ 64.9 Product 6.2 — — 0.6 — 6.8 Total revenue 50.5 8.7 4.2 8.3 — 71.7 Cost of sales, excluding depreciation and amortization: Cost of service (4.7 ) (0.7 ) (0.8 ) (2.1 ) — (8.3 ) Cost of product (4.0 ) — — (0.5 ) — (4.5 ) Selling, general and administrative expenses (6.7 ) (1.7 ) (1.3 ) (7.5 ) (6.9 ) (24.1 ) Stock - based compensation expense (0.3 ) (0.1 ) (0.1 ) (0.1 ) (1.1 ) (1.7 ) Acquisition and integration related transaction expenses — — — — (1.4 ) (1.4 ) Depreciation and amortization (6.6 ) (1.1 ) (0.6 ) (3.7 ) (0.4 ) (12.4 ) Segment operating income (loss) 28.3 5.1 1.4 (5.6 ) (9.9 ) 19.3 Net operating income (loss) $ 19.3 Three Months Ended December 31, 2020 Note: Results are not pro forma for the NTG acquisition. Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions. 11

 

 

Segment Performance – Q3 2020 Unaudited, ($ in millions) Gaming Virtual Sports Interactive Leisure Corporate Total Revenue: Service $ 27.2 $ 8.3 $ 3.5 $ 16.6 $ — $ 55.6 Product 3.7 — — 0.8 — 4.5 Total revenue 30.9 8.3 3.5 17.4 — 60.1 Cost of sales, excluding depreciation and amortization: Cost of service (5.8 ) (0.7 ) (0.4 ) (3.9 ) — (10.8 ) Cost of product (2.7 ) — — (0.6 ) — (3.3 ) Selling, general and administrative expenses (6.0 ) (0.8 ) (0.9 ) (9.6 ) (4.2 ) (21.5 ) Stock - based compensation expense (0.2 ) (0.1 ) (0.1 ) — (0.7 ) (1.1 ) Acquisition and integration related transaction expenses — — — — (1.2 ) (1.2 ) Depreciation and amortization (6.6 ) (1.0 ) (0.5 ) (5.4 ) (0.5 ) (14.0 ) Segment operating income (loss) 9.6 5.7 1.6 (2.1 ) (6.6 ) 8.2 Net operating income (loss) $ 8.2 Three Months Ended September 30, 2020 Note: Results are not pro forma for the NTG acquisition. Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions. 12

 

 

Segment Performance – Q2 2020 Unaudited , ($ in millions) Gaming Virtual Sports Interactive Leisure Corporate Total Revenue: Service $ 4.1 $ 7.6 $ 3.4 $ 0.2 $ — $ 15.3 Product 0.1 — — 0.2 — 0.3 Total revenue 4.2 7.6 3.4 0.4 — 15.6 Cost of sales, excluding depreciation and amortization: Cost of service (1.0 ) (0.8 ) (0.4 ) (0.3 ) — (2.5 ) Cost of product (0.2 ) — — (0.1 ) — (0.3 ) Selling, general and administrative expenses (3.0 ) (0.7 ) (0.6 ) (2.6 ) (4.3 ) (11.2 ) Stock - based compensation expense (0.1 ) (0.1 ) (0.1 ) — (0.7 ) (1.0 ) Acquisition and integration related transaction expenses — — — — (1.2 ) (1.2 ) Depreciation and amortization (7.0 ) (0.9 ) (0.6 ) (4.4 ) (0.4 ) (13.3 ) Segment operating income (loss) (7.1 ) 5.1 1.7 (7.0 ) (6.6 ) (13.9 ) Net operating income (loss) $ (13.9 ) Three Months Ended June 30, 2020 Note: Results are not pro forma for the NTG acquisition. Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions. 13

 

 

Segment Performance – Q1 2020 Three Months Ended March 31, 2020 Unaudited , ($ in millions) Gaming Virtual Sports Interactive Leisure Corporate Total Revenue: Service $ 16.6 $ 7.8 $ 2.1 $ 16.3 $ — $ 42.8 Product 8.3 — — 1.2 — 9.5 Total revenue 24.9 7.8 2.1 17.5 — 52.3 Cost of sales, excluding depreciation and amortization: Cost of service (4.3 ) (0.7 ) (0.2 ) (3.3 ) — (8.4 ) Cost of product (5.4 ) — — (0.8 ) — (6.2 ) Selling, general and administrative expenses (8.9 ) (1.2 ) (1.2 ) (11.0 ) (5.7 ) (28.0 ) Stock - based compensation expense (0.1 ) (0.1 ) — — (0.8 ) (1.0 ) Acquisition and integration related transaction expenses — — — (3.2 ) (3.2 ) Depreciation and amortization (7.4 ) (0.8 ) (0.6 ) (3.4 ) (0.4 ) (12.6 ) Segment operating income (loss) (1.2 ) 5.0 0.1 (1.0 ) (10.1 ) (7.2 ) Net operating income (loss) $ (7.2 ) Note: Results are not pro forma for the NTG acquisition. Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions. 14

 

 

Segment Performance – FY 2019 Unaudited, ($ in millions) Gaming Virtual Sports Interactive Leisure Corporate Total Revenue: Service $ 73.8 $ 33.4 $ 4.7 $ 22.6 $ — $ 134.5 Product 17.7 — — 1.2 — 18.9 Total revenue 91.5 33.4 4.7 23.8 — 153.4 Cost of sales, excluding depreciation and amortization: Cost of service (18.1 ) (2.6 ) (0.7 ) (4.0 ) — (25.4 ) Cost of product (12.0 ) — — (0.9 ) — (12.9 ) Selling, general and administrative expenses (29.7 ) (6.0 ) (4.0 ) (12.7 ) (18.0 ) (70.4 ) Stock - based compensation expense (1.0 ) (0.6 ) (0.2 ) (0.1 ) (7.1 ) (9.0 ) Acquisition and integration related transaction expenses — — — — (6.7 ) (6.7 ) Depreciation and amortization (30.4 ) (2.6 ) (2.9 ) (3.8 ) (2.3 ) (42.0 ) Segment operating income (loss) 0.3 21.6 (3.1 ) 2.3 (34.1 ) (13.0 ) Net operating income (loss) $ (13.0 ) Twelve Months Ended December 31, 2019 Note: Results are not pro forma for the NTG acquisition. Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions. 15

 

 

Segment Performance – Q4 2019 Unaudited, ($ in millions) Gaming Virtual Sports Interactive Leisure Corporate Total Revenue: Service $ 21.9 $ 8.5 $ 2.1 $ 21.8 $ — $ 54.3 Product 11.3 — — 0.8 — 12.1 Total revenue 33.2 8.5 2.1 22.6 — 66.4 Cost of sales, excluding depreciation and amortization: Cost of service (5.4 ) (0.5 ) (0.3 ) (3.9 ) — (10.1 ) Cost of product (7.4 ) — — (0.6 ) — (8.0 ) Selling, general and administrative expenses (9.9 ) (1.8 ) (1.0 ) (12.7 ) (5.9 ) (31.3 ) Stock - based compensation expense (0.3 ) (0.2 ) (0.1 ) — (1.8 ) (2.4 ) Acquisition and integration related transaction expenses — — — — (1.8 ) (1.8 ) Depreciation and amortization (8.6 ) (0.6 ) (0.7 ) (3.8 ) (1.2 ) (14.9 ) Segment operating income (loss) 1.6 5.4 — 1.7 (10.9 ) (2.1 ) Net operating income (loss) $ (2.1 ) Three Months Ended December 31, 2019 Note: Results are not pro forma for the NTG acquisition. Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions. 16

 

 

Non - GAAP Reconciliation: FY 2020 Adjusted EBITDA by Segment Twelve Months Ended December 31, 2020 Unaudited, ($ in millions) Gaming Virtual Sports Interactive Leisure Corporate Total Net gain (loss) $ 29.5 $ 21.0 $ 4.9 $ (15.8) $ (68.8 ) $ (29.2 ) Items Relating to Discontinued Activities Pension charges — — — — 0.6 0.6 Items outside the normal course of business: Costs of group restructure — — — — 0.8 0.8 Acquisition and integration related transaction expenses — — — — 7.0 7.0 Impairment on interest in equity method investee — — — — 0.7 0.7 Stock - based compensation expense 0.8 0.4 0.3 0.1 3.2 4.8 Depreciation and amortization 27.6 3.7 2.3 16.9 1.8 52.3 Total other expense (net) — — — — 34.7 34.7 Income tax — — — — 0.4 0.4 Adjusted EBITDA $ 57.9 $ 25.1 $ 7.5 $ 1.3 $ (19.7 ) $ 72.1 Adjusted EBITDA £ 44.3 £ 19.6 £ 5.9 £ 0.9 £ (15.2 ) £ 55.5 Exchange rate - $ to £ 1.29 Please see relevant Notes to Adjusted EBITDA Tables in Inspired’s annual report on Form 10 - K for the fiscal year ended December 31, 2019 and in Inspired’s subsequent quarterly reports on Form 10 - Q and our other filings with the SEC. Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this co uld be slightly different from the average rate during the period depending on timing of transactions. 17

 

 

Non - GAAP Reconciliation: Q4 2020 Adjusted EBITDA by Segment Unaudited, ($ in millions) Gaming Virtual Sports Interactive Leisure Corporate Total Net gain (loss) $ 28.3 $ 5.1 $ 1.4 $ (5.6 ) $ (16.8 ) $ 12.4 Items Relating to Discontinued Activities Pension charges — — — — 0.1 0.1 Items outside the normal course of business: Acquisition and integration related transaction expenses — — — — 1.4 1.4 Stock - based compensation expense 0.3 0.1 0.1 0.1 1.1 1.7 — — — — Depreciation and amortization 6.6 1.1 0.6 3.7 0.4 12.4 Total other expense (net) — — — — 6.8 6.8 Income tax — — — — 0.1 0.1 Adjusted EBITDA $ 35.2 $ 6.3 $ 2.1 $ (1.8 ) $ (6.9 ) $ 34.9 Adjusted EBITDA £ 26.5 £ 4.9 £ 1.6 £ (1.3 ) £ (5.1 ) £ 26.6 Exchange rate - $ to £ 1.32 Three Months Ended December 31, 2020 Please see relevant Notes to Adjusted EBITDA Tables in Inspired’s annual report on Form 10 - K for the fiscal year ended December 31, 2019 and in Inspired’s subsequent quarterly reports on Form 10 - Q and our other filings with the SEC. Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this co uld be slightly different from the average rate during the period depending on timing of transactions. 18

 

 

Non - GAAP Reconciliation: Q3 2020 Adjusted EBITDA by Segment Three Months Ended September 30, 2020 Unaudited, ($ in millions) Gaming Virtual Sports Interactive Leisure Corporate Total Net gain (loss) $ 9.6 $ 5.7 $ 1.6 $ (2.1 ) $ (14.5 ) $ 0.3 Items Relating to Discontinued Activities Pension charges — — — — 0.2 0.2 Items outside the normal course of business: Costs of group restructure — — — — 0.4 0.4 Acquisition and integration related transaction expenses — — — — 1.2 1.2 Stock - based compensation expense 0.2 0.1 0.1 — 0.7 1.1 Depreciation and amortization 6.6 1.0 0.5 5.4 0.5 14.0 Total other expense (net) — — — — 7.8 7.8 Income tax — — — — — — Adjusted EBITDA $ 16.4 $ 6.8 $ 2.2 $ 3.3 $ (3.7 ) $ 25.0 Adjusted EBITDA £ 12.8 £ 5.2 £ 1.7 £ 2.7 £ (2.9 ) £ 19.5 Exchange rate - $ to £ 1.28 Please see relevant Notes to Adjusted EBITDA Tables in Inspired’s annual report on Form 10 - K for the fiscal year ended December 31, 2019 and in Inspired’s subsequent quarterly reports on Form 10 - Q and our other filings with the SEC. Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this co uld be slightly different from the average rate during the period depending on timing of transactions. 19

 

 

Non - GAAP Reconciliation: Q2 2020 Adjusted EBITDA by Segment Three Months Ended June 30, 2020 Unaudited, ($ in millions) Gaming Virtual Sports Interactive Leisure Corporate Total Net gain (loss) $ (7.2 ) $ 5.1 $ 1.7 $ (7.0 ) $ (17.2 ) $ (24.6 ) Items Relating to Discontinued Activities Pension charges — — — — 0.2 0.2 Items outside the normal course of business: — — — — Costs of group restructure 0.3 0.3 Acquisition and integration related transaction expenses — — — — 1.2 1.2 Stock - based compensation expense 0.1 0.1 0.1 — 0.7 1.0 Depreciation and amortization 7.0 0.9 0.6 4.4 0.4 13.3 Total other expense (net) — — — — 10.5 10.5 Income tax — — — — 0.1 0.1 Adjusted EBITDA $ — $ 6.1 $ 2.4 $ (2.6 ) $ (3.8 ) $ 2.1 Adjusted EBITDA £ — £ 4.9 £ 2.0 £ (2.1 ) £ (3.1 ) £ 1.7 Exchange rate - $ to £ 1.24 Please see relevant Notes to Adjusted EBITDA Tables in Inspired’s annual report on Form 10 - K for the fiscal year ended December 31, 2019 and in Inspired’s subsequent quarterly reports on Form 10 - Q and our other filings with the SEC. Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this co uld be slightly different from the average rate during the period depending on timing of transactions. 20

 

 

Non - GAAP Reconciliation: Q1 2020 Adjusted EBITDA by Segment Three Months Ended March 31, 2020 Unaudited, ($ in millions) Gaming Virtual Sports Interactive Leisure Corporate Total Net gain (loss) $ (1.2 ) $ 5.0 $ 0.1 $ (1.0 ) $ (20.3 ) $ (17.4 ) Items Relating to Discontinued Activities Pension charges — — — — 0.2 0.2 Items outside the normal course of business: Costs of group restructure — — — — 0.1 0.1 Acquisition and integration related transaction expenses — — — — 3.2 3.2 Impairment on interest in equity method investee — — — — 0.7 0.7 Stock - based compensation expense 0.1 0.1 — — 0.8 1.0 Depreciation and amortization 7.4 0.8 0.6 3.4 0.4 12.6 Total other expense (net) — — — — 9.5 9.5 Income tax — — — — 0.2 0.2 Adjusted EBITDA $ 6.3 $ 5.9 $ 0.7 $ 2.4 $ (5.2 ) $ 10.1 Adjusted EBITDA £ 4.9 £ 4.6 £ 0.6 £ 1.8 £ (4.1 ) £ 7.8 Exchange rate - $ to £ 1.28 Please see relevant Notes to Adjusted EBITDA Tables in Inspired’s annual report on Form 10 - K for the fiscal year ended December 31, 2019 and in Inspired’s subsequent quarterly reports on Form 10 - Q and our other filings with the SEC. Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this co uld be slightly different from the average rate during the period depending on timing of transactions. 21

 

 

Non - GAAP Reconciliation: FY 2019 Adjusted EBITDA by Segment Twelve Months Ended December 31, 2019 Unaudited, ($ in millions) Gaming Virtual Sports Interactive Leisure Corporate Total Net gain (loss) $ 0.3 $ 21.6 $ (3.1) $ 2.3 $ (58.1 ) $ (37.0 ) Items Relating to Discontinued Activities Pension charges — — — — 0.6 0.6 Items outside the normal course of business: Costs of group restructure 1.1 — 0.1 — 2.1 3.3 Acquisition and integration related transaction expenses — — — — 6.7 6.7 Italian tax related costs relating to prior years — 0.4 — — — 0.4 Stock - based compensation expense 1.0 0.6 0.2 0.1 7.1 9.0 Depreciation and amortization 30.4 2.6 2.9 3.8 2.3 42.0 Total other expense (net) — — — — 23.9 23.9 Income tax — — — — 0.1 0.1 Adjusted EBITDA $ 32.8 $ 25.2 $ 0.1 $ 6.2 $ (15.3 ) $ 49.0 Adjusted EBITDA £ 25.5 £ 19.7 £ 0.1 £ 4.8 £ (11.9 ) £ 38.2 Exchange rate - $ to £ 1.28 Please see relevant Notes to Adjusted EBITDA Tables in Inspired’s annual report on Form 10 - K for the fiscal year ended December 31, 2019 and in Inspired’s subsequent quarterly reports on Form 10 - Q and our other filings with the SEC. Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this co uld be slightly different from the average rate during the period depending on timing of transactions. 22

 

 

Non - GAAP Reconciliation: Q4 2019 Adjusted EBITDA by Segment Three Months Ended December 31, 2019 Unaudited, ($ in millions) Gaming Virtual Sports Interactive Leisure Corporate Total Net gain (loss) $ 1.6 $ 5.4 $ — $ 1.6 $ (21.4 ) $ (12.8 ) Items Relating to Discontinued Activities Pension charges — — — — 0.2 0.2 Items outside the normal course of business: Costs of group restructure — — — — 0.1 0.1 Acquisition and integration related transaction expenses — — — — 1.8 1.8 Italian tax related costs relating to prior years — 0.4 — — — 0.4 Stock - based compensation expense 0.3 0.2 0.1 — 1.9 2.4 Depreciation and amortization 8.6 0.6 0.7 3.8 1.2 14.9 Total other expense (net) — — — — 10.6 10.6 Income tax — — — — — — Adjusted EBITDA $ 10.5 $ 6.6 $ 0.8 $ 5.5 $ (5.7 ) $ 17.7 Adjusted EBITDA £ 8.1 £ 5.1 £ 0.6 £ 4.3 £ (4.3 ) £ 13.8 Exchange rate - $ to £ 1.29 Please see relevant Notes to Adjusted EBITDA Tables in Inspired’s annual report on Form 10 - K for the fiscal year ended December 31, 2019 and in Inspired’s subsequent quarterly reports on Form 10 - Q and our other filings with the SEC. Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this co uld be slightly different from the average rate during the period depending on timing of transactions. 23

 

 

Pro Forma Key Performance Indicators – Gaming Note: End of period installed base is total terminal base excluding service only (1) Includes all gaming terminals in which the company take a participation revenue share across all territories. (2) Includes all days of the year, including the days during which the Gaming terminals were not operating due to COVID - 19 closu res (3) Results for the twelve months ended December 31, 2019 are pro forma for full year of NTG results Unaudited . Q1 Q2 Q3 Q4 Full Q1 Q2 Q3 Q4 Full Gaming 2019 (3) 2019 (3) 2019 (3) 2019 year (3) 2020 2020 2020 2020 year End of period installed base (# of terminals) 36,924 36,565 33,190 32,520 32,520 32,182 32,325 31,725 31,515 31,515 Total Gaming - Average installed base (# of terminals) 36,649 36,796 36,055 32,447 35,178 32,069 32,259 32,117 31,601 32,069 Participation - Average installed base (# of terminals) 34,486 34,695 34,220 30,778 33,293 30,311 30,392 30,188 29,661 30,165 Fixed Rental - Average installed base (# of terminals) 2,163 2,101 1,836 1,670 1,885 1,758 1,867 1,929 1,940 1,903 Service Only - Average installed base (# of terminals) 16,860 17,073 17,820 19,133 17,839 21,114 21,668 21,377 21,668 21,015 Customer Gross Win per unit per day (1)(2) £105.4 £73.0 £74.3 £80.5 £83.9 £64.5 £12.2 £70.4 £39.7 £46.7 Customer Net Win per unit per day (1)(2) £73.4 £51.9 £53.2 £57.3 £59.4 £47.7 £8.9 £51.4 £30.4 £34.6 Inspired Blended Participation Rate 6.3% 6.8% 6.6% 6.7% 6.6% 6.5% 6.6% 6.7% 6.2% 6.5% Inspired Fixed Rental Revenue per Gaming Machine per week £30.9 £36.3 £44.3 £45.0 £38.5 £44.1 £0.0 £37.9 £24.3 £26.3 Inspired Service Rental Revenue per Gaming Machine per week £4.6 £4.4 £4.3 £4.2 £4.4 £3.7 £1.3 £4.5 £3.6 £3.3 Gaming long-term license amortization (£'m) £1.1 £1.1 £1.2 £0.7 £4.0 £1.2 £1.3 £1.3 £1.3 £5.1 Number of Machine sales 1,910 1,221 1,812 1,419 6,362 580 13 363 1,271 2,227 Average selling price per terminal £3,193 £3,769 £3,468 £4,655 £3,708 £4,994 £5,672 £6,422 £3,704 £4,495 24

 

 

Pro Forma Key Performance Indicators – Virtual Sports Unaudited Q1 Q2 Q3 Q4 Full Q1 Q2 Q3 Q4 Full Virtual Sports 2019 2019 2019 2019 year 2020 2020 2020 2020 year No. of Live Customers at the end of the period 65 65 60 60 60 56 57 56 55 55 Average No. of Live Customers 64 65 60 59 62 56 58 56 56 58 Total Revenue (£'m) £ 7.0 £ 6.5 £ 6.0 £ 6.6 £ 26.1 £ 6.1 £ 6.1 £ 6.4 £ 6.6 £ 25.2 Total Virtual Sports Recurring Revenue (£'m) £ 6.4 £ 5.8 £ 5.4 £ 5.9 £ 23.5 £ 5.5 £ 5.3 £ 6.1 £ 5.3 £ 22.2 Total Revenue £'m - Retail £ 4.1 £ 4.0 £ 3.8 £ 4.2 £ 16.2 £ 3.3 £ 1.0 £ 3.2 £ 2.0 £ 9.5 Total Revenue £'m - Scheduled Online Virtuals £ 2.9 £ 2.4 £ 2.2 £ 2.4 £ 10.0 £ 2.7 £ 5.2 £ 3.2 £ 4.6 £ 15.7 25

 

 

Pro Forma Key Performance Indicators – Interactive (1) Results for the twelve months ended December 31, 2019 are pro forma for full year of NTG results. Unaudited 26 Q1 Q2 Q3 Q4 Full Q1 Q2 Q3 Q4 Full Interactive 2019 (1) 2019 (1) 2019 (1) 2019 year (1) 2020 2020 2020 2020 year No. of Live Customers at the end of the period 40 44 46 54 54 57 70 76 92 92 Average No. of Live Customers 39 44 45 53 46 55 70 75 83 80 No. of Live Games at the end of the period 151 162 165 171 171 181 189 200 208 208 Average No. of Live Games 150 159 164 169 162 176 187 198 211 196 Total Revenue (£'m) £ 1.2 £ 1.5 £ 1.4 £ 1.6 £ 5.7 £ 1.7 £ 2.8 £ 2.7 £ 3.2 £ 10.3 Revenue Per Game (£) £ 7,975 £ 9,360 £ 8,366 £ 9,728 35,262£ £ 9,514 £ 14,785 £ 13,709 £ 15,173 52,725£ Revenue Per Customer (£) £ 30,674 £ 33,894 £ 30,552 £ 31,215 124,279£ £ 30,205 £ 39,757 £ 36,291 £ 38,668 129,276£

 

 

Pro Forma Key Performance Indicators – Leisure (1) Motorway Service Area machines (2) Results for the twelve months ended December 31, 2019 are pro forma for full year of NTG results Note: End of period installed base Gaming is gaming machines Cat B&C only and End of period installed base Other is all other machines (excluding Service Only) Unaudited Leisure Q1 2019 (2) Q2 2019 (2) Q3 2019 (2) Q4 2019 Full year (2) Q1 2020 Q2 2020 Q3 2020 Q4 2020 Full year End of period installed base Gaming (# of terminals) 12,671 12,987 12,378 12,383 12,383 12,269 12,262 11,964 11,667 11,667 Average installed base Gaming (# of terminals) 12,612 12,898 12,649 12,403 12,641 12,276 12,267 12,101 11,688 12,083 End of period installed base Other (# of terminals) 8,889 8,384 8,437 8,368 8,368 8,235 8,224 7,719 7,193 7,193 Average installed base Other (# of terminals) 9,056 8,588 8,452 8,400 8,624 8,274 8,231 7,935 7,259 7,925 Pub Digital Gaming Machines - Average installed base (# of terminals) 4,166 4,633 5,106 5,413 4,830 5,746 5,773 5,772 5,814 5,772 Pub Analogue Gaming Machines - Average installed base (# of terminals) 4,103 3,744 3,450 3,177 3,619 2,737 2,690 2,602 2,262 2,570 MSA and Bingo Gaming Machines - Average installed base (# of terminals) (1) 3,940 4,089 3,776 3,546 3,838 3,510 3,517 3,464 3,353 3,461 Inspired Total Leisure Revenue per Gaming Machine per week (Excludes LP) £53.9 £56.0 £57.9 £60.1 £57.0 £53.6 £0.1 £40.4 £22.5 £29.2 Inspired Pub Digital Revenue per Gaming Machine per week £63.3 £65.5 £65.8 £68.5 £66.0 £60.2 £0.0 £49.2 £21.7 £32.8 Inspired Pub Analogue Revenue per Gaming Machine per week £43.9 £43.4 £42.3 £42.8 £43.1 £38.2 £0.0 £25.3 £9.6 £18.7 Inspired MSA and Bingo Revenue per Gaming Machine per week £57.5 £60.5 £63.8 £64.8 £61.6 £56.7 £0.2 £39.4 £33.4 £32.4 Inspired Other Revenue per Machine per week £19.4 £20.0 £21.3 £19.8 £20.1 £18.9 £0.0 £4.3 £4.0 £6.9 Total Leisure Parks Revenue (Gaming and Non Gaming) (£'m) £1.6 £8.2 £11.4 £4.4 £25.7 £1.6 £0.1 £5.4 £2.0 £9.1 27

 

 

Glossary of Terms GAMING E nd of Period Installed Base is equal to the number of deployed Gaming terminals at the end of each period that have been placed on a participation or fix ed rental basis. Gaming participation revenue, which comprises the majority of Gaming service revenue, is directly related to the participation terminal installed bas e. This does not include Service Only terminals. Total Gaming - Average Installed Base is the average number of deployed Gaming terminals during the period split by Participation terminals and Fixed Rental termin al s. Therefore, it is more closely aligned to revenue in the period. This measure is particularly useful for assessing existing customers or markets to pro vide comparisons of historical size and performance. This does not include Service Only terminals. Participation - Average Installed Base is the average number of deployed Gaming terminals that generated revenue on a participation basis. Fixed Rental - Average Installed Base is the average number of deployed Gaming terminals that generated revenue on a fixed rental basis. Service Only - Average Installed Base is the average number of terminals that generated revenue on a service only basis. Customer Gross Win per unit per day is the average per unit cash generated across all Gaming terminals in which the Company takes a participation revenue share a cro ss all territories in the period, defined as the difference between the amounts staked less winnings to players divided by the Average Installed Base i n t he period, then divided by the number of days in the period. Customer Net Win per unit per day is Customer Gross Win per unit per day after giving effect to the deduction of gaming taxes. Inspired Blended Participation Rate is the Company’s average revenue share percentage across all participation terminals where revenue is earned on a participati on basis, weighted by Customer Net Win per unit per day. Inspired Fixed Rental Revenue per Gaming Machine per week is the Company’s average fixed rental amount across all fixed rental terminals where revenue is generated on a fixed fee basis, per unit per week. Inspired Service Rental Revenue per Gaming Machine per week is the Company’s average service rental amount across all service only rental terminals where revenue is generated on a servi ce only fixed fee basis, per unit per week. Gaming Long term license amortization is the upfront license fee per terminal which is then spread over the life of the terminal Participation Revenue is the product of the Participation - Average Installed Base, the Customer Net Win per unit per day, the number of days in the peri od, and the Inspired Blended Participation Rate. Number of Machine sales is the number of terminals sold during the period. Average selling price per terminal is the total revenue in GBP of the Gaming terminals sold divided by the number of Machine sales. 28

 

 

Glossary of Terms continued VIRTUAL SPORTS Total Revenue (£m) represents total revenue for the Virtual Sports segment, including recurring and upfront service revenue. Total Revenue (£m) – Retail consists of revenue earned through players wagering at Virtual Sports venues. Total Revenue (£m) – Scheduled Online Virtuals consists of revenue earned through players wagering on Virtual Sports online. INTERACTIVE No. of Live Customers at the end of the period and Average No. of Live Customers represent the number of customers from which there is Interactive revenue at the end of the period and the average number of customers from which there is Interactive revenue during the period, respectively. Total Revenue (£m) represents total revenue for the Interactive segment, including recurring and upfront service revenue. LEISURE End of period installed base and Average installed base Gaming Machines represent the number of gaming machines installed (excluding Leisure park machines) that are Category B and Category C from which there is participation or rental revenue at the end of the period or as an average over the period. End of period installed base and Average installed base Other represent the number of all other category machines installed (excluding Leisure park machines) from which there is participation or rental revenue at the end of the period or as an average over the period. Revenue per machine unit per week represents the average weekly participation or rental revenue recognized during the period. NON - GAAP FINANCIAL MEASURES Pro Forma financial information is intended to illustrate the combined impact of the Company’s Acquired Businesses by showing how the s pec ific transaction might have affected historical financial statements had the acquisition occurred at the beginning of the acquirer’s most recently completed fisca l y ear. Adjusted EBITDA is defined as net loss excluding depreciation and amortization, interest expense, interest income and income tax expense, and ot her additional exclusions and adjustments. Such additional excluded amounts include stock - based compensation U.S. GAAP charges where the associated liability is expected to be settled in stock, and changes in the value of earnout liabilities and income and expenditure in relation to legacy portions of the business (being those porti ons where trading no longer occurs) including closed defined benefit pension schemes. Additional adjustments are made for items considered outside the normal course of business, inc luding (1) restructuring costs, which include charges attributable to employee severance, management changes, restructuring, dual running costs, costs related to facility clo sures and integration costs, (2) merger and acquisition costs and (3) gains or losses not in the ordinary course of business. This does not include any adjustments related to COVID - 19. 29

 

 

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