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Inspired Reports First Quarter 2019 Results

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Inspired Reports First Quarter 2019 Results
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  • Total Revenue for the First Quarter of $33.7 Million
  • Functional Currency1 Virtual Sports Revenue Increased 11.0% Year-over-Year
  • Net Operating Loss Narrows to $0.7 Million from $0.9 Million in the Prior Year
  • Functional Currency Adjusted EBITDA Growth of 18.5% Year-over-Year
  • Adjusted EBITDA2 Increased to $13.7 Million from $12.4 Million in the Prior Year
  • Adjusted EBITDA Margin3 Increased to 40.7% from 36.6% in the Prior Year
  • Cash Generation of $3.0 Million During the Quarter
  • North American Video Lottery Terminal (“VLT”) Business Expected to Commence Shipments in the Fourth Quarter 2019

Inspired Entertainment, Inc. reported financial results for the three-month period ended March 31, 2019.

Total Revenue for the three months ended March 31, 2019 was $33.7 million, a year-over-year decrease of $3.8 million, on a reported basis, driven mainly by adverse currency movements of $2.5 million, as well as a reduction in non-recurring software licenses and nil margin sales of hardware.  Excluding these sales (software licenses of $1.3 million and nil margin hardware of $3.6 million), revenue increased $3.6 million, or 11.0%, on a functional currency (£) basis, and $1.1 million, or 3.3%, on a reported basis.

Adjusted EBITDA for the three months ended March 31, 2019 was $13.7 million, a year-over-year increase of 18.5% on a functional currency basis and 10.4% on a reported basis.  Adjusted EBITDA margin increased to 40.7% from 36.6% in the prior year, primarily as a result of significant overhead savings, more profitable revenue mix, and more effective business processes.

“Our results for the quarter were in line with our guidance, driven by solid participation revenue, growth in Virtual Sports, and reduced overhead expenses,” said Lorne Weil, Executive Chairman of Inspired Entertainment.  “Most importantly, our high-margin Virtual Sports business, which includes Interactive, delivered a great underlying performance, increasing 11.0% on a functional currency basis.”

Mr. Weil continued, “As we move into the second quarter, we have begun to see the impact of the April implementation of the new £2 stake limit in the UK.  I applaud the efforts of our UK team, which has successfully remodeled and converted our games and software to satisfy the new requirements on an accelerated timetable.  Results to date, albeit only one month, are generally in line with what we were expecting and we continue to believe the projected impact of the reduction in the maximum FOBT betting stake on our Adjusted EBITDA to be approximately $10 million to $11 million annually on a steady state basis.  We remain optimistic about our strategy to mitigate a portion of the potential impact.  However, with only one month of data, we are not yet prepared to predict either player adoption rates or the acceleration of the mitigants with greater specificity.”

“We continue to see strong growth in our Virtual Sports and Interactive businesses and we are extremely focused and encouraged by our business development activity across a number of key territories,” concluded Mr. Weil.  “In particular we have a unique opportunity and a clear strategy to build our VLT, Virtual Sports and Interactive businesses in North America and we expect to see more meaningful results starting in the fourth quarter of 2019 when we plan to commence shipments of VLTs into the market.”

Summary of Consolidated First Quarter 2019 Financial Results (unaudited)

















Functional





Qtr Ended



Currency

Currency





March 31

Change

Movement

Growth





2019

2018

(%)

2019

(%)

(In $ millions, except per share figures)













GAAP Measures:













Revenue



$      33.7

$       37.5

-10.1%

$        (2.5)

-3.5%

Net Operating Loss



$      (0.7)

$       (0.9)

NM2

$         0.1

NM

Net (loss)



$      (5.0)

$       (0.5)

NM

$         0.4

NM

Net (loss) per diluted share



$    (0.24)

$     (0.02)

NM





Non-GAAP Measures:













Adjusted Revenue1



$      33.7

$       33.8

-0.5%

$        (2.5)

6.8%

Adjusted EBITDA1



$      13.7

$       12.4

10.4%

$        (1.0)

18.5%

1Reconciliation to GAAP shown below.

2Percentage change is not meaningful.













Recent Highlights

Server Based Gaming (“SBG”)

  • End of Period Installed Base Increased 11.6% Year Over Year –Installed terminal base at the end of the period increased to 35,286 due to the continued terminal rollout in Greece, growth from new contract awards in the UK Licensed Betting Office (“LBO”) estate, and further machine growth in Italy.
  • Total OPAP Terminals Installed Increased to Over 7,300 – The roll out into Greece continued during the period, with an additional 500 terminals having been deployed on site and live as of March 31, 2019. The performance of our Greek terminals continues to be strong compared to those of other suppliers.
  • Growth in Italy Estate –Customer Gross Win per unit per day in Italy increased by 4.2% (in Euros) across all customers compared to the same period last year, due to continued improvement in games and account management. However, an increase in tax on revenue reduced Net Win per unit per day by 22%.
  • 125 Self Service Betting Terminals (“SSBTs”) sold and deployed in the UK – In addition to the hardware sale margin, these terminals also generate a recurring service fee.
  • 50 “Flex” B3 Terminals Sold to a Major Customer in the UK – Terminals were installed towards the end of the first quarter and will result in a recurring service fee and content revenue share to Inspired.
  • Over 100 “Sabre Hydra” Terminals Sold – These Electronic Table Games were sold to a major casino customer in the UK and are expected to be installed during the early half of 2019.

Virtual Sports

  • Additional Virtual Sports Operators – Number of Virtual Sports operators increased to 101 live worldwide (as of March 31, 2019), up 7.4% from the same time last year.
  • Launched Two Streams of Rush Football 2® with BetStars – Both scheduled and on-demand Virtual Sports launched online with BetStars, the international online sports betting brand of The Stars Group Inc., one of the world’s largest online gaming operators.
  • Launched Rush Football 2 with the Moroccan Lottery – Virtual Sports went live in Morocco via the Intralot platform in approximately 200 venues.
  • Inspired Named Virtual Supplier of the Year – The Gaming International Awards at ICE 2019 recognized Inspired as the Virtual Supplier of the Year.

Interactive

  • Number of Live Interactive Customers Increased to 35 – Two new Interactive customers launched during the quarter via the NYX platform.
  • Launched Proprietary Virtual Connect Platform with Genting Online – Virtual Horses, Dogs and Football went live in the UK on Genting’s online platform.
  • Renewed Bet365 Contract – Inspired to continue to provide Virtual Sports online to Bet365 for a further three years.
  • Signed Contract with BCLC to Provide Virtual Sports – New Interactive contract with British Columbia Lottery Corporation (“BCLC”) to supply Virtual Sports on demand, slots and table content.

“Now that the implementation of the £2 maximum stake in the UK is behind us, we are focused on mitigation efforts, including further streamlining of our organization, to more effectively align our resources.  We began this process proactively last quarter and I’m happy to report that we realized over 400 basis points of year-over-year improvement to our Adjusted EBITDA margin in the quarter,” said Stewart Baker, Executive Vice President and Chief Financial Officer of Inspired.  “We have also seen a decrease in our capital expenditures due to lower levels of machine spending and software development, leading to positive cash flow in the quarter.”

Management Outlook and Commentary

As previously announced, the implementation of the reduction in the maximum FOBT betting stake mandated by the Triennial Review took place on April 1, 2019.  Management has made no changes to the outlook previously presented on the projected impact on Adjusted EBITDA to be approximately $10 million to $11 million annually on a steady state basis, assuming exchange rates remain stable.  Outside of the UK FOBT business, management anticipates growth across its business units and more meaningful contributions from its North American business in the fourth quarter of 2019.

Overview of First Quarter Results

Total Revenue for the three months ended March 31, 2019 was $33.7 million on a reported basis.  Revenue for the period decreased 3.5% year-over-year on a functional currency (£) basis, driven mainly by a reduction in SBG nil margin hardware and software license sales.

SBG revenue decreased by $2.4 million on a functional currency, or 8.5% at a constant rate, comprised of a reduction in service revenue of $1.2 million and reduction in hardware sales of $1.2 million on a functional currency at constant rate basis.  Total SBG Recurring Revenue increased 1.1% on a functional currency basis.

Virtual Sports revenue increased by $1.1 million on a functional currency basis, or 11.0% at a constant rate, due to growth in the UK and growth in new customer launches in the rest of the world, as well as one-off income from historic recurring revenues previously unreported to the Company. Total Virtual Sports Recurring Revenue increased 16.7% on a functional currency basis.

Adjusted Revenue, revenue excluding nil margin sales, for the three months ended March 31, 2019 was relatively flat year-over-year on a reported basis and up 6.8% on a functional currency basis.

Adjusted EBITDA for the three months ended March 31, 2019 was $13.7 million, a year-over-year increase of 18.5% on a functional currency (£) basis and an increase of 10.4% on a reported basis.  Adjusted EBITDA margin increased to 40.7%, from 36.6% in the prior year, primarily as a result of overhead savings due to lower staff related costs from group restructuring.

SG&A expenses decreased by $0.9 million, or 5.6%, on a reported basis, to $14.7 million. This decrease was driven by staff related cost savings of $1.5 million.  These savings were offset by an increase in the costs of group restructure of $1.1 million (removed from Adjusted EBITDA) and a decrease in net labor capitalization and manufacturing recoveries of $0.7 million due to mix of projects and lower factory throughput as a result of fewer machines being built in the quarter.

On a reported basis, net operating result improved from a loss of $0.9 million in the prior period to a loss of $0.7 million, mainly due to savings in cost of sales and depreciation and amortization, partly offset by a decrease in revenue and increases in stock-based compensation, acquisition related transaction and SG&A expenses.

For the three months ended March 31, 2019 the Company reported a change in fair value of earnout liability of $2.3 million.  In the prior period, due to changes in share price, the corresponding figure was a $3.8 million gain, a $6.0 million difference.  On March 25, 2019 the shares relating to the earnout liability were issued and will no longer represent a liability to the Company.

 

About Inspired Entertainment, Inc.

Inspired is a global games technology company, supplying Virtual Sports, Mobile Gaming and Server Based Gaming systems with associated terminals and digital content to regulated lottery, betting and gaming operators around the world. Inspired currently operates approximately 30,000 digital gaming terminals and supplies its Virtual Sports products through more than 40,000 retail channels and over 100 websites, in approximately 35 gaming jurisdictions worldwide. Inspired employs more than 650 employees in the UK and elsewhere, developing and operating digital games and networks. Additional information can be found at www.inseinc.com.

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The untapped potential of SEO in iGaming

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The untapped potential of SEO in iGaming
Reading Time: 4 minutes

 

With Filip Podborschi, SEO Strategist at The Unit

From our experience in SEO in igaming, there are a number of areas where we see room for improvement and common mistakes which can be rectified. Let’s take a look at these facets of SEO one by one, with our best tips for how to make sure you can maximise your search ranking and drive more volume to your website.

Keyword strategy

The first thing operators should do in this area is identify the best performing keywords that result in higher search volumes on each post. It’s pages that rank rather than websites, so you need a different search intent on each page, and that increases the list of keywords you’re ranking for.

The way to do this is by checking the search volume, and then implementing the keywords according to SEO best practices, which means having primary and secondary keywords and adjusting repetition accordingly.

The common mistake we see here is that companies don’t go into enough depth when conducting competitive analysis; especially when they’re new to the industry. Identifying what exactly your competitors are doing regarding SEO is harder than it looks, and it’s an area where marketing agencies tend to be quite lazy. They may use some tools which will show the standout competitors by algorithm, but they won’t crawl for long enough to ascertain what services they offer and provide a comparison with their client’s service. You need to find out which sites could be ranking better than you, and why.

We also see issues with the ranking of sites based on the user’s location. For example, you may have a website that ranks well in Canada, and when I as a user based in Romania search for that category, I’m not going to get the same list of results as a user who is based in Canada. The best thing to do is use a VPN to gauge how your websites are ranking and performing with your specific audience in your domestic geographical area.

SEO tags optimisation

With SEO tags, which are essentially the page title and description you see on the search engine results page, the page title has the highest ranking power. Google will first check the page title to get an idea of what the page is about and what searches it is relevant for. It will then check the H1 and the content, and it may look through the H2 as well.

A common issue here is some websites have templated SEO tags, especially for the inner pages, so it’s more of a formula within the code to generate a random structure. It is very obvious they are templated and that the operator doesn’t really care about the length.

The key thing with tags is to make sure your pages have titles that don’t exceed the ideal length. This is a big mistake if you get this wrong, and it is very important to optimise your titles. SEO tags can be optimised around keywords. Once doing so, it is very important to prioritise your main pages. If you have 10 pages as part of the main menu, then you should optimise those, before optimising the inner pages.

Identifying duplicate pages is also important, as well as making sure meta inscriptions include CTAs; those inscriptions don’t impact rankings directly, but they do impact the CTR. You have to do that without being too spammy though, so it’s advisable to avoid words like ‘sale’ or calls to “CLICK HERE NOW”.

Headings

Keywords must be implemented in headings; especially in H1s and H2s. Make sure not to overuse H2s and keep them optimised for content value.

If we structure the ranking power of the elements that are bringing results, we would optimise with the page title first, H1 second, content third and H2s fourth. It is better to have five H2s with three of them being optimised around the same search intent that is highlighted in H1, than it is to have 3/10 optimised around keywords. Too many H2s will just confuse Google about your search intent. You can have similar search intent as with H1s, and also have H3s and H4s to highlight value to the reader.

Interlinking strategy

Interlinking between pages is often missing. I’m not talking about interlinking from the main menu, as every page has the ability for you to go back, but I’m talking about interlinking within content, which Google considers to be much more important, because it cares about the relevancy. Google will consider pages with high-quality content as a higher authority page.

Our advice would be to implement anchor links on both branded and non-branded keywords. You should make sure there is an anchor link to the parent page. For example, domain.com/blog is a parent for domain.com/blog/igaming-seo.

It’s very important to have child pages linking to the parent page, passing authority to the parent page. Having that interlinked structure will pass more authority to that parent page.

To explain that in a little more detail, let’s say you have a sportsbook page with 10 more child pages that reflect a particular set of sports. Having each of those 10 pages optimised so they have some authority and linking them to the parent page would pass authority to that parent page. Parent pages usually have a keyword with higher search volume, and passing as much authority as you can to the child page is very important. Too often websites lack content on child pages.

The future of SEO and experience needed

Going forward, we see AI as one of the most significant developments in SEO. At this point, we are not able to rank user engagement in AI, and it is important to keep yourself updated with how Google is reacting to this.

Google in time may provide additional options if you want to be eligible for a particular set of results in that environment. Keep an eye on what features it will offer and the types of websites. Google may consider implementing specific types of results for betting, such as displaying odds or a comparison of odds from three or four sites at the same time.

With all these issues, it is vital to have the relevant experience on board, particularly when it comes to the skill of conducting very in-depth competitor analysis, and this is something The Unit can provide. Conducting competitor analysis is something we have done across several industries, and not just in igaming. The main strength you can have with SEO is to know your competitors inside out, and those skills can be adjusted based on your needs.

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IGT Expands Footprint in Spain’s ‘Salones’ Sector with Launch of New Multi-level Progressive Theme

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International Game Technology PLC announced that its latest multi-level progressive (MLP) game, Diamond Mania, has launched in Spain’s Amusement with Prize (AWP) “salones” sector. Diamond Mania will follow the success of IGT’s Magic Fortune Link AWP game in Spain, a high-performing title that recently surpassed a 1000-unit deployment milestone.

“IGT is committed to growing its footprint in Spain by supplying researched-backed, market-attuned games that meet the player preferences in the region. Building on the successful deployment of IGT’s debut title for the salones sector, Magic Fortune Link, we are excited to expand our offering to include Diamond Mania, a unique multi-game jackpot that can help operators achieve excellent results and diversify their gaming floors,” said Maria Aldana, IGT Director of Sales Western Europe and Africa.

Specifically adapted for the salones market, Diamond Mania features four lively base game themes: Samurai Takeo, Majestic Stallion, Ramosis Treasures and Wish Mistress. Featuring proven mechanics for a highly engaging experience for players, Diamond Mania offers three special bonuses, a reel boost, a prize boost and a jackpot bonus, which can combine to activate the super games and mega games features and ultimately lead to the chance to win one of the four progressive jackpots.

Diamond Mania is available on the BINTIA 27-inch multi-game cabinet, which offers dual HD monitors and a topper option for casino-like styling. It features an ergonomic design, programmable LED lighting, vivid high-resolution graphics, an immersive sound system and can be configured with the TITO function.

The game will be exclusively distributed through Orenes Grupo, Spain’s salones sector market leader in operations and gaming machine distribution. Later this year, IGT plans to introduce Treasure Box, the Company’s third MLP developed specifically for Spain’s salones sector, which represents approximately 3000 gaming and bingo halls.

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Sportradar Appoints Behshad Behzadi as the Company’s Chief Technology Officer and Chief Artificial Intelligence Officer

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Sportradar Group AG announced that Behshad Behzadi has been named Chief Technology Officer and Chief Artificial Intelligence Officer of the Company (CTO and CAIO), effective May 1.

As Sportradar’s CTO and CAIO, Behzadi will be based in the organisation’s headquarters in Switzerland and report directly to Chief Executive Officer, Carsten Koerl. Working collaboratively across the organisation, Behzadi will drive the usage and adoption of AI and cutting-edge technology to enhance its product offerings and roadmap to deliver hyper-personalised experiences for sports fans. Additionally, his extensive experience in leading initiatives aimed at improving internal operational efficiency will help optimise processes and drive innovation across the business. Sportradar has the largest global coverage of sports data, fan insights and betting liquidity. The usage of cutting-edge AI will help to drive the Company’s future efficiency and can create significant value for clients and stakeholders.

Koerl said: “We are proud to welcome Behshad, a world-renowned leader in harnessing generative AI and other advanced technologies, who marries a unique blend of technical expertise and business acumen. His proven track record in developing and commercializing product strategies to accelerate growth and innovation, as well as spearheading initiatives aimed at improving internal operational efficiency, will bolster our leadership position, keeping Sportradar at the forefront of technological advancement.”

With more than 20 years of experience, Behzadi is a distinguished computer scientist and recognised global technology leader with expertise in algorithms, search ranking, natural language processing, speech recognition, machine learning and generative AI. Behzadi joined Google Zurich in 2006 and has played a key role in Google’s AI-first strategy as co-founder of Google Assistant, Google Lens, Google Smart Display and the Next Gen Assistant, a breakthrough in mobile assistant technology with on-device Machine Learning. Most recently, he led Google Cloud’s Conversational AI and applied Generative AI initiative focusing on applying the latest AI advancements to reimagine and automate customer services and operations for large enterprises. Behzadi earned a PhD in Bioinformatics from Ecole Polytechnique in Paris and did postdoctoral research at the Max Planck Institute for Molecular Genetics.

Behzadi said: “Sportradar is an exceptional company and category leader operating at the global intersection of sports, technology and digital content. I am very excited to join an organization that pushes the boundaries on technology and puts a premium on innovation. I look forward to working alongside Carsten, the rest of the executive management team and their talented group of creators to continue Sportradar’s history of innovation as the Company enters its next exciting chapter.”

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