The financial performance of Inspired Entertainment for the fiscal year 2023 was marked by a significant increase in revenue, reaching $323 million (£259.1 million/€303.6 million). This growth was primarily driven by the robust expansion of its interactive division.
Inspired released its financial results for the fourth quarter and the entire fiscal year on Monday, April 15th, considerably later than originally anticipated. This delay was attributed to a warning issued by Nasdaq, citing the company’s failure to submit its filings in a timely manner.
Nasdaq had previously issued a cautionary notice to Inspired regarding the delay in releasing its third-quarter results, emphasizing that this delay violated its established regulations.
Inspired attributed the recent delay to a thorough review of its accounting practices during the fourth quarter. The company announced its intention to revise previously published financial reports after uncovering discrepancies in its financial statements dating back to January 1, 2021.
iGB has reached out to Inspired seeking further clarification on the revised financial statements.
Inspired’s Revenue for 2023
Based on the revised financial reports, revenue exhibited a 14.7% increase compared to the fiscal year 2022, which recorded revenue of $281.6 million. Product sales demonstrated a substantial year-over-year growth of 86.1%, rising from $33.2 million to $61.8 million. Concurrently, service revenue experienced an increase from $248.4 million to $261.2 million.
Simultaneously, the company’s total adjusted EBITDA experienced a slight upward trend, rising from $99 million in 2022 to $100.5 million.
In spite of this, Inspired’s bottom line for 2023 was $7.6 million, a decrease of 63.1% from $20.6 million in 2022, despite higher sales.
This was mainly due to escalating costs, with marketing, general and administrative expenses rising considerably from $101.9 million in 2022 to $115.5 million in 2023. The cost of products sold also jumped from $21.9 million to $52.6 million.
Earnings per share for the 2023 fiscal year fell 63.0% year-on-year, dropping from $0.73 to $0.27, while operating income also decreased from $46 million to $39.9 million.
Furthermore, adjusted EBITDA margin was 31%, compared to 35% the previous year. In a conference call with investors following the release of the results, company president and CEO Brooks Pierce stated the company is aiming for an adjusted EBITDA margin of 40%.
With 2023 revenue and EBITDA hitting record levels, Inspired’s executive chairman, Lorne Weil, said the company will continue on a path of growth in the years to come.
“As the worldwide online betting and gaming environment continues to change, with new markets opening and consumer acceptance increasing, we see potential for continued expansion,” Weil stated.
“We are enthusiastic about the opportunities ahead as we aim to take advantage of the expanding global online betting and gaming market.”
Inspired’s interactive growth has alleviated worries about stagnation.
Inspireds digital division experienced a notable surge in earnings, hitting $27.9 million, a 35.4% jump from the $20.6 million recorded in the previous fiscal year. This growth occurred despite the fact that its wagering, simulated sports, and entertainment divisions only witnessed a 1%, 4%, and 1% increase in revenue year-on-year, respectively.
The digital division’s adjusted EBITDA also saw a substantial increase, climbing from $11.3 million to $15.4 million. Meanwhile, wagering’s adjusted EBITDA saw a modest 0.7% increase to $44 million, while simulated sports’ adjusted EBITDA grew by a slightly better 6.2%, reaching $47.7 million from $44.9 million.
The digital division particularly excelled in the final quarter, with earnings reaching $8 million, representing a 48.1% year-on-year increase. Its adjusted EBITDA also skyrocketed from $2.8 million last year to $4 million.
Weil expressed his gratitude for the company’s digital division’s performance in the final quarter, stating, “Our final quarter results concluded a strong year, driven by our successful strategic focus on expanding high-margin digital verticals, coupled with steady growth in our land-based operations.”
“Our digital business continued to be led by our digital division in the final quarter, with revenue and adjusted EBITDA increasing by approximately 41% and 39% year-on-year at constant currency, as we continue to expand our reach through new customer acquisition and benefit from growth in our existing customer base.”
Inspireds final quarter cost increases were a notable trend. While Inspireds final quarter revenue increased by 6.0% to $81.2 million from $76 million.
In the final three months of the fiscal year 2023, Inspired’s operational income declined to $9.3 million from $11.6 million in the preceding year, primarily due to elevated expenses. This contrasts with $6 million in the equivalent period a year ago.
The cost of products sold for the quarter rose slightly from $10.7 million to $10.8 million, while service costs surged significantly from $16.5 million to $18.2 million. The most substantial increase was in sales, general and administrative expenditures, which climbed 18.0% year-on-year from $27.8 million last year to $32.8 million.
Inspired’s fourth-quarter results also incorporated $5 million in costs associated with the revision of its financial statements. For the entire fiscal year 2023, Inspired’s enterprise segment reported a loss of $77.9 million and an adjusted EBITDA loss of $26 million.
Furthermore, other total net expenses rose from $6.4 million to $7.1 million, while Inspired paid $2.2 million in income taxes in the final three months, resulting in a net profit of zero for Inspired in the fourth quarter.
Despite gaming revenue rising only $0.7 million year-on-year in fiscal year 2023, gaming performance remained strong and continues to be crucial for Inspired. The segment generated total revenue of $111.3 million, representing 39.6% of Inspired’s total annual revenue, and an adjusted EBITDA of $43.7 million, representing 34.1% of the company’s fiscal year 2023 figures.
Virtual sports also performed well, with the segment generating total revenue of $54.2 million in fiscal year 2023, representing 19.2% of the company’s total annual revenue. It also outperformed gaming in terms of its contribution to adjusted EBITDA, with the industry accounting for 40.4% of the full-year figures.
The Interactive division demonstrated strong performance during the 2022 fiscal year. However, it only contributed a small portion to Inspired’s overall income, representing 7.3% of total revenue and 9.6% of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the year.
**Inspired’s Future Prospects**
It’s crucial to recognize that Inspired maintains a policy of refraining from providing financial projections. Nevertheless, during the investor conference call, Weil indicated that the company was content with the consensus estimate for the full year, which was slightly elevated compared to the fiscal 2023 figures.
Weil also expressed his anticipation that fiscal 2024 performance would be heavily concentrated towards the year’s end, with virtual sports experiencing a rebound following a period of decline. He attributed this expectation to the time required for the company’s strategic initiatives to fully materialize.
Furthermore, Weil acknowledged that “ongoing irregularities” stemming from the accounting restatement, coupled with a backlog of product sales at the year’s conclusion, could potentially influence Inspired’s fiscal 2024 performance.