Inspired(INSE) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The first quarter adjusted EBITDA was approximately $18.5 million, representing a growth of nearly 20% year-over-year despite some unexpected challenges [3][4] - The company experienced a loss of about $1 million in EBITDA due to the reclassification of lease revenue [4] Business Line Data and Key Metrics Changes - The interactive business saw revenue and EBITDA growth of 497% and 4979% respectively compared to Q1 2024, with margins expanding from 54% to 64% [7][12] - The leisure business was impacted by the timing of the UK Easter holiday, which shifted from Q1 to Q2, affecting performance metrics [4][22] - The virtual sports business showed a year-over-year decline in EBITDA but is expected to stabilize and return to growth by Q3 [10][11] Market Data and Key Metrics Changes - The US market for the interactive business grew by 90%, significantly outpacing the underlying market growth of about 20% [8][12] - The company is expanding its presence in North America and abroad, with new game launches planned in West Virginia and South Africa [13][20] Company Strategy and Development Direction - The company plans to divest its Holiday Park business to reduce capital intensity and focus on capital-light operations in retail bedding and digital businesses [5][6] - The strategy includes minimizing capital expenditures to around $25 million annually, primarily for content-related expenses [7] - The company aims to achieve EBITDA margins comfortably over 40% following the divestiture and restructuring of its pub business [32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the stabilization of the virtual sports business and the overall growth trajectory of the interactive segment [10][11] - The company is well-positioned to benefit from new state revenue requirements in the US, particularly in states like Michigan and New Jersey [9][10] - Management highlighted the importance of the hybrid dealer product category, which is expected to scale rapidly and contribute significantly to future growth [14][15] Other Important Information - The company successfully negotiated refinancing of existing bonds, providing greater flexibility and reducing capital costs [5][44] - The company is actively pursuing opportunities in the lottery space, with plans to launch a lottery game in Virginia [20] Q&A Session Summary Question: Impact of US tariffs on the business - Management indicated that tariffs are not a significant issue, with potential benefits from selling into Canadian markets [24][26] Question: Path to achieving 40% EBITDA margin - Management expressed confidence that the divestiture and restructuring would ensure EBITDA margins above 40% [32] Question: Stabilization of virtual sports business - Management acknowledged volatility but noted that stabilization trends are being observed, with expectations for growth moving forward [41][42] Question: Details on new debt refinancing terms - Management provided insights into the refinancing objectives, including minimizing call protection and achieving a favorable floating rate [43][44] Question: Deleveraging strategy and market conditions - Management confirmed that the new debt terms incentivize deleveraging, which aligns with the company's growth strategy in digital businesses [49][50] Question: Performance in international markets - Management reported mixed results in international markets, with growth in the UK and stabilization in Greece and Italy [61][63]