Inspired Entertainment, Inc. (NASDAQ:INSE) Q4 2018 Earnings Conference Call - Final Transcript

Dec 10, 2018 • 09:00 am ET

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Inspired Entertainment, Inc. (NASDAQ:INSE) Q4 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning, everyone, and welcome to the Inspired Entertainment Fourth Quarter and Fiscal Year-End 2018 Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. Please note, today's event is being recorded.

(Forward-Looking Cautionary Statements) In addition, please note that the company will discuss both GAAP and non-GAAP financial measures. A reconciliation is included in the earnings press release. With that completed, I would now like to turn the conference over to Lorne Weil, the company's Executive Chairman. Mr. Weil, please go ahead, sir.

Executive
Lorne Weil

Thank you, operator. Good morning, everyone, and thanks for joining our year-end conference call. As I think, you know we had planned to have the call last Wednesday. But then the markets were closed because of President Bush's funeral. So we decided to change the date.

Joining me today in the UK are Stewart Baker, our CFO and Brooks Pierce, President and COO, and here with me in New York, is Daniel Silvers, our Chief Strategy Officer. As described in the press release we were quite pleased with our results for fiscal 2018.

Revenue and adjusted EBITDA were $141 million and $54 million, up 15% and 33% respectively from fiscal 2017. Perhaps most importantly, adjusted EBITDA margin expanded by 475 basis points, driven by a number of significant operating and strategic factors that we could talk more about in Q&A if anyone's interested. Adjusted EBITDA of $54 million was within our guidance range, but as we anticipated in our third quarter conference call towards the lower end, largely related to the somewhat slower than expected launch of some new revenue sources. As of now, many of these largely in the virtual sports and interactive markets are solidly on-stream. In a moment I'll discuss the interactive opportunity in particular in a little more detail.

Fourth quarter adjusted EBITDA of $16 million was 17% of last year, but 37% ahead when the effects of significant hardware sales to Colombia are excluded, illustrating both the momentum and profitability inherent in our recurring revenue model. Looking at quarter-to-quarter progress, and this is very important for number of reasons, our annualized adjusted EBITDA was approximately $40 million in the first quarter of fiscal 2018, $50 million in the second, $60 million in the third and $65 million in the fourth. Reflecting on the ever-present issue of the UK Triennial Review, I think it's important to mention that little if any of the quarter-to-quarter growth in adjusted EBITDA that we experienced in fiscal 2018 was attributable to the UK FOBT segment of our business, although there were of course ups and downs from one customer to another.

As I imagine, most of you are aware, was recently announced that the implementation of the GBP2 maximum stake, occasioned by the Triennial Review was accelerated from October 2019 to April 2019. In the intermediate term this change should have no effect on our previously provided commentary which estimated an annual steady state adjusted