Inspired Entertainment, Inc. (NASDAQ:INSE) Q1 2019 Earnings Conference Call Transcript

Feb 11, 2019 • 09:30 am ET

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Inspired Entertainment, Inc. (NASDAQ:INSE) Q1 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning, everyone, and welcome to the Inspired Entertainment Results Conference Call for the Three-Months Ended December 31st, 2018. All participants will be in a listen-only mode. (Operator Instructions) Please note that today's event is being recorded.

I'll begin today's conference call by referring you to the Company's Safe Harbor statement that appears in the earnings press release, which is available in the Investor section of the Company's website at www.inseinc.com.

The Safe Harbor statement also applies to today's conference call, as the Company's management will be making certain statements that will be considered forward-looking under the securities laws and rules of the SEC. These statements are based on management's current expectations or beliefs and are subject to risks, uncertainties and changes in circumstances. 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 call over to Lorne Weil, the Company's Executive Chairman. Mr. Weil, please go ahead.

Executive
A. Lorne Weil

Thank you, operator. Good morning, and thank you all for joining the conference call for our transitional quarter-ended December 31st, transitional in the sense that, as I think most of you know , we've changed our accounting year from fiscal year that most recently ended in September 30th, 2018, now to a calendar year that began on January 1st, 2019. And we believe there are number of benefits to doing this.

It was not only a transitional quarter, but in some respects an aberrational quarter too, there was modest growth in revenue, somewhat stronger growth in adjusted EBITDA, 2.3% and 11.3%, respectively in constant currency. But we didn't see the continued acceleration in overall performance that we have been seeing for several quarters, most recently, and which as we expected, and fortunately we see resuming strongly now in the first quarter of 2019, which is about half over.

We were pleased with the continuing strengthening in adjusted EBITDA margins, which went from 31.3% last year to 34.1% this year, and this is a trend that we see continuing, as the mix of the business changes in ways that we've discussed in detail in the past.

The quarter was aberrational in a few respects. One-time hardware and software license sales declined significantly from previous levels, although, our backlog now has been building very nicely and supports, encouraging strengthening going forward. And while recurring revenues grew by 9% on a constant currency basis, considerably greater than the overall growth rate of 2.3% in revenue. Some of our growth initiatives in the Virtual Sports and Interactive parts of our business, areas of our business that have the highest margin and highest return on capital were somewhat slower to develop in the quarter than we had expected, but here again, we're seeing a resumption in progress as we move forward through the first quarter of 2019, as Brooks Pierce will discuss in a couple of minutes.

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