Inspired Entertainment, Inc. (NASDAQ:INSE) Q2 2019 Earnings Conference Call - Final Transcript

Aug 12, 2019 • 11:00 am ET

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Inspired Entertainment, Inc. (NASDAQ:INSE) Q2 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning, and welcome to the Inspired Entertainment Second Quarter 2019 Conference Call. [Operator Instructions] Please note, 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 second quarter 2019 earnings press release, which is available in the Investors section of the company's website at www.inseinc.com, that's www.inseinc.com. This 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 securities laws and the 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 like to turn the conference over to Mr. Lorne Weil, the company's Executive Chairman. Mr. Weil, please go ahead.

Executive
A. Lorne Weil

Thank you, operator. Good morning, everyone, and thank you for joining our second quarter earnings call. Here with me this morning, as usual, are Brooks Pierce, President and CEO; Stewart Baker, our CFO; and Dan Silvers, our Chief Strategy Officer.

By now, I assume you've had a chance to read the press release. In that press release, we referred to the three-pronged strategy that we're in the process of implementing mitigation of the Triennial impact to a level of $2.5 million a quarter or less, generation of new business in our VLT, Virtual Sports and Interactive business to fully offset the impact of the Triennial by the end of this year or beginning of next, and the completion and the integration of the Novomatic UK Gaming Technology Group acquisition.

In my own remarks, I'd like to touch on each of these and then hand it off to Brooks to talk in more detail about our business development initiatives and, in particular, our progress in North America. Stewart will cover the financials and any deal related discussion at the end of our prepared remarks.

Our second quarter results were, of course, negatively impacted by the reduction in the maximum B2 stakes to GBP 2 in the UK LBO market, which was implemented on April 1, 2019. We believe this regulatory change caused a decrease of approximately $5.5 million in revenue and $4 million in adjusted EBITDA on a constant currency basis. Excluding the impact of the Triennial, we think the second quarter would have been very much in line with the 2019 first quarter and due to the impact of one-time sales, a topic that I'll return to in a couple of minutes, the second quarter would've been somewhat behind the second quarter of last year.

As we have discussed previously, we think it will take until the end of the year fourth quarter 2019 or first quarter 2020 for the full mitigation plan to be implemented. As expected, we have borne the full impact maybe even more than the