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What changed in Inspired Entertainment, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Inspired Entertainment, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+344 added−333 removedSource: 10-K (2025-03-26) vs 10-K (2024-04-15)

Top changes in Inspired Entertainment, Inc.'s 2024 10-K

344 paragraphs added · 333 removed · 262 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

106 edited+33 added−18 removed79 unchanged
Biggest changeThe Gambling Commission regularly reviews and revises the LCCP. ● Regulatory returns and reporting of key events: The LCCP requires licensees to submit quarterly returns to the Gambling Commission detailing prescribed operational data.
Biggest changeThe Gambling Commission regularly reviews and revises the LCCP with the most recent proposals expected to come into effect on 28 February 2025 (Financial vulnerability checks) and 1 May 2025 (Improving customer choice on direct marketing). ● Regulatory returns and reporting of key events: The LCCP requires licensees to submit quarterly returns to the Gambling Commission detailing prescribed operational data to ensure licensees are within correct fee categories and also to provide vital information regarding the UK market to enable the UK Gambling Commission to regulate effectively and publish industry statistics.
It supplies products and utilizes our Server Based Gaming (“SBG”) technology to supply gaming content to our customers’ global land-based gaming venues. SBG products offer an extensive portfolio of games through digital terminals. Our games are currently deployed through more than 34,000 digital terminals.
It supplies products and utilizes our Server Based Gaming (“SBG”) technology to supply gaming content to our customers’ global land-based gaming venues. SBG products offer an extensive portfolio of games through digital terminals. Our games are currently deployed through more than 34,000 terminals.
Whilst many of our game launches are omni-channel, we have a focus on building the right game for the right market and take pride in tweaking and modifying the math and themes for the target player.
Whilst many of our game launches are omni-channel, we have a focus on building the right game for the right market and take pride in tweaking modifying the math and themes for the target player.
With our participation-driven business model, our Virtual Sports segment produces approximately 99% of total revenue on a recurring basis under long-term contracts that average four years when entered into and we have historically had a 100% renewal rate over the last three years for contracts that expired.
With our participation-driven business model, our Virtual Sports segment produces approximately 99% of total revenue on a recurring basis under long-term contracts that average three to four years when entered into and we have historically had a 100% renewal rate over the last three years for contracts that expired.
Our technology extends play for existing players and has the capability to reach new player segments. This and other technology help position us for future online real-money gaming opportunities by offering play-for-fun online gaming options in jurisdictions where online real-money gaming may be legalized in the future.
Our technology extends engagement for existing players and has the capability to reach new player segments. This and other technology help position us for future online real-money gaming opportunities by offering play-for-fun online gaming options in jurisdictions where online real-money gaming may be legalized in the future.
We release over 100 games each year onto our own priority gaming system, Interactive Remote Gaming Server (“RGS”) and to our G2S clients around the world in markets such as North America, UK, Greece, Spain, Belgium, Italy, Sweden and more.
We release over 100 games each year onto our own priority gaming system, Interactive Remote Gaming Server (“RGS”) and to our G2S clients around the world in markets such as North America, UK, Brazil, Greece, Spain, Belgium, Italy, Sweden and more.
Accordingly, manufacturers need to obtain a Suitability License Type A1 or A2 (depending on whether the manufacturer provides management services to the operator or not), while importers/distributors need to obtain a Suitability License Type E1 or E2. 11 Gaming Regulation and Changes in Ownership In all of the jurisdictions in which we are subject to gaming regulations, regulators require us to keep them informed as to our ownership structure and composition and, to varying extents and in various circumstances, require us to disclose certain information regarding the persons who directly or indirectly hold our shares.
Accordingly, manufacturers need to obtain a Suitability License Type A1 or A2 (depending on whether the manufacturer provides management services to the operator or not), while importers/distributors need to obtain a Suitability License Type E1 or E2. 11 Gaming Regulation and Changes in Ownership In a number of the jurisdictions in which we are subject to gaming regulations, regulators require us to keep them informed as to our ownership structure and composition and, to varying extents and in various circumstances, require us to disclose certain information regarding the persons who directly or indirectly hold our shares.
Highly Diversified Business Underpinned by Longstanding Customer Relationships We operate in several business segments and geographic locations that provide us a diversified revenue and cash flow stream that has proven to be resilient under various economic environments.
Highly Diversified Business Underpinned by Longstanding Customer Relationships We operate in several business segments and geographic locations that provide a diversified revenue and cash flow stream that has proven to be resilient under various economic environments.
We are licensed or certified (as applicable) by the Gambling Commission in the UK, (the “UK Gambling Commission” or the “Gambling Commission”), and by the Hellenic Gaming Commission in Greece, and registered with L’Agenzia delle dogane e dei Monopoli (“ADM”) in Italy.
We are licensed or certified (as applicable) by the Gambling Commission in the UK, (the “UK Gambling Commission”), the Hellenic Gaming Commission in Greece, and registered with L’Agenzia delle Dogane e dei Monopoli (“ADM”) in Italy.
The system centralization enabled by digital operations offers flexibility to rotate or change games, tailor game availability to time-of-day, target specific player demographics and take advantage of seasonal and themed marketing opportunities. New games often can be phased in without the interim revenue declines often associated with replacing games on traditional slot machines.
The system centralization enabled by digital operations offers flexibility to rotate or change games, tailor game availability to time-of-day, target specific player demographics and take advantage of seasonal and themed marketing opportunities. New games often can be phased in without the interim revenue declines often associated with replacing games on traditional lottery terminals or slot machines.
Commercial arrangements are typically structured as either revenue participations or rental agreements. Our customers in this segment include large pub operators JD Wetherspoons, Stonegate Pub Company, Greene King, Mitchells and Butler, Whitbread Marstons and Admiral Taverns. In the Bingo sector, we supply gaming terminals and services to Buzz Bingo and Mecca.
Commercial arrangements are typically structured as either revenue participation or rental agreements. Our customers in this segment include large pub operators JD Wetherspoons, Stonegate Pub Company, Greene King, Mitchells and Butler, Whitbread Marstons and Admiral Taverns. In the Bingo sector, we supply gaming terminals and services to Buzz Bingo and Mecca.
ITEM 1. BUSINESS. Overview Inspired Entertainment, Inc. (the “Company”, “Inspired”, “we” or “us”) is a global gaming technology company, supplying content, platform and other products and services to online and land-based regulated lottery, betting and gaming operators worldwide through a broad range of distribution channels, predominantly on a business-to-business basis.
ITEM 1. BUSINESS. Overview Inspired Entertainment, Inc. (the “Company”, “Inspired”, “we” or “us”) is a global gaming technology company, supplying content, platform and other products and services to licensed online and land-based lottery, betting and gaming operators worldwide through a broad range of distribution channels, predominantly on a business-to-business basis.
Our interactive content includes a wide range of random number generated casino content from feature-rich bonus games to European-style casino free spins and table games incorporating well-known first and third-party brands including Space Invaders ® , 20p Roulette™, Jagr’s Super Slot™, Super Hot Fruits ® and Reel King Megaways™.
Our interactive content includes a wide range of random number generated casino content from feature-rich bonus games to European-style casino free spins and table games incorporating well-known first and third-party brands including Space Invaders ® , 20p Roulette™, Super Hot Fruits ® and Reel King Megaways™.
Additionally, we continue to expand in high growth markets, such as North America, which are expected to drive further geographic diversification across business segments. We have over 600 customers, including major lottery, sports betting and gaming operators (both interactive and location-based) within regulated sectors worldwide.
Additionally, we continue to expand in high growth markets, such as North America, which are expected to drive further geographic diversification across business segments. We have over 700 customers, including major lottery, sports betting and gaming operators (both interactive and location-based) within regulated sectors worldwide.
Great Britain In the British sector, we supply and distribute Category B3 gaming machines (with maximum betting stakes for players of £2) and ETG machines to third parties who are licensed to operate such machines in bricks-and-mortar premises. In addition, we operate a number of Adult Entertainment Centers.
Great Britain In the British sector, we supply and distribute Category B3 gaming machines (with maximum betting stakes for players of £2), Category C gaming machines, Category D gaming machines and ETG machines to third parties who are licensed to operate such machines in bricks-and-mortar premises. In addition, we operate a number of Adult Entertainment Centers.
Additionally, we earn revenue through the sale of units, as well as a fixed daily fee for certain of our installed units. With our participation-driven business model, approximately 98% of revenue for our Leisure segment is recurring in nature and derived under long-term contracts.
Additionally, we earn revenue through the sale of units, as well as a fixed daily fee for certain of our installed units. With our participation-driven business model, approximately 97% of revenue for our Leisure segment is recurring in nature and derived under long-term contracts.
Customers Our customer base includes regulated operators of lotteries, licensed sports bookmakers, gaming and bingo halls, casinos, pubs, adult gaming centers, holiday parks and regulated online operators. We typically implement design and content variations to customize their terminals and player experiences.
Customers Our customer base includes regulated operators of lotteries, licensed sports bookmakers, operators of licensed betting offices, gaming and bingo halls, casinos, pubs, adult gaming centers, holiday parks and regulated online operators. We typically implement design and content variations to customize their terminals and player experiences.
Over the last three years, a substantial portion of our annual revenue has been recurring and based on long-term contracts with customers, where our revenue typically grows in line with the growth of our customers’ gaming revenue from our content and products.
Over the last few years, a substantial portion of our annual revenue has been recurring and based on long-term contracts with customers, where our revenue typically grows in line with the growth of our customers’ gaming revenue from our content and products.
Our customer base includes regulated operators of lotteries, licensed sports bookmakers, gaming and bingo halls, casinos and regulated online operators, adult gaming centers, pubs, holiday parks, and motorway service areas. Some of our key customers include William Hill, SNAI, Sisal, Lottomatica, Betfred, Paddy Power, Betfair, Genting, bet365, Sky Bet, Fortuna, the Greek Organisation of Football Prognostics S.A.
Our customer base includes licensed operators of lotteries, licensed sports bookmakers, gaming and bingo halls, casinos, online operators, adult gaming centers, pubs, holiday parks, and motorway service areas. Some of our key customers include William Hill, SNAI, Sisal, Betfred, Paddy Power, Betfair, Genting, bet365, Sky Bet, the Greek Organisation of Football Prognostics S.A.
For the year ended December 31, 2023, our recurring revenue, which included revenue generated from participation-based contracts and licensing arrangements, represented 79% of total revenue, as compared to approximately 86% of total revenue for the year ended December 31, 2022.
For the year ended December 31, 2024, our recurring revenue, which included revenue generated from participation-based contracts and licensing arrangements, represented 86% of total revenue, as compared to approximately 79% of total revenue for the year ended December 31, 2023.
Our full suite of high-quality gaming products, services and multichannel distribution capabilities, extensive traditional content library, sizeable installed gaming machine base and deep relationships with operator-customers help make us an attractive partner for potential licensors of branded content. 5 Our Interactive business has expanded rapidly, with revenue growing at an approximate compound annual growth rate of 57% on a functional currency at constant rate basis between 2019 and 2023.
Our full suite of high-quality gaming products, services and multichannel distribution capabilities, extensive traditional content library, sizeable installed gaming machine base and deep relationships with operator-customers help make us an attractive partner for potential licensors of branded content. 5 Our Interactive business has expanded rapidly, with revenue growing at an approximate compound annual growth rate of 53% on a functional currency at constant rate basis between 2019 and 2024.
The provision of our products and services in relation to the British sector is authorized by a series of licenses issued by the UK Gambling Commission, namely remote and non-remote Gaming Machine Technical (Full) operating licenses, a remote casino operating license, a remote and non-remote gambling software license and a remote general betting standard (virtual events) license gaming machine general adult gaming center license and a gaming machine general family entertainment center license.
The provision of our products and services in relation to the British sector is authorized by a multi-category operating license issued by the UK Gambling Commission, namely remote and non-remote Gaming Machine Technical (Full) operating licenses, a remote casino operating license, a remote and non-remote gambling software license and a remote general betting standard (virtual events) license gaming machine general adult gaming center license and a gaming machine general family entertainment center license.
Our Strengths We believe key factors that give us an advantage in the gaming technology space include: 4 Established presence across multiple Product Verticals We have a substantial installed base, including over 32,000 digital terminals in the Gaming segment located across key jurisdictions in the UK, Greece, Italy and South America, with approximately 12,800 terminals installed in UK Licensed Betting Offices and approximately 8,700 installed in Greek VLTs.
Our Strengths We believe key factors that give us an advantage in the gaming technology space include: 4 Established presence across multiple Product Verticals We have a substantial installed base, including over 32,000 digital terminals in the Gaming segment located across key jurisdictions in the UK, Greece and Italy, with approximately 12,800 terminals installed in UK Licensed Betting Offices and approximately 8,700 terminals installed in Greek venues.
Additionally, our Interactive segment provides a wide range of iGaming content to large operators primarily located in the UK, Italy, Greece and North America, as well as several other countries across Europe through over approximately 250 websites.
Additionally, our Interactive segment provides a wide range of iGaming content to large operators primarily marketing to customers located in the UK, Italy, Greece and North America, as well as several other regulated countries across Europe through over approximately 250 websites.
We also supply virtual racing software to local retail venues and to online operators who are licensed to target the British sector. We also supply our Interactive product to remote operators who are licensed to target the British sector.
We also supply virtual sports software to local retail venues and to online operators who are licensed to target the British sector. We also supply our Interactive product to remote operators who are licensed to target the British sector.
Our license agreements with customers for the provision of machines, content and Virtual Sports products include provisions to protect our intellectual property rights in our games and other content. Customer Contracts – Gaming Our contracts in the Gaming segment involve supplying gaming terminals and licensing gaming software and games for the terminals.
Our license agreements with customers for the provision of machines, content and Virtual Sports products include provisions to protect our intellectual property rights in our games and other content. Customer Contracts – Gaming Our contracts in the Gaming segment involve supplying gaming terminals and licensing gaming software and games for use and operation in conjunction with the terminals.
Experienced Management Team Our seasoned management team is led by our Executive Chairman, Lorne Weil, who is known as a gaming industry innovator and whose past leadership includes growing a diversified global gaming technology company both organically and through extensive acquisitions and joint ventures further bolstering the business.
Experienced Management Team Our seasoned management team is led by our Executive Chairman, Lorne Weil, who is known as a gaming industry innovator and whose past leadership includes growing a diversified global gaming technology company both organically and through extensive acquisitions and joint ventures further bolstering the business. In addition to Mr.
In addition to the foregoing, we believe there are significant benefits for our customers in adopting digitally networked gaming and lottery technologies. We believe our digitally-enabled products allow operators to remotely manage their operations with minimal disruption to their businesses.
We believe there are significant benefits for our customers in adopting digitally networked gaming and lottery technologies. We believe our digitally-enabled products allow operators to remotely manage their operations with minimal disruption to their businesses.
With our participation-driven business model, approximately 100% of revenue for our Interactive segment is recurring in nature and derived under long-term contracts that averaged three years from when we entered into these contracts. Over the last three years, we have renewed approximately 100% of these contracts for those customers that have continued to trade.
With our participation-driven business model, approximately 100% of revenue for our Interactive segment is recurring in nature and derived under long-term contracts that averaged three years. Over the last three years, we have renewed approximately 100% of these contracts for those customers that have continued to trade.
European and UK design registration lasts for five years but it can be renewed four times (giving a maximum total of 25 years of protection). European and UK patents can only be renewed for up to 20 years.
European and UK trademark registration lasts for 10 years but can be renewed indefinitely. European and UK design registration lasts for five years but it can be renewed four times (giving a maximum total of 25 years of protection). European and UK patents can only be renewed for up to 20 years.
We have joint venture agreements with holiday park operators including Parkdean Resorts, Bourne Leisure and Butlins, where we supply machines and trained staff to manage and operate family entertainment centers. Overall, our Leisure segment had, as of December 31, 2023, an installed base of over 11,000 gaming terminals, which were operated primarily under participation-based contracts.
We have joint venture agreements with holiday park operators including Parkdean Resorts, Bourne Leisure (Haven), Butlins and Cove, where we supply machines and trained staff to manage and operate family entertainment centers. Overall, our Leisure segment had, as of December 31, 2024, an installed base of over 10,000 gaming terminals, which were operated primarily under participation-based contracts.
Our Products We operate in four business segments: Gaming, Virtual Sports, Interactive and Leisure, as further described below. 1 Gaming Segment Our Gaming segment supplies gaming terminals as well as gaming software and games for the terminals provided to betting offices, casinos, gaming halls and high street adult gaming centers.
Our Products We operate in four business segments: Gaming, Virtual Sports, Interactive and Leisure, as further described below. 1 Gaming Segment Our Gaming segment supplies gaming terminals as well as gaming software and games for the terminals provided to Licensed Betting Offices (“LBOs”), casinos, gaming halls and adult gaming centers (“AGCs”).
Our Virtual Sports products are typically offered to operators on a participation basis, whereby we receive a portion of the gaming revenue generated, plus an upfront software license fee.
Our Virtual Sports products are typically offered to operators on a participation basis, whereby we receive a royalty for a portion of the gaming revenue generated, plus an upfront software license fee and a hosting fee.
According to the H2 Database, the total global gaming and lottery industry is projected to grow an average of 6% per year from 2022 to 2027 driven by the projected growth in mobile and online gaming.
According to the H2 Database, the total global gaming and lottery industry is projected to grow an average of 6% per year from 2024 to 2029 driven by the projected growth in mobile and online gaming.
Because our SBG products are fully digital, they interact with a central server and are provided on a “distributed” basis, which allows us to access a wide geographic footprint through internet and Inspired and third-party proprietary networks.
Because our SBG products are fully digital, they interact with a central server and are provided on a “distributed” basis, which allows us to access a wide geographic footprint through the internet, the Company’s, and third parties’ proprietary networks.
Inspired’s Virtual Sports products offer a wide range of betting markets and what we consider to be superior graphics. Our Virtual Sports revenue has been growing fast and has achieved high Adjusted EBITDA margins, while providing an attractive recurring-revenue base.
Our Virtual Sports products offer a wide range of betting markets and what we consider to be superior graphics. Our Virtual Sports revenue has achieved high EBITDA margins, while providing an attractive recurring revenue base.
As of December 31, 2023, we supplied and operated over 11,000 gaming terminals and 4,500 pool tables, prize vending and jukeboxes located in pubs, bingo halls, and adult gaming centers. We also service approximately 2,800 gaming terminals under maintenance only contracts.
As of December 31, 2024, we supplied and operated over 10,000 gaming terminals and 3,500 pool tables, prize vending and jukeboxes located in pubs, bingo halls, and adult gaming centers. We also service approximately 2,800 gaming terminals under maintenance only contracts.
Our content and other products can be found through the consumer-facing portals of our interactive customers and, through our land-based customers, in licensed betting offices, adult gaming centers, pubs, bingo halls, airports, motorway service areas and leisure parks.
Our content and other products can be found through the consumer-facing portals of our customers operating digital channels, and, in licensed betting offices, adult gaming centers, pubs, bingo halls, airports, motorway service areas and leisure parks for our customers operating land-based venues.
We seek to achieve these goals as we: Extend our positions in each of the sectors in which we operate by developing new content and products which can often be utilized across multiple distribution channels. We continually invest in new content and product development in each of the business segments in which we operate.
We seek to achieve these goals as we: Extend our positions in each of the sectors in which we operate by developing new content and products which can often be utilized across multiple distribution channels.
According to the H2 Database, these industry sectors have grown at a 15% compounded annual growth rate from 2012 to 2022, driven by rapid growth in the deployment of digital games and technologies, including many of our products, into land-based venues in the primary sectors in which we operate, where regulators have supported the transition to digital, online and retail channels.
According to the H2 Database, these industry sectors have grown at an estimated 17% compounded annual growth rate from 2014 to 2024, driven by rapid growth in the deployment of digital games and technologies, including many of our products, into land-based venues in the primary sectors in which we operate, where regulators have supported the transition to digital, online and retail channels.
In addition, we also supply and operate approximately 9,500 amusement machines and 2,200 gaming terminals in family entertainment centers and adult gaming centers located in holiday parks, bowling centers and other entertainment venues. These include virtual reality simulators and arcade games, redemption and skill with prize games, basketball, air hockey and cue sports.
In addition, we also supply and operate approximately 8,000 amusement machines and 1,400 gaming terminals in family entertainment centers and adult gaming centers located in holiday parks, bowling centers and other entertainment venues. These include virtual reality simulators and arcade games, redemption and skill with prize games, basketball, air hockey and cue sports.
Our Virtual Sports gaming products are installed in approximately 32 gaming jurisdictions worldwide, including the UK, Italy, Greece, Morocco and the United States, our customers being many of the largest operators of lottery, gaming, and betting operations worldwide.
Our Virtual Sports gaming products are available in approximately 32 gaming jurisdictions worldwide, including the UK, Italy, Greece, Morocco and the U.S., our customers being many of the largest operators of lottery, gaming, and betting operations worldwide.
This supplements the existing broad-based online gambling market across Europe. Our multi-channel solutions and customer relationship management capabilities position us to take advantage of new opportunities to extend our gaming solutions across different channels for our customers to reach new players, expand the player demographic base and access players wherever they are whenever they want to play.
Our multi-channel solutions and customer relationship management capabilities position us to take advantage of new opportunities to extend our gaming solutions across different channels for our customers to reach new players, expand the player demographic base and access players wherever they are whenever they want to play.
We may agree to customize and brand the virtual sporting events for the operator or to provide language variations of the event. The contracts may be terminated early in various circumstances, including, for example, if the operator fails to pay an invoice within 60 days of receipt.
These are typically one-time non-exclusive licenses specific to the virtual sporting event. We may agree to customize and brand the virtual sporting events for the operator or to provide language variations of the event. The contracts may be terminated early in various circumstances, including, for example, if the operator fails to pay an invoice within 60 days of receipt.
With our participation-driven business model, approximately 94% of service revenue (excluding VAT related income) for our Gaming segment is recurring in nature and derived under long-term contracts that are typically between three and five years (although may be shorter for contract extensions). Over the last three years, we have renewed a significant majority of contracts that were expiring.
With our participation-driven business model, approximately 94% of service revenue (excluding VAT related income) for our Gaming segment is recurring in nature and derived under long-term contracts that are typically between three and five years (although may be shorter for contract extensions). Major contracts have been renewed over the past three (3) years.
We are licensed by regulators in other jurisdictions such as the Malta Gaming Authority (Malta), Licensing Authority of Gibraltar (Gibraltar), the Alderney Gambling Control Commission (Chennel Islands), the Belgian Commission (Belgium), Autorité Des Marchés Financiers (Quebec), the Romanian National Gambling Office, Oficiul National pentru Jocuri de Noroc, Spelinspektionen (Romania), the Swedish Gaming Authority (Sweden) and we hold licenses with the US States of Connecticut, Illinois, Michigan,, New Jersey, Oregon, Pennsylvania, West Virginia and the Canadian provinces of Alberta, Nova Scotia, Ontario and Saskatchewan.
We are licensed by regulators in other jurisdictions such as the Malta Gaming Authority (Malta), the Licensing Authority of Gibraltar (Gibraltar), the Alderney Gambling Control Commission (Channel Islands), the Belgian Kansspel Commissie (Belgium), Oficiul National pentru Jocuri de Noroc, Spelinspektionen (Romania), the Swedish Gaming Authority (Sweden) and we hold licenses with the U.S. states of Connecticut, Illinois, Michigan, Delaware, New Jersey, Oregon, Pennsylvania, and West Virginia, and the Canadian provinces of Alberta, Nova Scotia, Manitoba, Quebec, Ontario and Saskatchewan.
Our management team shares a combination of operating, investing, financial and transactional experience that we believe will serve the Company well as it seeks to identify opportunities for value-adding acquisitions and negotiate and close on beneficial acquisition transactions.
Our management team shares a combination of operating, investing, financial and transactional experience that we believe will serve the Company well as it seeks to identify opportunities for value-adding acquisitions to negotiate and close on potential acquisition transactions. 7 Industry Overview We operate within the global gaming and lottery industry.
We supply the terminals on an exclusive or non-exclusive basis for all terminals of a customer or for specific locations. Under these contracts, we have general obligations to deliver, install, upgrade and service the terminals and software.
We supply the terminals on an exclusive or non-exclusive basis on a per customer or per location basis. Under these contracts, we have general obligations to deliver, install, upgrade and service the terminals and software.
Our SBG terminals in the UK account for a material portion of all SBG terminal placements, and we offer over 100 games for play across this portfolio. We are also a material supplier to customers in Greece and Italy.
Our SBG products comply with all requirements in the UK (B2/B3), Italy (6B), Greece (G2S) and Illinois (G2S). Our SBG terminals in the UK account for a material portion of all SBG terminal placements, and we offer over 100 games for play across this portfolio. We are also a material supplier to customers in Greece and Italy.
Accordingly, we continually invest in new content and technology offerings that we believe will enable our customers to keep their offerings fresh and allow them to offer their players new forms of entertainment. As our content demonstrates successful commercial results, we seek to place it with additional customers who recognize its performance.
Accordingly, we continually invest in new content and technology offerings that permit our customers to keep their offerings fresh, offering their players new forms of entertainment. As our content demonstrates successful commercial results, we seek to place it with additional customers who may recognize its value and performance.
We also believe there are likely to be growth opportunities in Latin America which will be available to us in the future. Pursue targeted mergers and acquisitions to expand our product portfolio and distribution footprint.
We also believe there may be further growth opportunities in Latin America which will be available to us in the future, as new regulations permit. Pursue targeted mergers and acquisitions to expand our product portfolio and distribution footprint.
Customer Contracts – Virtual Sports Our contracts in the Virtual Sports segment typically involve the supply of licenses to operators to make available, either via online or retail channels, virtual sporting events such as darts, cricket, or basketball, and to enable end-users to place bets on these events. These are typically one-time non-exclusive licenses specific to the virtual sporting event.
Customer Contracts – Virtual Sports Our contracts in the Virtual Sports segment typically involve the supply of licenses to operators to make available, either via online or retail channels, virtual sporting events such as horse racing, soccer, football, darts, cricket, or basketball, and to enable end-users to place bets on these events.
Proprietary Technology and Track-Record of Strong Content Development We are dedicated to being at the forefront of our industry in terms of technology and innovation. We combine complementary expertise in technology and operations, positioning us as a provider of superior technical solutions. As of December 31, 2023, we held approximately 15 patents and approximately 200 trademarks worldwide.
Proprietary Technology and Track-Record of Strong Content Development We are dedicated to being at the forefront of our industry in terms of technology and innovation. We combine complementary expertise in technology and operations, positioning us as a provider of superior content and technical solutions.
Such VLT platforms, machines and games, and Virtual Sports platforms and games, must be certified and approved by either SOGEI, an entity controlled by the Italian Ministry of Finance and authorized to conduct such certifications or testing labs accredited with ADM.
No gaming license is required in order to supply VLTs or Virtual Sports products to such operators. Such VLT platforms, machines and games, and Virtual Sports platforms and games, must be certified and approved by either SOGEI, an entity controlled by the Italian Ministry of Finance and authorized to conduct such certifications or testing labs accredited with ADM.
Suppliers Our principal supply arrangements concern the supply of our terminal components, content provision and outsourced labor. We work closely with our key suppliers to ensure a high level of quality of goods and services is obtained and have worked with many of these suppliers for many years. We have achieved significant cost savings through centralization of purchases.
We work closely with our key suppliers to ensure a high level of quality of goods and services is obtained and have worked with many of these suppliers for many years. We have achieved significant cost savings through centralization of purchases.
For the year ended December 31, 2023, our Gaming segment generated revenue and Adjusted EBITDA of $142.6 million and $44.5 million, respectively, as compared to the year ended December 31, 2022, during which we generated $111.3 million and $43.7 million in revenue and Adjusted EBITDA, respectively.
For the year ended December 31, 2024, our Gaming segment generated revenue and Adjusted EBITDA of $110.6 million and $45.3 million, respectively, as compared to the year ended December 31, 2023, during which we generated $142.5 million and $42.8 million in revenue and Adjusted EBITDA, respectively.
Government initiatives, such as the legalization of casino operations in new jurisdictions, increases in the number of casinos allowed to operate in a given jurisdiction and the legalization of new products, have helped stimulate growth in the gaming market. In the United States, legislative change has led to an increase in the legalization of sports betting.
Government initiatives, such as the legalization of casino operations in new jurisdictions, increases in the number of casinos allowed to operate in a given jurisdiction and the legalization of new products, have helped stimulate growth in the gaming market.
For the year ended December 31, 2023, our Virtual Sports segment generated revenue and Adjusted EBITDA of $56.2 million and $47.7 million, respectively, as compared to the year ended December 31 2022, during which we generated $54.2 million and $44.9 million in revenue and Adjusted EBITDA, respectively.
For the year ended December 31, 2024, our Virtual Sports segment generated revenue and Adjusted EBITDA of $45.4 million and $36.0 million, respectively, as compared to the year ended December 31, 2023, during which we generated $56.2 million and $47.6 million in revenue and Adjusted EBITDA, respectively.
Our products are installed in over 20 gaming jurisdictions worldwide, including the UK, Italy, Greece, Turkey, Morocco, and the U.S. 2 Our Virtual Sports game portfolio includes titles such as V-Play Soccer™, V-Play Women’s Soccer™, V-Play Football™, V-Play Basketball™, V-Play Baseball™, and V-Play NFLA™, as well as greyhounds, other horse racing products, tennis, motor racing, cycling, cricket, speedway, golf and darts.
We have operations across 20+ gaming jurisdictions worldwide, including the UK, Italy, Greece, Turkey, Morocco, and the U.S. 2 Our Virtual Sports portfolio includes titles such as V-Play Soccer™, V-Play Women’s Soccer™, V-Play Football™, V-Play Basketball™, and V-Play Baseball™, along with greyhound racing, horse racing, tennis, motor racing, cycling, cricket, speedway, golf and darts.
As a gaming and lottery business-to-business supplier focused on digital products and technologies, we believe we are well-positioned to benefit from these trends. Influencers of Digital Adoption We believe the digital segment of the global gaming and lottery industry will continue to grow, including as a result of the following factors: Governments: Opening of new gaming territories .
Influencers of Digital Adoption We believe the digital segment of the global gaming and lottery industry will continue to grow, including as a result of the following factors: Governments: Opening of new gaming territories .
Inspired has a full stack game development structure, combining its proprietary technology frameworks together with some of the industry’s best math, art, creative and production personnel spread across 3 game studios (Inspired, Astra and Bell Fruit).
Content Development We continually invest in new product development in each of our Gaming, Virtual Sports, Interactive and Leisure business segments. Inspired has a full stack game development structure, combining its proprietary technology frameworks together with some of the industry’s best math, art, creative and production personnel spread across 3 game studios (Inspired, Astra and Bell Fruit).
Operators of betting premises offering VLTs (including the entities managing the networks connecting such VLTs to ADM servers), and operators of betting premises or online platforms offering Virtual Sports products, must hold an Italian gaming license. No gaming license is required in order to supply VLTs or Virtual Sports products to such operators.
Operators of betting premises offering VLTs (including the entities managing the networks connecting such VLTs to ADM servers), and operators of betting premises or online platforms offering Virtual Sports products, must hold an Italian gaming license while operators of gaming halls where VLTs are located operate do not need a gaming license.
Inspired’s Virgo Remote Gaming System (“RGS™”) is integrated with a number of best known casino brands, including William Hill, Entain, bet365, Flutter, 888, Kindred, Gamesys, BetFred, Rank, Leo Vegas, OPAP and Stoiximan.
Other prominent territories the segment operates in outside of these include the markets of Brazil and Mexico. Inspired’s Virgo Remote Gaming System (“RGS™”) is integrated with a number of leading casino brands, including William Hill, Entain, bet365, Flutter, 888, Kindred, Gamesys, Betfred, Rank, Leo Vegas, OPAP, Kaizen, Betano and Stoiximan.
We believe content development is a key aspect of our strategy and we intend to continue this strategic priority for each of the businesses in which we operate. Add new customers by expanding into underpenetrated markets. We believe our historical growth has been driven by our entry into new geographies and supplemented by increasing our share in existing markets.
We believe content development is a key aspect of our overall strategy and we intend to continue this strategic priority for each of the business segments in which we operate. Add new customers, or extend our collaboration with existing customers, by expanding into new markets.
We depend upon agreements relating to trade secrets and proprietary know-how to protect our rights in this intellectual property. We require all our employees, contractors and other collaborators to enter into agreements that prohibit the disclosure of our confidential information to other parties.
We require all our employees, contractors and other collaborators to enter into agreements that prohibit the disclosure of our confidential information to other parties.
Our customers are many of the largest operators in lottery, gaming and betting worldwide. We are contracted to supply Virtual Sports to mobile and online operators in the UK; the U.S. states of Nevada, Pennsylvania, D.C. and New Jersey; Gibraltar and other regulated EU sectors, including Italy, Greece and Poland; and other jurisdictions such as Ontario, Turkey and Morocco.
Our customers include some of the largest operators in lottery, gaming and sports betting globally. We are contracted to supply Virtual Sports to mobile and online operators across key regulated markets, including the United Kingdom; the U.S. states of Nevada, Pennsylvania, New Jersey, and the District of Columbia; Gibraltar and other regulated markets in Europe, including Italy, Greece and Poland.
Our products are designed to operate within applicable gaming and lottery regulations. We conduct business across different jurisdictions of which Great Britain, Italy and Greece have historically contributed the most significant recurring revenue. Recently we have begun to conduct a meaningful amount of business in North America as well.
We conduct business across different jurisdictions, of which Great Britain, Italy and Greece have historically contributed the most significant recurring revenue. Since 2021, we have begun to conduct a meaningful amount of business in regulated North American markets and states.
Our multi-channel offerings are well-positioned to benefit from the prevalence of smart phones and tablets and the legalization of online gaming in certain parts of the United States, Canada and other jurisdictions. Such jurisdictions have provided new growth opportunities for gaming and lottery operators through the introduction of new channels and portals for delivering games to customers.
Our multi-channel offerings are well-positioned to benefit from the prevalence of smart phones and tablets and the legalization of online gaming in certain parts of the United States, Canada, Brazil, LATAM more generally and other jurisdictions.
As a result, material changes in our shareholdings may be subject to special procedures in order to ensure the continuation of our gaming licenses and certifications. Content Development We continually invest in new product development in each of our Gaming, Virtual Sports, Interactive and Leisure business segments.
As a result, material changes in our shareholdings may be subject to special procedures or consents in order to ensure the continuation and confirmation of our gaming licenses and certifications.
Our Virtual Sports products are typically offered to operators on a participation basis, whereby we receive a portion of the gaming revenue generated, plus an upfront software license fee.
Our Virtual Sports products are typically offered to operators on a participation-based revenue model, where we receive a share of the gaming revenue generated, along with an upfront software licensing fee, hosting fees, or a combination of the foregoing.
We believe our technological approach allows us to quickly adapt to changes in player preferences. Continue to invest in content and technology in order to grow our existing customers’ revenue and penetrate new customers in our existing markets.
Continue to invest in content, technology and delivery channels in order to grow our existing customers’ revenue and penetrate new customers in our existing markets.
For the year ended December 31, 2023, our Interactive segment generated revenue and Adjusted EBITDA of $27.9 million and $15.4 million, respectively. With our participation-driven business model, approximately 100% of revenue for our Interactive segment is recurring in nature and derived under long-term contracts for which our standard term is three years in duration.
With our participation-driven business model, approximately 100% of revenue for our Interactive segment is recurring in nature and derived under long-term contracts for which our standard term is three years in duration. We have successfully renewed all of our key Interactive contracts expiring over the last three years.
While our Gaming segment has represented the largest proportion of our revenue in each of the last three years, our Virtual Sports and Interactive segments represent substantial growth opportunities as demonstrated by recent trends where Virtual Sports and Interactive trading has been seen to be increasing, which are expected to continue to diversify our business.
While our Gaming segment has represented the largest proportion of our revenue in each of the last three years, our Interactive segment represents substantial growth opportunities in the digital and retail space, which is expected to continue to diversify our business, together with Virtual Sports in Latin America.
We expect to continue to focus on North American markets in the Gaming, Virtual Sports and Interactive segments for such expansion. We believe North America is a major gaming market in which we currently have limited participation, but where our products are well positioned, or can be positioned, for future success.
We believe North America is a valuable gaming market in which we currently have more limited participation and a lower market share, but where we expect our products can be positioned for future success.
We also hold certain patents, trademarks, design rights and other intellectual property rights in respect of our products, systems, web domains, and other intellectual property. We also rely on certain products and technologies that we license from third parties. Proprietary licenses typically limit our use of intellectual property to specific uses and for specific time periods.
We also rely on certain products and technologies that we license from third parties. Proprietary licenses typically limit our use of intellectual property to specific uses and for specific time periods. The terms of our intellectual property registrations vary based on the type of registration and the date and jurisdiction of filing or grant.
We focus our product development efforts on emerging technology trends, utilizing a combination of customer research, design experience and engineering excellence. We are committed to developing innovative products for our customers and are focused on improving player entertainment and customer profitability. We believe convergence trends in the gaming industry emphasize the importance of proprietary content, including licensed content.
We are committed to developing innovative products for our customers and are focused on improving player entertainment and customer profitability. We believe convergence trends in the gaming industry emphasize the importance of proprietary content, including licensed content. Such content is needed to successfully promote a compelling game offering across multiple platforms and to develop distinctive products for operator-clients.
Inspired releases several new titles per month and new games can be seamlessly deployed to the full estate of operators and aggregators through its proprietary Virgo RGS™.
Inspired releases several new titles per month and new games can be seamlessly deployed to the full estate of operators and aggregators through its proprietary Virgo RGS™. Games are available on over 300 websites across much of regulated Europe and North American territories in the form of New Jersey, Michigan, Pennsylvania, Connecticut, Alberta, Ontario and Quebec.
In addition, the members of the OEC have centered their careers on identifying, acquiring and integrating, through the implementation of value creation initiatives, complementary businesses. 6 Our Strategy We seek to deliver innovative and differentiated products that provide value to our customers and exciting experiences to their players in multiple jurisdictions throughout the world while achieving long-term growth in revenue, profit and cash flow.
The members of the management team between them have decades of experience in the gaming industry, including relationships with suppliers and customers around the world, helping them build and sustain revenue growth and achieve strategic objectives. 6 Our Strategy We seek to deliver innovative and differentiated products that provide value to our customers and exciting experiences to their players in multiple jurisdictions throughout the world while achieving long-term growth in revenue, profit and cash flow.
We are also live with a number of notable North American operators: Bet MGM, Draft Kings, Caesars, Resorts/Mohegan, Rush Street Interactive, Wynn, Unibet, Ballys, Tipico, Ocean, 888 and Golden Nugget and with Loto Quebec in Canada. In 2023 we launched our Hybrid Dealer® product with Caesars Digital.
We are also live with a number of notable North American operators: Bet MGM, Draft Kings, Caesars, FanDuel, Rush Street Interactive, Golden Nugget and Loto Quebec in Canada. We have launched our Hybrid Dealer® product which is a new product category for the segment and offers players branded casino and gameshow content without the challenges associated with live-dealer products.
In addition, we are licensed or certified (as applicable) in a number of other jurisdictions by regulators such as the Malta Gaming Authority, Licensing Authority of Gibraltar, the Alderney Gambling Control Commission, the Belgian Commission, Autorité Des Marchés Financiers (Quebec) and state regulators in various jurisdictions in North America.
In addition, we are licensed or certified (as applicable) in a number of other jurisdictions by regulators such as the Malta Gaming Authority, His Majesty’s Government Gibraltar, the Alderney Gambling Control Commission, the Belgian Kansspel Commissie, Romania – Oficiul National pentru Jocuri de Noroc, Autorité Des Marchés Financiers (Quebec), Nova Scotia Alcohol, Gaming, Fuel and Tomabbo Division, Saskatchewan Liquor and Gaming Authority, Alcohol and Gaming Commission (Ontario), Ministerio de Comercio Exterior y Turismo (MINCETEUR) in Peru and state regulators in various jurisdictions in North America such as New Jersey, Pennsylvania, Michigan, Illinois and others.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFailure to remediate the material weaknesses or any other material weaknesses that we identify in the future could result in material misstatements in our financial statements. ● We are dependent on our relationships with key suppliers to obtain equipment and other supplies for our business on acceptable terms. ● Data privacy and security laws and regulations in the jurisdictions in which we do business could increase the cost of our operations and subject us to possible sanctions and other penalties. ● Our results of operations fluctuate due to seasonality and other factors and, therefore, our periodic operating results are not guarantees of future performance. ● Our industry is subject to strict government regulations that could limit our existing operations and have a negative impact on our ability to grow. ● Our industry is subject to regulations that set parameters for levels of gaming or wagering duty, tax, stake, prize and return to player. ● We may be adversely affected by disruptions to our transaction gaming and lottery systems, as well as disruptions to our internal enterprise and information technology systems. 15 ● Our directors and key personnel are subject to the approval of certain regulatory authorities, which, if withheld, would require us to sever our relationship with non-approved individuals, which could adversely impact our operations. ● Licensing and gaming authorities have significant control over our operations and ownership and could cause us to redeem certain stockholders on potentially disadvantageous terms. ● Certain of our executive officers and directors could be affiliated with entities engaged in business activities similar to those conducted by us in the future and, accordingly, may have conflicts of interest in determining whether a particular business opportunity should be presented to us or to another entity. ● We have operations in a variety of countries, which subjects us to additional risks. ● We may have future capital needs and may not be able to obtain additional financing on acceptable terms. ● Because tax laws and regulations are subject to interpretation and uncertainty, tax payments may ultimately differ from amounts currently recorded by the Company. ● We may be unable to develop sufficient new products and product lines and integrate them into our existing business, which may adversely affect our ability to compete; our expansion into new sectors may present competitive and regulatory challenges that differ from current ones. ● We may be required to recognize impairment charges related to goodwill, identified intangible assets and property and equipment or to take write-downs or write-offs, restructuring or other charges that could have a significant negative effect on our financial condition, results of operations and stock price, which could have an adverse effect on your investment. ● Volatility or disruption in the financial markets could materially adversely affect our business and the trading price of our common stock. ● Global economic conditions could have an adverse effect on our business, operating results and financial condition.
Biggest changeOur operations in non-European markets means withholding taxes are payable on royalty, interest and/or dividend which may impact cash flow and/or profitability; ● We may be adversely affected by disruptions to our transaction gaming and lottery systems, as well as disruptions to our internal enterprise and information technology systems. 15 ● Our directors and key personnel are subject to the approval of certain regulatory authorities, which, if withheld, would require us to sever our relationship with non-approved individuals, which could adversely impact our operations. ● Licensing and gaming authorities have significant control over our operations and ownership and could cause us to redeem certain stockholders on potentially disadvantageous terms. ● Certain of our executive officers and directors could be affiliated with entities engaged in business activities similar to those conducted by us in the future and, accordingly, may have conflicts of interest in determining whether a particular business opportunity should be presented to us or to another entity. ● Licensing and gaming authorities have significant control over our operations and ownership and could cause us to redeem certain stockholders on potentially disadvantageous terms. ● We have operations and assets in a variety of countries, which subjects us to additional geopolitical risks. ● Our business is capital intensive and our ability to retain customers may be influenced by our ability to deploy additional capital. ● We may be unable to develop sufficient new products and product lines and integrate them into our existing business, which may adversely affect our ability to compete; our expansion into new sectors may present competitive and regulatory challenges that differ from current ones. ● We may be required to recognize impairment charges related to goodwill, identified intangible assets and property and equipment or to take write-downs or write-offs, restructuring or other charges that could have a significant negative effect on our financial condition, results of operations and stock price, which could have an adverse effect on the Company’s net assets. ● Volatility or disruption in the financial markets could materially adversely affect our business and the trading price of our common stock. ● Global economic conditions could have an adverse effect on our business, operating results and financial condition.
The failure of beneficial owners of our common stock to submit to such background checks and provide required disclosure could jeopardize our business.
The failure of beneficial owners of our common stock to submit to such background checks and provide required disclosure could jeopardize our business.
Following the occurrence of an event of default which has not been waived or remedied, the Lenders who represent more than 66.67% of total commitments under the RCF may, subject to the terms of an intercreditor agreement (which governs the relationship between the Lenders and the holders of the Senior Secured Notes), instruct the agent to (i) accelerate the RCF Loans, (ii) instruct the security agent to enforce the transaction security and/or (iii) exercise any other remedies available to the Lenders. 29 The RCF Agreement requires that the Company maintain a maximum consolidated senior secured net leverage ratio of 6.25x on the test date for the relevant period ending June 30, 2022, stepping down to 6.0x on March 31, 2022, 5.75x on March 31, 2023 and 5.50x from March 31, 2024 and thereafter (the “RCF Financial Covenant”).
Following the occurrence of an event of default which has not been waived or remedied, the Lenders who represent more than 66.67% of total commitments under the RCF may, subject to the terms of an intercreditor agreement (which governs the relationship between the Lenders and the holders of the Senior Secured Notes), instruct the agent to (i) accelerate the RCF Loans, (ii) instruct the security agent to enforce the transaction security and/or (iii) exercise any other remedies available to the Lenders. 29 The RCF Agreement requires that the Company maintain a maximum consolidated senior secured net leverage ratio of 6.25x on the test date for the relevant period ended June 30, 2022, stepping down to 6.0x on March 31, 2022, 5.75x on March 31, 2023 and 5.50x from March 31, 2024 and thereafter (the “RCF Financial Covenant”).
Our business in foreign markets subjects us to risks customarily associated with such operations, including: ● foreign withholding taxes on, or bank regulatory restrictions on expatriating, our subsidiaries’ earnings that could reduce cash flow available to meet our required debt service and other obligations; ● the complexity of foreign laws, regulations and markets; 26 ● the impact of foreign labor laws and disputes; ● potential risks relating to our ability to manage our foreign operations, monitor our customers’ activities or our partners’ activities which may subject us to risks involving such other entities’ financial condition or to inconsistent interests or goals; ● recent gaming tax increases in Italy; ● other economic, tax and regulatory policies of foreign governments; and ● the ability to attract and retain key personnel in foreign jurisdictions.
Our business in foreign markets subjects us to risks customarily associated with such operations, including: ● foreign withholding taxes on, or bank regulatory restrictions on expatriating, our subsidiaries’ earnings that could reduce cash flow available to meet our required debt service and other obligations; ● the complexity of foreign laws, regulations and markets; 26 ● the impact of foreign labor laws and disputes; ● potential risks relating to our ability to manage our foreign operations, monitor our customers’ activities or our partners’ activities which may subject us to risks involving such other entities’ financial condition or to inconsistent interests or goals; ● gaming tax increases; ● other economic, tax and regulatory policies of foreign governments; and ● the ability to attract and retain key personnel in foreign jurisdictions.
We enter into confidentiality or license agreements with our employees, vendors, consultants and, to the extent legally permissible, our customers, and generally control access to, and the distribution of, our game designs, systems and other software documentation and other proprietary information, as well as the designs, systems and other software documentation and other information we license from others.
We enter into confidentiality and license agreements with our employees, vendors, consultants and, to the extent legally permissible, our customers, and generally control access to, and the distribution of, our game designs, systems and other software documentation and other proprietary information, as well as the designs, systems and other software documentation and other information we license from others.
Certain contracts within the Leisure business segment also require injections of capital expenditure during the term for new or replacement hardware. Our business depends on our ability to prevent or mitigate the effects of a cybersecurity attack.
Certain contracts within the Leisure business segment also require injections of capital during the term for new or replacement hardware. Our business depends on our ability to prevent or mitigate the effects of a cybersecurity attack.
If not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and a s a result, our stockholders could lose confidence in our financial results, which could harm our business and the value of our shares.
If not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and as a result, our stockholders could lose confidence in our financial results, which could harm our business and the value of our shares.
In addition, the levy of substantial fines or forfeiture of assets could significantly harm our business, financial condition and results of operations. Some jurisdictions also require extensive personal and financial disclosure and background checks from persons and entities beneficially owning a specified percentage of equity securities of licensed or regulated businesses.
In addition, the levy of substantial fines or forfeiture of assets could significantly harm our business, financial condition and results of operations. Some jurisdictions also require extensive personal and financial disclosure and background checks from persons and entities beneficially owning a specified percentage, typically 5%, of equity securities of licensed or regulated businesses.
These provisions, alone or together, could delay hostile takeovers and changes in control of the Company or changes in our Board of Directors and management.
These provisions, alone or together, could delay or dissuade hostile takeovers and changes in control of the Company or changes in our Board of Directors and management.
Inflationary pressures, shortages in the labor market, and increased competition within and outside our industry for talented employees have increased our labor costs, which could negatively impact our profitability. Labor shortages or lack of skilled labor have led to increases in costs to meet demand as we roll out incremental programs to attract and retain talent.
Inflationary pressures, shortages in the labor market, and increased competition within and outside our industry for talented employees have increased our labor costs, which could negatively impact our profitability. Labor shortages or lack of skilled labor, and current UK policy have led to increases in costs to meet demand as we roll out incremental programs to attract and retain talent.
We are also subject to anti-money laundering and anti-terrorist financing laws and regulations, and to economic and trade sanctions programs administered by the Office of Foreign Assets Control (OFAC) in the United States relating to our ability to engage in transactions with entities that are domiciled in countries or territories subject to comprehensive OFAC trade sanctions (currently, Cuba, Iran, North Korea, Syria, and Crimea), or that are included on OFAC’s list of Specially Designated Nationals and Blocked Persons.
We are also subject to anti-money laundering and anti-terrorist financing laws and regulations, and to economic and trade sanctions programs administered by the Office of Foreign Assets Control (OFAC) in the U.S. relating to our ability to engage in transactions with entities that are domiciled in countries or territories subject to comprehensive OFAC trade sanctions (currently, Cuba, Iran, North Korea, Syria, and Crimea), or that are included on OFAC’s list of Specially Designated Nationals and Blocked Persons.
The Company may itself be subject to investigatory or enforcement action (if and to the extent that local laws or the laws of other jurisdictions in which the Company operates impose liability on suppliers for the activities of the customers that they supply or for receiving funds that are deemed to be illegal because of such activities).
The Company may also itself be subject to investigations or enforcement action (if and to the extent that local laws or the laws of other jurisdictions in which the Company operates impose liability on suppliers for the activities of the customers that they supply or for receiving funds that are deemed to be illegal because of such activities).
We are subject to income taxes as well as non-income based taxes, in both the United States and numerous foreign jurisdictions. The determination of the Company’s worldwide provision for income taxes and other tax liabilities requires judgment and is based on diverse legislative and regulatory structures that exist in the various jurisdictions where the company operates.
We are subject to income taxes as well as non-income based taxes, in both the U.S. and numerous foreign jurisdictions. The determination of the Company’s worldwide provision for income taxes and other tax liabilities requires judgment and is based on diverse legislative and regulatory structures that exist in the various jurisdictions where the company operates.
Acts of terrorist violence, cyber-terrorism, political unrest, armed regional and international hostilities and international responses to these hostilities, natural disasters, including hurricanes or floods, global health risks or pandemics (such as COVID-19) or the threat of or perceived potential for these events could have a negative impact on us.
Acts of terrorist violence, cyber-terrorism, political unrest, armed regional and international hostilities and international responses to these hostilities, natural disasters, including hurricanes or floods, global health risks or pandemics or the threat of or perceived potential for these events could have a negative impact on us.
In July 2020, the Court of Justice of the European Union (“CJEU”) in its Schrems II ruling invalidated the EU-US Privacy Shield framework, a self-certification mechanism that facilitated the lawful transfer of personal data from the EEA/UK to the United States, with immediate effect.
In July 2020, the Court of Justice of the European Union (“CJEU”) in its Schrems II ruling invalidated the EU-US Privacy Shield framework, a self-certification mechanism that facilitated the lawful transfer of personal data from the EEA/UK to the U.S., with immediate effect.
Risks Relating to Our Business and Industry We have identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting. Failure to remediate the material weaknesses or any other material weaknesses that we identify in the future could result in material misstatements in our financial statements.
Risks Relating to Our Business and Industry We have identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting which we are working to remediate. Failure to remediate these material weaknesses or any other material weaknesses that we identify in the future could result in material misstatements in our financial statements.
If we cannot successfully compete in our industry and business segments, our business, results, financial condition and prospects could suffer. We are heavily dependent on our ability to renew our long-term contracts with our customers and we could lose substantial revenue if we are unable to renew certain of these contracts.
If we cannot successfully compete in our industry and business segments, our business, results, financial condition and prospects could suffer. We are heavily dependent on our ability to renew our long-term contracts with our customers and we could lose substantial revenue if we are unable to renew certain of these contracts, or to renew them on substantially similar terms.
On February 16, 2022, the Company filed a registration statement pursuant to which the Company may offer and sell from time to time, in one or more series, any one of the following securities of our company, for total gross proceeds up to $300,000,000: ● common stock; ● preferred stock; ● secured or unsecured debt securities consisting of notes, debentures or other evidences of indebtedness which may be senior debt securities, senior subordinated debt securities or subordinated debt securities, each of which may be convertible into equity securities; ● warrants to purchase our securities; 33 ● rights to purchase any of the foregoing securities; or ● units comprised of, or other combinations of, the foregoing securities.
On May 17, 2021, the Company filed a registration statement on Form S-3, pursuant to which the Company may offer and sell from time to time, in one or more series, any one of the following securities of our company, for total gross proceeds up to $300,000,000: ● common stock; ● preferred stock; ● secured or unsecured debt securities consisting of notes, debentures or other evidence of indebtedness which may be senior debt securities, senior subordinated debt securities or subordinated debt securities, each of which may be convertible into equity securities; ● warrants to purchase our securities; 33 ● rights to purchase any of the foregoing securities; or ● units comprised of, or other combinations of, the foregoing securities.
Certain key customers, including certain UK, Italian and Greek gaming terminal customers and certain Virtual Sports customers, make a significant contribution to our revenue and profitability. Our top ten customers generated approximately 57% of total revenue and two customers generated more than 10% of total revenue in the year ended December 31, 2023.
Certain key customers, including certain UK, Italian and Greek gaming terminal customers and certain Virtual Sports customers, make a significant contribution to our revenue and profitability. Our top ten customers generated approximately 49% of total revenue, however, no customers generated more than 10% of total revenue in the year ended December 31, 2024.
We have operations in a variety of countries, which subjects us to additional risks. We are a global business and derived substantially all of our revenue outside the United States during the year ended December 31, 2022.
We have operations in a variety of countries, which subjects us to additional risks. We are a global business and derived substantially all of our revenue outside the U.S. during the year ended December 31, 2024.
Compliance with the GDPR will incur compliance and operational costs. In addition, a data supervisory authority may find our data processing practices and compliance steps to be inconsistent with the GDPR’s application in their respective jurisdiction.
In addition, a data supervisory authority may find our data processing practices and compliance steps to be inconsistent with the GDPR’s application in their respective jurisdiction.
Our industry is subject to regulations that set parameters for levels of gaming or wagering duty, tax, stake, prize and return to player.
Our industry is subject to regulations that set parameters for levels of gaming or wagering duty, tax, stakes, prize, technology certifications and return to player percentages.
Any such action may adversely affect our standing with gaming regulators and our ability to obtain and retain required licenses and other approvals in other jurisdictions. 21 We may be required to obtain and maintain licenses and certifications from various state and local jurisdictions in order to operate certain aspects of our business and we and our key personnel and certain security holders may be subject to extensive background investigations and suitability standards.
Any determination that we have, directly or indirectly, been engaged in unlawful activity relating to gaming may adversely affect our standing with gaming regulators, and our ability to obtain and retain required licenses and other approvals in such jurisdiction or other jurisdictions. 21 We may be required to obtain and maintain licenses and certifications from various state and local jurisdictions in order to operate certain aspects of our business and we and our key personnel and certain security holders may be subject to extensive background investigations and suitability standards.
Volatility in the financial markets could also result in difficulties for financial institutions and other parties that we do business with, which could potentially affect the ability to access financing under existing arrangements.
Volatility in the financial markets could also result in difficulties for financial institutions and other parties that we do business with, which could potentially affect the ability to access financing under existing arrangements. We are exposed to the impact of any global or domestic economic disruption.
We operate in a period of intense price-based competition in some key sectors, which could affect the profitability of the contracts and sales we do win.
Such competition could adversely affect our ability to win new contracts and sales and renew existing contracts. We operate in a period of intense price-based competition in some key sectors, which could affect the profitability of the contracts and sales we do win.
In most jurisdictions in which we operate or expect to seek to operate, the level of duty or taxation, the stake, prize and return to player of wagering, betting and lottery games and the speed at which players can participate in gaming are defined in government regulations which are subject to change.
In most jurisdictions in which we operate or expect to seek to operate, the level of duty or taxation, the stakes, prizes and return to player percentages of wagering, betting and lottery games and the speed at which players can participate in gaming, or technology certifications are, or may be, defined by government regulations, according to each jurisdiction and remain subject to change.
Labor shortages may also negatively impact us from servicing all demand that exists for our products or operating our service operations and manufacturing facilities efficiently.
Further taxes may be introduced in the UK which may further increase labor costs . Labor shortages may also negatively impact us from servicing all demand that exists for our products or operating our service operations and manufacturing facilities efficiently.
In the year ended December 31, 2023, we earned approximately 78% of our revenue from our operations in the UK, 8% of our revenue from our operations in Greece, and 14% of our revenue from our operations in the rest of the world.
In the year ended December 31, 2024, we earned approximately 73% of our revenue from our operations in the UK, 7% of our revenue from our operations in Greece, and 20% of our revenue from our operations in the rest of the world.
As of December 31, 2023, our senior debt consisted of an aggregate of £235.0 million ($299.6 million) of Senior Secured Notes (carrying an interest rate of 7.875% per annum, and maturing on June 1, 2026), and we had £20.0 million ($25.5 million) of credit facility borrowings available under the RCF Agreement, with £15.0 million ($19.1 million) drawn as of December 31, 2023 (see Note 13).
As of December 31, 2024, our senior debt consisted of an aggregate of £235.0 million ($294.4 million) of Senior Secured Notes (carrying an interest rate of 7.875% per annum, and maturing on June 1, 2026), and we had £20.0 million ($25.1 million) of credit facility borrowings available under the RCF Agreement, with £15.0 million ($18.8 million) drawn as of December 31, 2024 (see Note 13 to our audited financial statements for the year ended December 31, 2024, included elsewhere in this Report).
In addition, any such changes may cause our customers to seek to renegotiate their contracts, may alter the terms on which such customers are prepared to renew their contracts and may affect their ability or willingness to renew their contracts. 17 We rely on a relatively small number of customers for a significant portion of our sales, and the loss of, or material reduction in, sales to any of our top customers could have an adverse effect on our business, results of operations, financial condition and prospects.
Particularly in our Virtuals business, we rely on a relatively small number of customers for a significant portion of our sales, and the loss of, or material reduction in, sales to any of our top customers could have an adverse effect on our business, results of operations, financial condition and prospects.
While there have not been cybersecurity incidents or vulnerabilities that have had a material adverse effect on the company, there is no assurance that there will not be cybersecurity incidents or vulnerabilities that will have a material adverse effect in the future. Our business depends upon the protection of our intellectual property and proprietary information.
While there have not been cybersecurity incidents or vulnerabilities that have had a material adverse effect on the company, there is no assurance that there will not be cybersecurity incidents or vulnerabilities that will have a material adverse effect in the future. One of the major risks to our business is the use of AI by malicious actors.
Changes in applicable gambling regulations or taxation regimes may affect the revenue or profits generated by the contracts we enter into with our customers. Many of the contracts we have with our customers are on revenue-sharing (net of gaming taxes) terms, and therefore changes which adversely affect our customers may also adversely affect us.
Many of the contracts we have with our customers are on revenue-sharing (net of gaming taxes) terms, and therefore changes which adversely affect our customers are likely to adversely affect us.
Our ability to bid on new contracts may be dependent upon our ability to fund any required up-front capital expenditures through our cash from operations, the incurrence of indebtedness or the raising of additional equity capital.
Mandatory levies are and can be introduced in certain places, such as the UK, to fund research into the prevention, treatment, and prevention of gambling related harm . 17 Our ability to bid on new contracts may be dependent upon our ability to fund any required up-front capital expenditures through our cash from operations, the incurrence of indebtedness or the raising of additional equity capital.
These risks are discussed more fully below and include, but are not limited to, risks related to the following: ● We rely on a relatively small number of customers for a significant portion of our sales, and the loss of, or material reduction in, sales to any of our top customers could have an adverse effect on our business, results of operations, financial condition and prospects. ● We have identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting.
These risks are discussed more fully below and include, but are not limited to, risks related to the following: ● We have identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting, which we are in the process of remediating.
We seek to protect ourselves against any such liability for the activities of the operators that we supply, including by contractually requiring those operators not to operate in certain territories and only supplying operators who we have reviewed to determine whether they uphold the requisite standards of regulatory and legal compliance.
Although we attempt to protect ourselves against any such liability for the activities of the operators that we supply, including by contractually requiring those operators to operate in accordance with all applicable laws, not to operate in certain territories and only supplying operators whose activities have been reviewed to ascertain compliance with the requisite standards of regulatory and legal compliance, nonetheless, there is a risk that we may fail to undertake sufficient due diligence, or fail to receive accurate information on which to conduct due diligence.
The risk of cyber attacks may also increase owing to the current war in Ukraine. 18 Although the company continuously takes significant steps to mitigate cybersecurity risk across a range of functions, such measures can never eliminate the risk entirely or provide absolute security, and the Company has experienced and expects to continue to experience cyberattacks on its information systems.
The Company has continued to work to improve its defences against cybersecurity incidents, its educational programs for its employees and consultants in this area, and to comply with all recommendations from the Information Commissioners Office. 18 Although we continually take significant steps to mitigate cybersecurity risk across a range of functions, such measures can never eliminate the risk entirely or provide absolute security, and the Company has experienced and expects to continue to experience attempts at cyberattacks on its information systems.
We could also be negatively impacted by existing and proposed laws and regulations, and government policies and practices related to cybersecurity, data privacy, data localization and data protection.
We could also be negatively impacted by existing and proposed laws and regulations, and government policies and practices related to cybersecurity, data privacy, data localization and data protection. The risk of cyber attacks may also increase owing to current trends worldwide. On November 8, 2023, we detected a ransomware attack on our information technology (“IT”) systems.
We face competition from a number of businesses, including worldwide businesses, many of which have substantially greater financial resources and operating scale than we do. Such competition could adversely affect our ability to win new contracts and sales and renew existing contracts.
We operate in a highly competitive industry and our success depends upon our ability to effectively compete with numerous worldwide businesses. We face competition from a number of businesses, including worldwide businesses, many of which have substantially greater financial resources and operating scale than we do, or which may operate in countries which have lower labor costs .
We supply certain of our products to operators who operate gaming websites. Some of those operators may take bets from customers in sectors where no gaming laws or regulations exist and where the provision of online gaming is effectively unregulated.
Despite warranties from counterparties in our contracts, there is some risk that our products may be used by platforms or by customers who may take bets from customers in jurisdictions where no gaming laws or regulations exist or even where the provision of online gaming is ineffectively regulated.
Although the Company seeks to ensure that its customers only take bets in sectors where online gaming is legal, if any of those operators is subjected to investigatory or enforcement action for acting otherwise, this could result in the operator suffering interventions ranging from special conditions being applied to its licenses, license suspension or license loss, or the operator otherwise withdrawing from or curtailing its activities in its sector.
An adverse determination could result in the operator being subject to penalties ranging from special conditions being applied to its licenses, license suspension, license loss, or the operator otherwise withdrawing from or curtailing its activities in its sector or being subjected to fines, penalties or other legal consequences.
Any such developments could adversely affect such operator’s revenue and in turn adversely affect our earnings from such operator.
Any such developments could adversely affect such operator’s revenue and have adverse effects on the Company, including loss of earnings from such operators or platforms, or the Company’s ability to operate in such jurisdiction or in other jurisdictions.
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Further, we distribute our machines and receive parts through the freight transportation market, and reduced trucking capacity due to shortages of drivers has led to increased costs and reduced service levels due to lack of freight transportation availability. We operate in a highly competitive industry and our success depends upon our ability to effectively compete with numerous worldwide businesses.
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Failure to remediate these material weaknesses or any other material weaknesses that we identify in the future could result in material misstatements in our financial statements. ● Particularly in our Virtuals business, we rely on a relatively small number of customers for a significant portion of our sales, and the loss of, or material reduction in, sales to any of our top customers could have an adverse effect on our business, results of operations, financial condition and prospects. ● We are dependent on our relationships with key suppliers to obtain equipment and other supplies for our business on acceptable terms. ● We operate in a highly competitive industry and our success depends upon our ability to effectively compete with numerous worldwide businesses. ● One of the major risks to our business is the use of Artificial Intelligence (“AI”) by malicious actors.
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Nonetheless, there is a risk that we may fail to undertake sufficient due diligence, fail to receive accurate information on which to conduct due diligence, or become subject to investigatory or enforcement action should we or any of our customers be accused of breaching any regulations or laws.
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AI-powered bots can imitate human players in online gambling platforms, potentially undermining the fairness and integrity of games. These bots can be programmed to try and exploit vulnerabilities in a gambling platform’s security infrastructure, can launch advanced phishing attacks, malware, and ransomware, and pose a significant threat to the security of online gambling platforms.
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We are exposed to the impact of any global or domestic economic disruption, including any potential impact of the decision by the UK to exit the EU and the sovereign debt crises in certain Eurozone countries where we do business.
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These attacks can lead to substantial financial losses, compromise game, financial or user data, and damage the company’s reputation. ● Data privacy and security laws and regulations in the jurisdictions in which we do business could increase the cost of our operations and subject us to possible sanctions and other penalties. ● Our results of operations fluctuate due to seasonality and other factors and, therefore, our periodic operating results are not guarantees of future performance. ● Our industry is subject to strict government regulations that could limit our existing operations and have a negative impact on our ability to grow.
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Additionally, there has been, and may continue to be, volatility in currency exchange rates as a result of the UK’s June 23, 2016 referendum in which voters approved Brexit and subsequent entry into and ratification of a withdrawal agreement as of January 29, 2021 followed by an agreement of the terms of a trade and cooperation agreement effective as of December 31, 2021.
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A majority of our income is generated through the licensing and supply of software and technology to B2C operators.
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It is possible that sovereign debt crises in certain Eurozone countries could lead to the abandonment of the Euro and the reintroduction of national currencies in those countries.
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Our business is therefore highly dependent on the laws and regulations relating to the supply of gaming services, which laws and regulations are complex and inconsistent across jurisdictions and are subject to change. ● Our industry is subject to regulations that set parameters for levels of gaming or wagering duty, tax, stake, prize and return to player. ● Our ability to provide our software to gaming operators depends upon the integrity, reliability and operational performance of our systems, games and products. ● Because tax laws and regulations are subject to interpretation and uncertainty, tax payments may ultimately differ from amounts currently recorded by us.
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We could lose substantial revenue due to introduction or increase of gaming taxes, levies, withholding taxes and other local taxes. Changes in applicable gambling regulations or taxation regimes may affect the revenue or profits generated by the contracts we enter into with our customers.
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In addition, any such changes may cause our customers to seek to renegotiate their contracts, may alter the terms on which such customers are prepared to renew their contracts and may affect their ability or willingness to renew their contracts.
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Finally, revenues generated in third party countries (i.e. outside of the EU or the UK) often attract withholding and/or other local sales taxes which, even if recoverable, may impact short - term cashflow.
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The attack impacted and disrupted certain of the Company’s corporate IT systems but did not impact any product systems. As part of its cyber security, by design and physical separation, the product systems were separated from the corporate systems and therefore protected from attack.
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On November 15, 2023, the company also became aware that Company data (including in the form of personal data) had been exfiltrated.
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AI-powered bots can imitate human players in online gambling platforms, potentially undermining the fairness and integrity of games.
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These bots can be programmed to try and exploit vulnerabilities in a gambling platform’s security infrastructure, can launch advanced phishing attacks, malware, and ransomware, imitate human players in online gambling platforms, potentially undermining the fairness and integrity of games, and pose a significant threat to the security of online gambling platforms.
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These attacks can lead to substantial financial losses, compromise game, financial or user data, and damage the company’s reputation. Detecting fraudulent or malicious activity can be difficult. Although we have implemented measures intended to detect and reduce the occurrence of fraudulent activities, including click fraud, we cannot guarantee that we will be fully successful in doing so.
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If we fail to detect or prevent fraudulent or other malicious activity, it may result in dissuading sellers and customers alike from engaging with our products and services.
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Any actual or alleged future fraudulent activity may damage our reputation, or diminish the value of our brand name, either of which could adversely impact our business, results of operations and financial condition. Our business depends upon the protection of our intellectual property and proprietary information.
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We are also required to sign up to standard contractual clauses for protection of customer data in third countries, and to comply with local data protection requirements in places where the end users of our companies are established, as for example, Brazil. Compliance with the GDPR in each required jurisdiction incurs compliance and operational costs.
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We supply certain of our products to operators of gaming websites as well as to aggregators that provide content to other gaming operators utilizing the internet to offer services.
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Although the Company seeks to ensure that its content is available through operators where online gaming is legal, if claims are made that any of those operators or software platforms are not operating solely in jurisdictions where gaming is legal, the operators may be subjected to investigation or enforcement action by regulatory authorities.
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There is also a risk that there is a change in the operations by such operators, and a risk of lack of appropriate oversight by aggregator platforms. Our good relationships with gaming regulators, and our compliance with gaming laws and regulations is critical to our business.
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We may be subject to disciplinary action if, after we receive notice that a person is unsuitable to be a stockholder or to have any other relationship with us or any of our subsidiaries, we: (i) pay that person any dividend or interest upon our voting securities, (ii) allow that person to exercise, directly or indirectly, any voting right conferred through securities held by that person, (iii) pay remuneration in any form to that person for services rendered or otherwise, or (iv) fail to pursue all lawful efforts to require such unsuitable person to relinquish voting securities including, if necessary, the immediate purchase of said voting securities for cash at fair market value.
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Although the registration statement has expired, we may in the future file additional registration statements in order to register similar securities as those listed above, upon which the market price of our securities could drop significantly if the holders of these securities sell them or are perceived by the market as intending to sell them.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeITEM 1C. CYBERSECURITY. The Company maintains a governance structure to address cybersecurity risk, which involves a dedicated Information Security Team (the “Information Security Team”), an Information Security Governance Board (the “Information Security Governance Board”), the Audit Committee of the Board and the Board.
Biggest changeITEM 1C. CYBERSECURITY. The Company maintains a governance structure to address cybersecurity risk, which involves a dedicated Information Security Team (the “Information Security Team”), an Information Security Governance Board (the “ Information Security Governance Board ”), the Audit Committee of the Board and the Board.
The Company’s Information Security Governance Board, chaired by the Company’s Director of Information Security and comprised of the General Counsel, the President & Chief Executive Officer, the Interim Chief Financial Officer, and the Chief Technology Officer - Product, drives awareness and alignment across broad stakeholder groups for cybersecurity governance and risk management and reporting.
The Company’s Information Security Governance Board, chaired by the Company’s Director of Information Security and comprised of the General Counsel, the President & Chief Executive Officer, the Chief Financial Officer, and the Chief Technology Officer - Product, drives awareness and alignment across broad stakeholder groups for cybersecurity governance and risk management and reporting.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe primary locations were as follows: ● Approximately 40,000 square feet of office space on one floor in Burton-on-Trent, East Midlands, UK. ● Approximately 2,250 square feet of flexible office space in Manchester, UK. ● Approximately 80,000 square feet of administrative offices, workshop and warehousing in Bridgend, South Wales, UK. ● Approximately 17,000 square feet of office space on one floor in Kochi, India. ● Approximately 3,200 square feet of office space on one floor in New York.
Biggest changeThe primary locations were as follows: ● Approximately 40,000 square feet of office space on one floor in Burton-on-Trent, East Midlands, UK. ● Approximately 1,700 square feet of flexible office space in Manchester, UK. ● Approximately 105,000 square feet of warehousing, across six UK Regional Distribution Centres. ● Approximately 80,000 square feet of administrative offices, workshop and warehousing in Bridgend, South Wales, UK. ● Approximately 60,000 square feet of administrative offices, repair centre and warehousing at Ashby de La Zouche, UK. ● Approximately 17,000 square feet of office space on one floor in Kochi, India. ● Approximately 3,200 square feet of office space on one floor in New York.
ITEM 2. PROPERTIES. As of December 31, 2023, the Company occupied approximately 240,000 square feet of leased space in the UK, 1,000 square feet of leased space elsewhere in Europe, 3,200 square feet in New York and 17,000 square feet in Kochi, India.
ITEM 2. PROPERTIES. As of December 31, 2024, the Company occupied approximately 300,000 square feet of leased space in the UK, 3,200 square feet in New York and 17,000 square feet in Kochi, India.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, at this time, Management believes that the ultimate outcome and timing of the SEC investigation remains uncertain and is not estimable given the broad range of potential outcomes. From time to time, the Company is involved in legal matters arising in the ordinary course of business.
Biggest changeOn January 28, 2025, the SEC staff notified the Company that it had concluded its investigation as to the Company and did not intend to recommend an enforcement action. From time to time, the Company is involved in legal matters arising in the ordinary course of business.
While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have an adverse effect on its business, financial condition or results of operations. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. PART II
While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable.
ITEM 3. LEGAL PROCEEDINGS. Securities Matters Arising From the Company’s Restated Financial Statements and Related Matters On March 12, 2024, the Company received a subpoena from the SEC seeking documents concerning, among other things, the Company’s recently restated financial statements. The Company intends to comply with the subpoena and is cooperating with the SEC’s inquiry.
ITEM 3. LEGAL PROCEEDINGS. Securities Matters Arising From the Company’s Restated Financial Statements and Related Matters On March 12, 2024, the Company received a subpoena from the SEC seeking documents concerning, among other things, the Company’s recently restated financial statements. The Company cooperated with the SEC’s inquiry.
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The Company cannot predict the ultimate outcome or timing of the SEC investigation, what if any actions may be taken by the SEC, or the effect that such actions may have on the business, prospects, operating results and financial condition. The resolution of the SEC investigation may result in substantial monetary penalties or settlement costs.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis does not include the number of stockholders who hold shares of our common stock through banks, brokers or other financial institutions. Recent Sales of Unregistered Securities None. 37 Purchases of Equity Securities by the Issuer and Affiliated Purchasers There were no share repurchase activities for the three months ended December 31, 2023.
Biggest changeThis does not include the number of stockholders who hold shares of our common stock through banks, brokers or other financial institutions or nominees. Recent Sales of Unregistered Securities None. 37 Purchases of Equity Securities by the Issuer and Affiliated Purchasers There were no share repurchase activities during the three months ended December 31, 2024.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock is listed and traded on the Nasdaq Capital Market under the symbol “INSE”. Holders As of April 11, 2024, there were 33 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock is listed and traded on the Nasdaq Capital Market under the symbol “INSE”. Holders As of March 26, 2025, there were 32 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAll variances discussed in the overall company and segment results are on a functional currency (at constant rate) basis, which excludes the impact of any changes in foreign currency exchange rates. 40 Overall Company Results Twelve Months ended December 31, 2023, compared to Twelve Months ended December 31, 2022 For the Twelve-Month Variance Period ended December 31, 2023 vs December 31, 2022 (In millions) December 31, 2023 December 31, 2022 Variance Attributable to Currency Movement Variance on a Functional currency basis Total Functional Currency Variance % Total Reported Variance % Revenue: Service $ 261.2 $ 248.4 $ 3.0 $ 9.8 4 % 5 % Product 61.8 33.2 1.5 27.1 82 % 86 % Total revenue 323.0 281.6 4.5 36.9 13 % 15 % Cost of Sales, excluding depreciation and amortization: Cost of Service (75.1 ) (71.4 ) (1.3 ) (2.4 ) 3 % 5 % Cost of Product (52.6 ) (21.9 ) (1.0 ) (29.7 ) 136 % 140 % Selling, general and administrative expenses (104.3 ) (91.1 ) (0.7 ) (12.5 ) 14 % 14 % Stock-based compensation (11.2 ) (10.8 ) (0.1 ) (0.3 ) 3 % 4 % Acquisition and integration related transaction expenses - (0.5 ) - 0.5 (100 )% (100 )% Depreciation and amortization (39.9 ) (39.9 ) (0.5 ) 0.5 (1 )% 0 % Net operating Income (Loss) 39.9 46.0 0.9 (7.0 ) (15 )% (13 )% Other income (expense) Interest expense, net (27.7 ) (25.3 ) (0.4 ) (2.0 ) 8 % 9 % Profit on disposal of trade & assets - 0.9 (0.1 ) (0.8 ) (89 )% (100 )% Other finance income (expense) 0.4 1.1 - (0.7 ) (64 )% (64 )% Total other income (expense), net (27.3 ) (23.3 ) (0.5 ) (3.5 ) 15 % 17 % Income (loss) before income taxes 12.6 22.7 0.3 (10.4 ) (46 )% (44 )% Income tax expense (5.0 ) (2.1 ) (0.1 ) (2.8 ) 133 % 138 % Net Income (Loss) $ 7.6 $ 20.6 $ 0.2 $ (13.2 ) (64 )% (63 )% Exchange Rate - $ to £ 1.24 1.23 See “Segments Results” below for a more detailed explanation of the significant changes in our components of revenue within the individual segment results of operations.
Biggest changeIn addition, in the Leisure segment Inspired won a new multi-year contract with Parkdean Resorts for the sole supply of amusement and gaming machines to their holiday park estate of 64 sites nationwide in the UK and a new multi-year contract with Away Resorts for sole supply to 19 sites nationwide in the UK. 39 Overall Company Results Twelve Months ended December 31, 2024, compared to Twelve Months ended December 31, 2023 For the Twelve-Month Variance Period ended December 31, 2024 vs December 31, 2023 (In millions) December 31, 2024 December 31, 2023 Variance Attributable to Currency Movement Variance on a Functional currency basis Total Functional Currency Variance % Total Reported Variance % Revenue: Service $ 258.6 $ 257.8 $ 6.9 $ (6.1 ) (2 )% - Product 38.5 65.1 0.4 (27.0 ) (41 )% (41 )% Total revenue 297.1 322.9 7.3 (33.1 ) (10 )% (8 )% Cost of Sales, excluding depreciation and amortization: Cost of Service (70.3 ) (75.1 ) (1.9 ) 6.7 (9 )% (6 )% Cost of Product (22.0 ) (53.5 ) (0.4 ) 31.9 (60 )% (59 )% Staff-related selling, general and administrative expenses (65.5 ) (62.5 ) (1.6 ) (1.4 ) 2 % 5 % Non-staff related selling, general and administrative expenses (51.0 ) (44.3 ) (1.3 ) (5.4 ) 12 % 15 % Labor costs capitalized 11.9 11.8 0.2 (0.1 ) (1 )% 1 % Other segment items: Stock-based compensation (7.6 ) (11.2 ) (0.1 ) 3.7 (33 )% (32 )% Depreciation and amortization (43.3 ) (39.6 ) (1.1 ) (2.6 ) 7 % 9 % Other selling, general and administrative expenses (18.6 ) (9.6 ) (0.5 ) (8.5 ) 89 % 94 % Net operating Income 30.7 38.9 0.6 (8.8 ) (22 )% (21 )% Other income (expense) Interest expense, net (29.4 ) (27.4 ) (0.4 ) (1.6 ) 6 % 7 % Other finance income (expense) 0.5 0.4 - 0.1 25 % 25 % Total other income (expense), net (28.9 ) (27.0 ) (0.4 ) (1.5 ) 6 % 7 % Net Income from continuing operations before income taxes 1.8 11.9 0.2 (10.3 ) (87 )% (85 )% Income tax income (expense) 63.0 (5.0 ) 0.7 67.3 (1346 )% (1360 )% Net Income $ 64.8 $ 6.9 $ 0.9 $ 57.0 826 % 839 % Exchange Rate - $ to £ 1.28 1.25 See “Segments Results” below for a more detailed explanation of the significant changes in our components of revenue within the individual segment results of operations.
“Gaming Project Recurring Revenue” relates specifically to a single customer for machine estate upgrades and distribution. “Gaming Other Fixed Fee Recurring Revenue” includes service revenue in which the Company earns a periodic fixed fee on a contracted basis. “Gaming Long term license amortization” – see the definition provided above.
“Gaming Other Fixed Fee Recurring Revenue” includes service revenue in which the Company earns a periodic fixed fee on a contracted basis. “Gaming Project Recurring Revenue” relates specifically to a single customer for machine estate upgrades and distribution. “Gaming Long term license amortization” – see the definition provided above.
The Company must apply judgement in determining the amount of software development costs that should be capitalized. Specifically, we must evaluate, on a project by project basis, whether the resultant product or platform will be completed and generate ongoing economic benefits, principally through revenue from our customers, which is subject to uncertainties.
Software Development Costs The Company must apply judgement in determining the amount of software development costs that should be capitalized. Specifically, we must evaluate, on a project by project basis, whether the resultant product or platform will be completed and generate ongoing economic benefits, principally through revenue from our customers, which is subject to uncertainties.
(2) “Cost of Group Restructure” include redundancy costs, payment in lieu of notice costs and any associated employer taxes. To qualify as being an adjusting item, costs must be part of a large restructuring project, which will net save ongoing future costs or be in relation to the exit of an Executive.
(2) “Cost of Group Restructure” include redundancy costs, payment in lieu of notice costs and any associated employer taxes. To qualify as an adjusting item, costs must be part of a large restructuring project, which will net save ongoing future costs or be in relation to the exit of an Executive.
We are, however, subject to covenant testing at the level of Inspired Entertainment Inc., the ultimate holding company, on our Super Senior Revolving Credit Facility which requires the Company to maintain a maximum consolidated senior secured net leverage ratio of 6.25x on the test date for the relevant period ending June 30, 2021, stepping down to 6.0x on March 31, 2022, 5.75x on March 31, 2023 and 5.50x from March 31, 2024 and thereafter (the “RCF Financial Covenant”).
We are, however, subject to covenant testing at the level of Inspired Entertainment Inc., the ultimate holding company, on our Super Senior Revolving Credit Facility which requires the Company to maintain a maximum consolidated senior secured net leverage ratio of 6.25x on the test date for the relevant period ended June 30, 2021, stepping down to 6.0x on March 31, 2022, 5.75x on March 31, 2023 and 5.50x from March 31, 2024 and thereafter (the “RCF Financial Covenant”).
Share Repurchases The Board of Directors has authorized that the Company may use up to $25.0 million to repurchase Inspired shares of common stock, subject to repurchases being effected on or before May 10, 2025.
Share Repurchases The Board of Directors has authorized the Company to use up to $25.0 million to repurchase shares of Inspired common stock, subject to repurchases being effected on or before May 10, 2025.
Securities and Exchange Commission. Critical Accounting Policies and Accounting Estimates The preparation of our audited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions.
Securities and Exchange Commission. Critical Accounting Estimates The preparation of our audited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions.
Virtual Sports We generate revenue from our Virtual Sports segment through the on premise licensing solution and hosting of our products. We primarily receive fees on a participation basis.
Virtual Sports We generate revenue from our Virtual Sports segment through our on-premise licensing solution and hosting of our products. We primarily receive fees on a participation basis.
The RCF Financial Covenant does not include a minimum interest coverage ratio or other financial covenants. Covenant testing at December 31, 2023 showed covenant compliance. The Indenture contains covenants and certain reporting requirements including the requirement to provide the Lender, within 60 days after the close of the quarter, unaudited quarterly financial statements with footnote disclosures.
The RCF Financial Covenant does not include a minimum interest coverage ratio or other financial covenants. Covenant testing at December 31, 2024 showed covenant compliance. The Indenture contains covenants and certain reporting requirements including the requirement to provide the Lender, within 60 days after the close of the quarter, unaudited quarterly financial statements with footnote disclosures.
Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit.
Goodwill Impairment Assessment Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit.
Typically, we recognize revenue from these arrangements on a daily basis over the term of the contract. 47 Revenue growth for our Virtual Sports segment is principally driven by the number of customers we have, the net win performance of the games and the net win percentage that we receive pursuant to our contracts with our customers.
Typically, we recognize revenue from these arrangements on a daily basis over the term of the contract. 45 Revenue growth for our Virtual Sports segment is principally driven by the number of customers we have, the net win performance of the games and the net win percentage that we receive pursuant to our contracts with our customers.
Typically, we recognize revenue from these arrangements on a daily basis over the term of the contract. 49 Revenue growth for our Interactive segment is principally driven by the number of customers we have, the number of live games, the net win performance of the games and the net win percentage that we receive pursuant to our contracts with our customers.
Typically, we recognize revenue from these arrangements on a daily basis over the term of the contract. 47 Revenue growth for our Interactive segment is principally driven by the number of customers we have, the number of live games, the net win performance of the games and the net win percentage that we receive pursuant to our contracts with our customers.
Forward-Looking Statements We make forward-looking statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. For definitions of the term Forward-Looking Statements, see the definitions provided in the Cautionary Note Regarding Forward-Looking Statements at the start of this Annual Report on Form 10-K for the twelve month period ended December 31, 2023.
Forward-Looking Statements We make forward-looking statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. For definitions of the term Forward-Looking Statements, see the definitions provided in the Cautionary Note Regarding Forward-Looking Statements at the start of this Annual Report on Form 10-K for the twelve-month period ended December 31, 2024.
Currency Movement represents the difference between the results in our reporting currency (USD) and the results on a functional currency (at constant rate) basis. 54 Reconciliations from net loss, as shown in our Consolidated Statements of Operations and Comprehensive Income (Loss), to Adjusted EBITDA are shown below.
Currency Movement represents the difference between the results in our reporting currency (USD) and the results on a functional currency (at constant rate) basis. 52 Reconciliations from net loss, as shown in our Consolidated Statements of Operations and Comprehensive Income (Loss), to Adjusted EBITDA are shown below.
Revenue is derived from the performance of the installed base as described by the Gross and Net Win KPIs. 43 If the End of Period Installed Base is materially different from the Average Installed Base (described below), we believe this gives an indication as to potential future performance.
Revenue is derived from the performance of the installed base as described by the Gross and Net Win KPIs. 41 If the End of Period Installed Base is materially different from the Average Installed Base (described below), we believe this gives an indication as to potential future performance.
“Number of Machine sales” is the number of terminals sold during the period. “Average selling price per terminal” is the total revenue in GBP of the Gaming terminals sold divided by the “number of Machine sales”. 44 Gaming, Recurring Revenue Set forth below is a breakdown of our Gaming recurring revenue.
“Number of Machine sales” is the number of terminals sold during the period. “Average selling price per terminal” is the total revenue in GBP of the Gaming terminals sold divided by the “number of Machine sales”. 42 Gaming, Recurring Revenue Set forth below is a breakdown of our Gaming recurring revenue.
Liens and Encumbrances As of December 31, 2023, our senior secured notes were secured by the imposition of a fixed and floating charge in favor of the lender over all the assets of the Company and certain of the Company’s subsidiaries.
Liens and Encumbrances As of December 31, 2024, our senior secured notes were secured by the imposition of a fixed and floating charge in favor of the lender over all the assets of the Company and certain of the Company’s subsidiaries.
Interactive We generate revenue from our Interactive segment through various games content made available via third party aggregation platforms integrated with Inspired’s remote gaming server or directly on the Company’s remote gaming servers platform, and services such as customer support, platform maintenance, updates and upgrades. Typically, we receive fees on a participation basis.
Interactive We generate revenue from our Interactive segment through various gaming content made available via third-party aggregation platforms integrated with our remote gaming server or directly on the Company’s remote gaming server platform, and services such as customer support, platform maintenance, updates and upgrades. Typically, we receive fees on a participation basis.
Management evaluates the useful lives of these assets on a recurring basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. 63
Management evaluates the useful lives of these assets on a recurring basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. 61
(2) Includes circa 2,500 of lottery terminals where the share is on handle instead of net win. In the table above: “End of Period Installed Base” is equal to the number of deployed Gaming terminals at the end of each period that have been placed on a participation or fixed rental basis.
(2) Includes approximately 2,500 lottery terminals where the revenue share is on handle instead of net win. In the table above: “End of Period Installed Base” is equal to the number of deployed Gaming terminals at the end of each period that have been placed on a participation or fixed rental basis.
The debt agreement allows the Company a 30-day grace period to provide such financial information once they receive any notice of non-compliance. No such notice was received and concurrent with the filing of the September 30,2023 10Q with the SEC on February 27, 2024, the reporting requirement was met.
The debt agreement allows the Company a 30-day grace period to provide such financial information once they receive any notice of non-compliance. No such notice was received and concurrent with the filing of the September 30, 2023 10-Q with the SEC on February 27, 2024, the reporting requirement was met.
To qualify as being an adjusting item, costs must be specific to the event and be neither normal nor recurring in nature. 56 (4) Stock-based compensation expense, Depreciation and amortization, Total other expense, net and Income tax are as described above in the Results of Operations line item discussions.
To qualify as an adjusting item, costs must be specific to the event and be neither normal nor recurring in nature. 54 (4) Stock-based compensation expense, Depreciation and amortization, Total other expense, net and Income tax are as described above in the Results of Operations line item discussions.
Segment Results ( for the twelve months ended December 31, 2023, compared to the twelve months ended December 31, 2022) Gaming We generate revenue from our Gaming segment through the delivery of our gaming terminals preloaded with proprietary gaming software, server-based content, as well as services such as terminal repairs, maintenance, software updates and upgrades on an when and if available basis and content development.
Segment Results ( for the twelve months ended December 31, 2024, compared to the twelve months ended December 31, 2023) Gaming We generate revenue from our Gaming segment through the delivery of our gaming terminals preloaded with proprietary gaming software, server-based content, as well as services such as terminal repairs, maintenance, software updates and upgrades on a when and if available basis and content development.
We believe the End of Period Installed Base is particularly useful for assessing new customers or markets, to indicate the progress being made with respect to entering new territories or jurisdictions. “Total Gaming - Average Installed Base” is the average number of deployed Gaming terminals during the period split by Participation terminals and Fixed Rental terminals.
We believe the End of Period Installed Base is particularly useful for assessing new customers or markets, to indicate the progress being made with respect to entering new territories or jurisdictions. “Total Gaming - Average Installed Base” is the average number of deployed Gaming terminals during the period consisting of both participation terminals and fixed rental terminals.
Foreign Exchange Our results are affected by changes in foreign currency exchange rates because of the translation of foreign functional currencies into our reporting currency and the re-measurement of foreign currency transactions and balances. The impact of foreign currency exchange rate fluctuations represents the difference between current rates and prior-period rates applied to current activity.
Foreign Exchange Our results are affected by changes in foreign currency exchange rates as a result of the translation of foreign functional currencies into our reporting currency and the re-measurement of foreign currency transactions and balances. The impact of foreign currency exchange rate fluctuations represents the difference between current rates and prior-period rates applied to current activity.
“No. of Live Games at the end of the period” and “Average No. of Live Games” represents the number of games from which there is Interactive revenue at the end of the period and the average number of games from which there is Interactive revenue during the period, respectively.
This incorporated live games and inactive games. “No. of Live Games at the end of the period” and “Average No. of Live Games” represents the number of games from which there is Interactive revenue at the end of the period and the average number of games from which there is Interactive revenue during the period, respectively.
A discussion and analysis of the Company’s consolidated results of operation and results of operations for each of the Company’s segments for the twelve-month period ended December 31, 2022, compared to the same period in 2021, can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Form 10-K/A for the fiscal year ended December 31, 2022 filed with the SEC on February 27, 2024.
A discussion and analysis of the Company’s consolidated results of operation and results of operations for each of the Company’s segments for the twelve-month period ended December 31, 2023, compared to the same period in 2022, can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on April 15, 2024.
Additional adjustments are made for items considered outside the normal course of business, including but not limited to (1) restructuring costs, which include charges attributable to employee severance, impairments, management changes, restructuring, dual running costs, costs related to facility closures and integration costs, (2) merger and acquisition costs and (3) gains or losses not in the ordinary course of business.
Additional adjustments are made for items considered outside the normal course of business, including but not limited to (1) restructuring costs, which include charges attributable to employee severance, impairments, management changes, restructuring, dual running costs, costs related to facility closures and integration costs, (2) merger and acquisition costs and (3) gains or losses not in the ordinary course of business (4) the costs of the restatement of previously issued financial statements.
Stock-based compensation During the twelve-month period ended December 31, 2023, the Company recorded expenses of $11.2 million, compared to expenses of $10.8 million, for the twelve month period ended December 31, 2022. All expenses related to outstanding awards, but the twelve months ended December 31, 2023, included $0.4 million of shares that fully vested on the date of grant.
Stock-based compensation During the twelve-month period ended December 31, 2024, the Company recorded expenses of $7.6 million, compared to expenses of $11.2 million, for the twelve-month period ended December 31, 2023. All expenses related to outstanding awards, but the twelve-months ended December 31, 2023, included $0.4 million of shares that fully vested on the date of grant.
Funding Needs and Sources To fund our obligations, historically we have relied on a combination of cash flows provided by operations and the incurrence of additional debt or the refinancing of existing debt. As of December 31, 2023, we had liquidity consisting of $40.0 million in cash and a further $6.4 million of undrawn revolver facility.
Funding Needs and Sources To fund our obligations, historically we have relied on a combination of cash flows provided by operations and the incurrence of additional debt or the refinancing of existing debt. As of December 31, 2024, we had liquidity consisting of $29.3 million in cash and a further $6.3 million of undrawn revolver facility.
During the twelve months ended December 31, 2023, we derived approximately 22% of our revenue from sales to customers outside the UK, compared to 26% during the twelve months ended December 31, 2022.
During the twelve-months ended December 31, 2024, we derived approximately 27% of our revenue from sales to customers outside the UK, compared to 22% during the twelve months ended December 31, 2023.
All variances discussed in the Leisure results below are on a functional currency (at constant rate) basis, which excludes the impact of any changes in foreign currency exchange rates. Leisure Revenue For the twelve-month period ended December 31, 2023 revenue decreased by $0.5 million, or 0.8%.
All variances discussed in the Leisure results below are on a functional currency (at constant rate) basis, which excludes the impact of any changes in foreign currency exchange rates. Leisure Revenue For the twelve-month period ended December 31, 2024 revenue increased by $3.0 million, or 3%.
The following discussion and analysis of our results of operations has been organized in the following manner: ● a discussion and analysis of the Company’s results of operations for the twelve-month period ended December 31, 2023, compared to the same period in 2022; and ● a discussion and analysis of the results of operations for each of the Company’s segments (Gaming, Virtual Sports, Interactive and Leisure) for the twelve-month periods ended December 31, 2023, compared to the same period in 2022, including KPI analysis.
The following discussion and analysis of our results of operations has been organized in the following manner: ● a discussion and analysis of the Company’s results of operations for the twelve-month period ended December 31, 2024, compared to the same period in 2023; and ● a discussion and analysis of the results of operations for each of the Company’s segments (Gaming, Virtual Sports, Interactive and Leisure) for the twelve-month periods ended December 31, 2024, compared to the same period in 2023, including key performance indicator (“KPI”) analysis.
At December 31, 2022, $2.5 million of our $25.0 million of cash were held as operational floats within the machines Management currently believes that the Company’s cash balances on hand, cash flows expected to be generated from operations, and the ability to control and defer capital projects will be sufficient to fund the Company’s net cash requirements through April 2025. 59 Long Term and Other Debt (In millions) December 31, 2023 December 31, 2022 Cash held £ 31.4 $ 40.0 £ 20.8 $ 25.0 Revolver drawn (15.0 ) (19.1 ) - - Original principal senior debt (235.0 ) (299.6 ) (235.0 ) (282.9 ) Cash interest accrued (1.6 ) (2.0 ) (1.5 ) (1.8 ) Finance lease creditors (1.9 ) (2.4 ) (1.8 ) (2.2 ) Total £ (222.1 ) $ (283.1 ) £ (217.6 ) $ (261.9 ) Debt Covenants Under our debt facilities in place as of December 31, 2023, we are not subject to covenant testing on the Senior Secured Notes.
At December 31, 2023, $3.1 million of our $40.0 million of cash were held as operational floats within the machines Management currently believes that the Company’s cash balances on hand, cash flows expected to be generated from operations, and the ability to control and defer capital projects will be sufficient to fund the Company’s net cash requirements through April 2026. 57 Long Term and Other Debt (In millions) December 31, 2024 December 31, 2023 Cash held £ 23.4 $ 29.3 £ 31.4 $ 40.0 Revolver drawn (15.0 ) (18.8 ) (15.0 ) (19.1 ) Original principal senior debt (235.0 ) (294.4 ) (235.0 ) (299.6 ) Cash interest accrued (1.9 ) (2.4 ) (1.6 ) (2.0 ) Finance lease creditors (18.4 ) (23.0 ) (1.9 ) (2.4 ) Total £ (246.9 ) $ (309.3 ) £ (222.1 ) $ (283.1 ) Debt Covenants Under our debt facilities in place as of December 31, 2024, we are not subject to covenant testing on the Senior Secured Notes.
For the Twelve-Month Period ended Variance December 31, 2023 vs December 31,2022 (In £ millions) December 31, 2023 December 31, 2021 % Virtual Sports Recurring Revenue Total Virtual Sports Revenue £ 45.3 £ 44.1 £ 1.2 2.7 % Recurring Revenue - Retail Virtuals £ 9.9 £ 8.7 £ 1.2 13.8 % Recurring Revenue - Online Virtuals £ 34.6 £ 35.1 £ (0.5 ) (1.4 )% Total Virtual Sports Long-term license amortization £ 0.2 £ - £ 0.2 100 % Total Virtual Sports Recurring Revenue £ 44.7 £ 43.8 £ 0.9 2.1 % Virtual Sports Recurring Revenue as a Percentage of Total Virtual Sports Revenue 98.7 % 99.3 % (0.6 )% 48 “Recurring Revenue” includes our share of revenue generated from (i) our Virtual Sports products placed with operators; (ii) licensing our game content and intellectual property to third parties; and (iii) our games on third-party online gaming platforms that are interoperable with our game servers.
For the Twelve-Month Period ended Variance December 31, 2024 vs December 31,2023 (In £ millions) December 31, 2024 December 31, 2023 % Virtual Sports Recurring Revenue Total Virtual Sports Revenue £ 35.6 £ 45.3 £ (9.7 ) (21.4 )% Recurring Revenue - Retail Virtuals £ 9.0 £ 9.9 £ (0.9 ) (9.1 )% Recurring Revenue - Online Virtuals £ 25.6 £ 34.6 £ (9.0 ) (26.0 )% Total Virtual Sports Long-term license amortization £ 0.1 £ 0.2 £ (0.1 ) (50.0 )% Total Virtual Sports Recurring Revenue £ 34.7 £ 44.7 £ (10.0 ) (22.4 )% Virtual Sports Recurring Revenue as a Percentage of Total Virtual Sports Revenue 97.5 % 98.7 % (1.2 )% 46 “Recurring Revenue” includes our share of revenue generated from (i) our Virtual Sports products placed with operators; (ii) licensing our game content and intellectual property to third parties; and (iii) our games on third-party online gaming platforms that are interoperable with our game servers.
Virtual Sports, Key Performance Indicators For the Twelve-Month Period ended Variance December 31, 2023 vs December 31,2022 December 31, 2023 December 31, 2022 % Virtuals No. of Live Customers at the end of the period 56 66 (10 ) (15.2 )% Average No. of Live Customers 57 65 (8 ) (12.3 )% Total Revenue (£’m) £ 45.3 £ 44.1 £ 1.2 2.7 % Total Revenue £’m - Retail £ 10.2 £ 9.0 £ 1.2 13.3 % Total Revenue £’m - Online Virtuals £ 35.2 £ 35.2 £ - 0 % In the table above: “No. of Live Customers at the end of the period” and “Average No. of Live Customers” represent the number of customers from which there is Virtual Sports revenue at the end of the period and the average number of customers from which there is Virtual Sports revenue during the period, respectively.
Virtual Sports, Key Performance Indicators For the Twelve-Month Period ended Variance December 31, 2024 vs December 31, 2023 December 31, 2024 December 31, 2023 % Virtuals No. of Live Customers at the end of the period 58 56 2 (3.6 )% Average No. of Live Customers 56 57 (1 ) (1.8 )% Total Revenue (£’m) £ 35.6 £ 45.3 £ (9.7 ) (21.4 )% Total Revenue £’m - Retail £ 9.2 £ 10.2 £ (1.0 ) (9.8 )% Total Revenue £’m - Online Virtuals £ 26.4 £ 35.2 £ (8.8 ) (25.0 )% In the table above: “No. of Live Customers at the end of the period” and “Average No. of Live Customers” represent the number of customers from which there is Virtual Sports revenue at the end of the period and the average number of customers from which there is Virtual Sports revenue during the period, respectively.
There were no other breaches of the debt covenants in the periods ended December 31, 2023 or December 31, 2022.
There were no other breaches of the debt covenants in the twelve-month periods ended December 31, 2024 or December 31, 2023.
Management has discretion as to whether to repurchase shares of the Company and as of December 31, 2023, an aggregate of $12.0 million of our shares of common stock had been repurchased. 60 Contractual Obligations As of December 31, 2023, our contractual obligations were as follows: Contractual Obligations (in millions) Total Less than 1 year 1-2 years 3-5 years More than 5 years Operating activities Interest on long term debt $ 59.0 $ 23.6 $ 23.5 $ 11.9 $ - Purchase of Vantage machines 12.6 12.6 - - - Financing activities Revolver repayment 20.1 20.1 - - - Senior secured notes - principal repayment 299.6 - - 299.6 - Finance lease payments 2.4 0.7 0.9 0.8 - Operating lease payments 14.5 4.7 3.0 4.2 2.6 Interest on non-utilization fees 0.6 0.2 0.4 - - Total $ 408.8 $ 61.9 $ 27.8 $ 316.5 $ 2.6 Off-Balance Sheet Arrangements As of December 31, 2023, there were no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, promulgated by the U.S.
Management has discretion as to whether to repurchase shares of the Company and as of December 31, 2024, an aggregate of $12.0 million of our shares of common stock had been repurchased over the past three years. 58 Contractual Obligations As of December 31, 2024, our contractual obligations were as follows: Contractual Obligations (in millions) Total Less than 1 year 1-2 years 3-5 years More than 5 years Operating activities Interest on long term debt $ 34.8 $ 23.2 $ 11.6 $ - $ - Purchase of Vantage machines 17.1 17.1 - - - Financing activities Revolver repayment 19.7 19.7 - - - Senior secured notes - principal repayment 294.4 - 294.4 - - Finance lease payments 23.0 4.4 4.7 13.9 - Operating lease payments 16.8 5.1 4.0 4.3 3.4 Interest on non-utilization fees 0.2 0.2 - - - Total $ 406.0 $ 69.7 $ 314.7 $ 18.2 $ 3.4 Off-Balance Sheet Arrangements As of December 31, 2024, there were no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, promulgated by the U.S.
This does not include any adjustments related to COVID-19. We believe Adjusted EBITDA, when considered along with other performance measures, is a particularly useful performance measure, because it focuses on certain operating drivers of the business, including sales growth, operating costs, selling and administrative expense and other operating income and expense.
We believe Adjusted EBITDA, when considered along with other performance measures, is a particularly useful performance measure, because it focuses on certain operating drivers of the business, including sales growth, operating costs, selling and administrative expense and other operating income and expense.
This compares to $25.0 million of cash as of December 31, 2022, with a further $24.1 million of revolver facilities undrawn. We had a working capital outflow of $9.0 million for the twelve months ended December 31, 2023, compared to a $44.5 million outflow for the twelve months ended December 31, 2022.
This compares to $40.0 million of cash as of December 31, 2023, with a further $6.4 million of revolver facilities undrawn. We had a working capital outflow of $89.5 million for the twelve months ended December 31, 2024, compared to a $9.1 million outflow for the twelve months ended December 31, 2023.
For a discussion of other recently issued accounting standards, and assessments as to their impacts on the Company, see Note 1 “Nature of Operations, Management’s Plans and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.
For a discussion of other recently issued accounting standards, and assessments as to their impacts on the Company, see Note 1 “Nature of Operations, Management’s Plans and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report. 59 Revenue Application of GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates.
See “Gaming Segment Revenue” below for a discussion of gaming service revenue between the periods under review. 45 For the Twelve-Month Period ended Variance (In millions) December 31, 2023 December 31, 2022 December 31, 2023 vs December 31, 2022 Total Functional Currency % Service Revenue: UK LBO $ 40.4 $ 40.7 $ (0.3 ) (0.1 )% 1.0 % UK VAT - Related Income 0.0 1.0 (1.0 ) (100.0 )% (100 )% UK Other 13.9 12.1 1.8 14.9 % 7.4 % Italy 2.7 2.7 0.0 0.0 % 0.0 % Greece 18.7 18.1 0.6 3.3 % 2.2 % Rest of the World 2.1 0.7 1.4 200.0 % 200 % Lotteries 5.2 5.1 0.1 2.0 % 2.0 % Total Service revenue $ 83.0 $ 80.4 $ 2.6 3.2 % 2.9 % Exchange Rate - $ to £ 1.25 1.23 Note: Exchange rate in the table is calculated by dividing the USD total service revenue by the GBP total service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
See “Gaming Segment Revenue” below for a discussion of gaming service revenue between the periods under review. 43 For the Twelve-Month Period ended Variance (In millions) December 31, 2024 December 31, 2023 December 31, 2024 vs December 31, 2023 Total Functional Currency % Service Revenue: UK LBO $ 34.5 $ 37.0 $ (2.5 ) (7 )% (18) % UK Other 16.1 13.9 2.2 16 % 13 % Italy 1.7 2.8 (1.1 ) (39 )% (43) % Greece 15.2 18.7 (3.5 ) (19 )% (20 )% Rest of the World 1.8 2.1 (0.3 ) (14 )% (19 )% Lotteries 5.4 5.2 0.2 4 % 4 % Total Service revenue $ 74.7 $ 79.6 $ (4.9 ) (6 )% (13 )% Exchange Rate - $ to £ 1.28 1.25 Note: Exchange rate in the table is calculated by dividing the USD total service revenue by the GBP total service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
Virtual Sports, Results of Operations For the Twelve-Month Period ended Variance December 31, 2023 vs December 31, 2022 (In millions) December 31, 2023 December 31, 2022 Variance Attributable to Currency Movement Variance on a Functional currency basis Total Functional Currency Variance % Total Reported Variance % Service Revenue $ 56.2 $ 54.2 $ 0.5 $ 1.5 2.8 % 3.7 % Cost of Service (1.4 ) (1.8 ) 0.0 0.4 (22.2 )% (22.2 )% Selling, general and administrative expenses (7.1 ) (8.0 ) (0.1 ) 1.0 (12.5 )% (11.3 )% Stock-based compensation (0.4 ) (0.7 ) 0.0 0.3 (42.9 )% (42.9 )% Depreciation and amortization (3.3 ) (2.7 ) 0.1 (0.7 ) 25.9 % 22.2 % Net operating Income (Loss) $ 44.0 $ 41.0 $ 0.5 $ 2.5 6.1 % 7.3 % Exchange Rate - $ to £ 1.25 1.23 Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
Virtual Sports, Results of Operations For the Twelve-Month Period ended Variance December 31, 2024 vs December 31, 2023 (In millions) December 31, 2024 December 31, 2023 Variance Attributable to Currency Movement Variance on a Functional currency basis Total Functional Currency Variance % Total Reported Variance % Service Revenue $ 45.4 $ 56.2 $ 1.2 $ (12.0 ) (21 )% (19 )% Cost of Service (1.7 ) (1.4 ) - (0.3 ) (21 )% (21 )% Staff-related selling, general and administrative expenses (9.2 ) (8.3 ) (0.3 ) (0.6 ) 7 % 11 % Non-staff related selling, general and administrative expenses (2.7 ) (2.4 ) (0.1 ) (0.2 ) 8 % 13 % Labor costs capitalized 4.3 3.5 - 0.8 23 % 23 % Other segment items: Stock-based compensation (0.5 ) (0.4 ) - (0.1 ) 25 % 25 % Depreciation and amortization (5.6 ) (3.2 ) (0.2 ) (2.2 ) 69 % 75 % Net operating Income $ 30.0 $ 44.0 $ 0.6 $ (14.6 ) (33 )% (32 )% Exchange Rate - $ to £ 1.28 1.25 Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
For the Twelve-Month Period ended (In millions) December 31, 2023 December 31 2022 Net revenue $ 323.0 $ 281.6 Less Low Margin Gaming Sales (30.6 ) - Adjusted Revenue $ 292.4 $ 281.6 Adjusted Revenue £ 234.7 £ 229.0 Exchange Rate - $ to £ 1.25 1.23 57 Liquidity and Capital Resources Twelve Months ended December 31, 2023, compared to Twelve Months ended December 31, 2022 Cash Flow Summary - A Two Year Comparative Twelve Months ended Variance (in millions) Dec 31, Dec 31, 2023 2022 2023 to 2022 Net profit $ 7.6 $ 20.6 $ (13.0 ) Non-cash interest expense relating to senior debt 2.0 1.8 0.2 Change in fair value of derivative liabilities and stock-based compensation expense 11.5 11.5 - Profit on sale of Gaming business - (0.9 ) 0.9 Contract cost additions (10.3 ) (7.2 ) (3.1 ) Depreciation and amortization (incl RoU assets) 43.7 43.4 0.3 Other net cash utilized by operating activities (9.0 ) (44.5 ) 35.5 Net cash provided by operating activities 45.5 24.7 20.8 Net cash used in investing activities (48.4 ) (32.6 ) (15.8 ) Net cash generated/(used) by financing activities 16.2 (11.0 ) 27.2 Effect of exchange rates on cash 1.7 (3.9 ) 5.6 Net increase/(decrease) in cash and cash equivalents $ 15.0 $ (22.8 ) $ 37.8 Net cash provided by operating activities For the twelve months ended December 31, 2023, net cash inflow provided by operating activities was $45.5 million, compared to a $24.7 million inflow for the twelve months ended December 31, 2022, representing a $20.8 million increase in cash generation.
For the Twelve-Month Period ended (In millions) December 31, 2024 December 31 2023 Net revenue $ 297.1 $ 322.9 Less Low Margin Gaming Sales - (30.6 ) Adjusted Revenue $ 297.1 $ 292.3 Adjusted Revenue £ 232.4 £ 234.7 Exchange Rate - $ to £ 1.28 1.25 55 Liquidity and Capital Resources Twelve Months ended December 31, 2024, compared to Twelve Months ended December 31, 2023 Cash Flow Summary - A Two Year Comparative Twelve Months ended Variance (in millions) Dec 31, Dec 31, 2024 2023 2024 to 2023 Net profit $ 64.8 $ 6.9 $ 57.9 Non-cash interest expense relating to senior debt 1.1 2.0 (0.9 ) Change in fair value of derivative liabilities and stock-based compensation expense 7.6 11.5 (3.9 ) Depreciation and amortization (incl RoU assets) 47.7 43.4 4.3 Other net cash utilized by operating activities (89.5 ) (9.1 ) (80.4 ) Net cash provided by operating activities 31.7 54.7 (23.0 ) Net cash used in investing activities (40.1 ) (57.6 ) 17.5 Net cash (used)/generated by financing activities (1.6 ) 16.2 (17.8 ) Effect of exchange rates on cash (0.7 ) 1.7 (2.4 ) Net (decrease)/increase in cash and cash equivalents $ (10.7 ) $ 15.0 $ (25.7 ) Net cash provided by operating activities For the twelve months ended December 31, 2024, net cash inflow provided by operating activities was $31.7 million, compared to a $54.7 million inflow for the twelve months ended December 31, 2023, representing a $23.0 million decrease in cash generation.
The geographic region in which the largest portion of our business is operated is the UK and GBP is our functional currency. Our reporting currency is the U.S. dollar (“USD”).
The geographic region in which the largest portion of our business is operated is the UK and the British pound (“GBP”) is considered to be our functional currency. Our reporting currency is the U.S. dollar (“USD”).
In the discussion and analysis below, certain data may vary from the amounts presented in our consolidated financial statements due to rounding. For all reported variances, refer to the overall company and segment tables shown below.
There were no significant changes in the trends, discussions and analyses included therein. In the discussion and analysis below, certain data may vary from the amounts presented in our consolidated financial statements due to rounding. For all reported variances, refer to the overall company and segment tables shown below.
As of December 31, 2023, our non-current assets (excluding goodwill) were attributable as follows: 71% to the UK, 12% to Greece and 17% across the rest of the world. As of as of December 31, 2022, our non-current assets (excluding goodwill) were attributable as follows: 79% to the UK, 6% to Greece and 15% across the rest of the world.
As of December 31, 2023, our non-current assets (excluding goodwill) were attributable as follows: 70% to the UK, 12% to Greece and 18% across the rest of the world.
The remaining difference, referred to as functional currency at constant rate, is calculated as the difference in our functional currency, multiplied by the prior-period average GBP:USD rate. This is not a measure used in generally accepted accounting principles in the United States (“U.S. GAAP” or “GAAP”), but is one which management believes gives a clearer indication of results.
The remaining difference, referred to as functional currency at constant rate, is calculated as the difference in our functional currency, multiplied by the prior-period average GBP:USD rate. This is not a U.S. GAAP measure but is one which management believes gives a clearer indication of results.
Interactive operating income Operating income for the twelve-month period ended December 31, 2023 increased by $2.2 million.
Interactive operating income Operating income for the twelve-month period ended December 31, 2024 increased by $8.6 million.
Total revenue is also divided between “Total Revenue (£m) – Retail,” which consists of revenue earned through players wagering at Virtual Sports venues, “Total Revenue (£m) – Online Virtuals,” which consists of revenue earned through players wagering on Virtual Sports online.
“Total Revenue (£m)” represents total revenue for the Virtual Sports segment, including recurring and upfront service revenue. Total revenue is also divided between “Total Revenue (£m) – Retail,” which consists of revenue earned through players wagering at Virtual Sports venues, “Total Revenue (£m) – Online Virtuals,” which consists of revenue earned through players wagering on Virtual Sports online.
Reconciliation to Adjusted EBITDA by segment for the Twelve Months ended December 31, 2023 For the Twelve-Month Period ended December 31, 2023 (In millions) Statutory Heading Total Gaming Virtual Sports Interactive Leisure Corporate Net Income/ (loss) Net Income $ 7.6 $ 23.5 $ 44.0 $ 11.2 $ 6.8 $ (77.9 ) Pension charges (1) SG&A $ 0.9 0.9 Cost of Group Restructure (2) SG&A $ 3.6 - 3.6 Cost of Group Restatement (3) SG&A $ 5.0 5.0 Stock-based compensation expense (4) Stock-based compensation expense $ 11.2 1.5 0.4 0.6 1.0 7.7 Depreciation and amortization (4) Depreciation and amortization $ 39.9 19.0 3.3 3.6 11.6 2.4 Interest expense net (4) Interest expense net $ 27.7 27.7 Other finance expenses / (income) (4) Other finance expenses / (income) $ (0.4 ) (0.4 ) Income Tax (4) Income Tax $ 5.0 5.0 Adjusted EBITDA $ 100.5 $ 44.0 $ 47.7 $ 15.4 $ 19.4 $ (26.0 ) Adjusted EBITDA £ 80.6 £ 35.6 £ 38.3 £ 12.4 £ 15.4 £ (21.1 ) Exchange Rate - $ to £ (6) 1.25 Note: Certain unallocated corporate function costs have not been allocated to the Company’s reportable operating segments because these costs are not allocable and to do so would not be practical; these are shown in the Corporate category. 55 Reconciliation to Adjusted EBITDA by segment for the Twelve Months ended December 31, 2022 For the Twelve-Month Period ended December 31, 2022 (In millions) Statutory Heading Total Gaming Virtual Sports Interactive Leisure Corporate Net Income/ (loss) $ 20.6 $ 23.1 $ 41.0 $ 8.6 $ 9.9 $ (62.0 ) Pension charges (1) SG&A $ 0.7 0.7 Acquisition and integration related transaction expenses (7) SG&A $ 0.5 0.5 Acquisition and integration related transaction expenses (7) Cost of Sale $ 0.6 0.3 0.3 Litigation Settlement(8) SG&A $ 0.5 0.5 Stock-based compensation expense (4) Stock-based compensation expense $ 10.8 1.6 0.7 0.7 0.6 7.2 Depreciation and amortization (4) Stock-based compensation expense $ 39.9 19.6 2.7 2.0 13.5 2.1 Interest expense net (4) Interest expense net $ 25.3 25.3 Profit on disposal of trade & assets (5) Profit on disposal of trade & assets $ (0.9 ) (0.9 ) Other finance expenses / (income) (4) Other finance expenses / (income) $ (1.1 ) (1.1 ) Income tax (4) Income tax $ 2.1 2.1 Adjusted EBITDA $ 99.0 $ 43.7 $ 44.9 $ 11.3 $ 24.3 $ (25.2 ) Adjusted EBITDA £ 80.3 £ 35.3 £ 36.5 £ 9.1 £ 19.7 £ (20.3 ) Exchange Rate - $ to £ (6) 1.23 Note: Certain unallocated corporate function costs have not been allocated to the Company’s reportable operating segments because these costs are not allocable and to do so would not be practical; these are shown in the Corporate category.
Reconciliation to Adjusted EBITDA by segment for the Twelve Months ended December 31, 2024 For the Twelve-Month Period ended December 31, 2024 (In millions) Statutory Heading Total Gaming Virtual Sports Interactive Leisure Corporate Net Income/ (loss) Net Income $ 64.8 $ 23.9 $ 30.0 $ 19.7 $ 9.8 $ (18.6 ) Pension charges (1) Staff-related selling, general and administrative expenses $ 1.1 1.1 Cost of Group Restructure (2) Other selling, general and administrative expenses $ 5.1 3.7 1.4 Cost of Group Restatement (3) Other selling, general and administrative expenses $ 12.3 12.3 Stock-based compensation expense (4) Stock-based compensation expense $ 7.6 0.9 0.5 0.4 0.6 5.2 Depreciation and amortization (4) Depreciation and amortization $ 43.3 16.8 5.6 5.5 12.9 2.5 Interest expense net (4) Interest expense net $ 29.4 29.4 Other finance expenses / (income) (4) Other finance expenses / (income) $ (0.5 ) (0.5 ) Income Tax (4) Income Tax $ (63.0 ) (63.0 ) Adjusted EBITDA $ 100.1 $ 45.3 $ 36.1 $ 25.6 $ 23.3 $ (30.2 ) Adjusted EBITDA £ 78.4 £ 35.5 £ 28.0 £ 20.0 £ 18.2 £ (23.3 ) Exchange Rate - $ to £ (6) 1.28 Note: Certain unallocated corporate function costs have not been allocated to the Company’s reportable operating segments because these costs are not allocable and to do so would not be practical; these are shown in the Corporate category. 53 Reconciliation to Adjusted EBITDA by segment for the Twelve Months ended December 31, 2023 For the Twelve-Month Period ended December 31, 2023 (In millions) Statutory Heading Total Gaming Virtual Sports Interactive Leisure Corporate Net Income/ (loss) $ 6.9 $ 22.6 $ 44.0 $ 11.1 $ 6.8 $ (77.6 ) Pension charges (1) Staff-related selling, general and administrative expenses $ 0.9 0.9 Cost of Group Restructure (2) Other selling, general and administrative expenses $ 3.6 3.6 Cost of Group Restatement (3) Other selling, general and administrative expenses $ 5.0 5.0 Stock-based compensation expense (4) Stock-based compensation expense $ 11.2 1.5 0.4 0.6 1.0 7.7 Depreciation and amortization (4) Depreciation and amortization $ 39.6 18.7 3.2 3.7 11.6 2.4 Interest expense net (4) Interest expense net $ 27.4 27.4 Other finance expenses / (income) (4) Other finance expenses / (income) $ (0.4 ) (0.4 ) Income tax (4) Income tax $ 5.0 5.0 Adjusted EBITDA $ 99.2 $ 42.8 $ 47.6 $ 15.4 $ 19.4 $ (26.0 ) Adjusted EBITDA £ 79.6 £ 34.5 £ 38.2 £ 12.3 £ 15.6 £ (21.0 ) Exchange Rate - $ to £ (5) 1.25 Note: Certain unallocated corporate function costs have not been allocated to the Company’s reportable operating segments because these costs are not allocable and to do so would not be practical; these are shown in the Corporate category.
Excluding Low Margin sales, Gaming Recurring Revenue was 68% of Total Gaming Revenue. In the table above: “Gaming Participation Revenue” includes our share of revenue generated from (i) our Gaming terminals placed in gaming and lottery venues; and (ii) licensing of our game content and intellectual property to third parties.
Total Gaming Revenue for the twelve-month period ended December 31, 2023 includes £24.3 million of Low Margin sales. In the table above: “Gaming Participation Revenue” includes our share of revenue generated from (i) our Gaming terminals placed in gaming and lottery venues; and (ii) licensing of our game content and intellectual property to third parties.
Interactive revenue During twelve-month period ended December 31, 2023 revenue increased by $6.9 million, driven by recurring revenue growth due to the launch of new content across the estate, growth in the customer base in new, emerging and core markets and increased promotional activity through exclusive deals with tier-one customers.
Interactive revenue During the twelve-month period ended December 31, 2024 revenue increased by $10.6 million, or 38%, driven by recurring revenue growth in the UK, North America and mainland Europe due to the launch of new content across the estate and increased promotional activity through exclusive deals with tier-one customers.
The estimates used to calculate the fair value of a reporting unit as a part of a quantitative goodwill assessment change from year to year based on operating results, market conditions, and other factors. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment, if any, for each reporting unit.
The estimates used to calculate the fair value of a reporting unit as a part of a quantitative goodwill assessment change from year to year based on operating results, market conditions, and other factors.
Interactive, Recurring Revenue All Interactive revenue in both years was recurring. 50 Interactive, Results of Operations For the Twelve-Month Period ended Variance December 31, 2023 vs December 31, 2022 (In millions) December 31,2023 December 31, 2022 Variance Attributable to Currency Movement Variance on a Functional currency basis Total Functional Currency Variance % Total Reported Variance % Service Revenue $ 27.9 $ 20.6 $ 0.4 $ 6.9 33.5 % 35.4 % Cost of Service (1.7 ) (1.3 ) 0.0 (0.4 ) 30.8 % 30.8 % Selling, general and administrative expenses (10.8 ) (8.0 ) 0.0 (2.8 ) 35.0 % 35.0 % Stock-based compensation (0.6 ) (0.7 ) 0.0 0.1 (14.3 )% (14.3 )% Depreciation and amortization (3.6 ) (2.0 ) 0.0 (1.6 ) 80.0 % 80.0 % Net operating Income (Loss) $ 11.2 $ 8.6 $ 0.4 $ 2.2 25.6 % 30.2 % Exchange Rate - $ to £ 1.25 1.23 Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
“Total Revenue (£m)” represents total revenue for the Interactive segment, including recurring and upfront service revenue. 48 Interactive, Results of Operations For the Twelve-Month Period ended Variance December 31, 2024 vs December 31, 2023 (In millions) December 31, 2024 December 31, 2023 Variance Attributable to Currency Movement Variance on a Functional currency basis Total Functional Currency Variance % Total Reported Variance % Service Revenue $ 39.3 $ 27.9 $ 0.8 $ 10.6 38 % 41 % Cost of Service (1.7 ) (1.7 ) - - - - Staff-related selling, general and administrative expenses (8.9 ) (8.4 ) (0.3 ) (0.2 ) 2 % 6 % Non-staff related selling, general and administrative expenses (5.4 ) (4.9 ) (0.2 ) (0.3 ) 6 % 10 % Labor costs capitalized 2.3 2.5 (0.2 ) - - (8) % Other segment items: Stock-based compensation (0.4 ) (0.6 ) - 0.2 (33 )% (33) % Depreciation and amortization (5.5 ) (3.7 ) 0.1 (1.7 ) 46 % 49 % Net operating Income $ 19.7 $ 11.1 $ 0.2 $ 8.4 76 % 77 % Exchange Rate - $ to £ 1.28 1.25 Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
Revenue growth for our Leisure segment is principally driven by the number of customers we have, the number of machines in operation, the net win performance of the machines and the net win percentage that we receive pursuant to our contracts with our customers. 51 Leisure, Key Performance Indicators For the Twelve-Month Period ended Variance December 31, 2023 vs December 31, 2022 Leisure December 31, 2023 December 31, 2022 % End of period installed base Gaming machines (# of terminals) 10,741 11,008 (267 ) (2.4 )% Average installed base Gaming machines (# of terminals) 10,761 10,960 (199 ) (1.8 )% End of period installed base Other (# of terminals) 4,209 4,646 (437 ) (9.4 )% Average installed base Other (# of terminals) 4,371 5,306 (935 ) (17.6 )% Pub Digital Gaming Machines - Average installed base (# of terminals) 6,175 6,102 73 1.2 % Pub Analogue Gaming Machines - Average installed base (# of terminals) 367 1,334 (967 ) (72.5 )% MSA and Bingo Gaming Machines - Average installed base (# of terminals) (1) 3,048 3,216 (168 ) (5.2 )% Inspired Leisure Revenue per Gaming Machine per week £ 67.7 £ 64.3 £ 3.4 5.3 % Inspired Pub Digital Revenue per Gaming Machine per week £ 70.0 £ 68.6 £ 1.4 2.0 % Inspired Pub Analogue Revenue per Gaming Machine per week £ 34.7 £ 38.3 £ (3.6 ) (9.4 )% Inspired MSA and Bingo Revenue per Gaming Machine per week £ 93.5 £ 91.0 £ 2.5 2.7 % Inspired Other Revenue per Machine per week £ 21.4 £ 19.7 £ 1.7 8.6 % Total Holiday Parks Revenue (Gaming and Non Gaming) (£’m) £ 32.2 £ 30.0 £ 2.2 7.3 % (1) Motorway Service Area machines In the table above: “End of period installed base Gaming” and “Average installed base Gaming” represent the number of gaming machines installed (excluding Holiday Park machines) that are Category B and Category C only, from which there is participation or rental revenue at the end of the period or as an average over the period.
Revenue growth for our Leisure segment is principally driven by the number of customers we have, the number of machines in operation, the net win performance of the machines and the net win percentage that we receive pursuant to our contracts with our customers. 49 Leisure, Key Performance Indicators For the Twelve-Month Period ended Variance December 31, 2024 vs December 31, 2023 Leisure December 31, 2024 December 31, 2023 % End of period installed base Gaming machines (# of terminals) 10,103 10,741 (638 ) (5.9) % Average installed base Gaming machines (# of terminals) 10,367 10,761 (394 ) (3.7 )% End of period installed base Other (# of terminals) 3,595 4,209 (614 ) (14.6 )% Average installed base Other (# of terminals) 3,892 4,371 (479 ) (11.0 )% Pub Digital Gaming Machines - Average installed base (# of terminals) 6,200 6,175 25 0.4 % Pub Analogue Gaming Machines - Average installed base (# of terminals) 124 367 (243 ) (66.2 )% MSA and Bingo Gaming Machines - Average installed base (# of terminals) (1) 2,944 3,048 (104 ) (3.4 )% Inspired Leisure Revenue per Gaming Machine per week £ 72.6 £ 67.7 £ 4.9 7.2 % Inspired Pub Digital Revenue per Gaming Machine per week £ 74.1 £ 70.0 £ 4.1 5.9 % Inspired Pub Analogue Revenue per Gaming Machine per week £ 31.3 £ 34.7 £ (3.4 ) (9.8 )% Inspired MSA and Bingo Revenue per Gaming Machine per week £ 97.7 £ 93.5 £ 4.2 4.5 % Inspired Other Revenue per Machine per week £ 24.1 £ 21.4 £ 2.7 12.6 % Total Holiday Parks Revenue (Gaming and Non Gaming) (£’m) £ 33.4 £ 32.2 £ 1.2 3.7 % (1) Motorway Service Area machines In the table above: “End of period installed base Gaming” and “Average installed base Gaming” represent the number of gaming machines installed (excluding Holiday Park machines) that are Category B and Category C only (UK Gambling Act 2005 places machines into categories dependent on maximum stake and prize available), from which there is participation or rental revenue at the end of the period or as an average over the period.
For the Twelve-Month Period ended Variance December 31, 2023 vs December 31, 2022 (In £ millions) December 31, 2023 December 31, 2022 % Leisure Recurring Revenue Total Leisure Revenue £ 77.2 £ 77.7 £ (0.5 ) (0.6 )% Total Leisure Recurring Revenue £ 75.4 £ 75.4 £ 0.0 0.0 % Leisure Recurring Revenue as a Percentage of Total Leisure Revenue 97.7 % 97.0 % 0.7 52 Leisure, Results of Operations For the Twelve-Month Period ended Variance December 31, 2023 vs December 31, 2022 (In millions) December 31, 2023 December 31,2022 Variance Attributable to Currency Movement Variance on a Functional currency basis Total Functional Currency Variance % Total Reported Variance % Revenue: Service $ 94.1 $ 93.2 $ 1.4 $ (0.5 ) (0.5 )% 1.0 % Product 2.2 2.3 (0.1 ) - 0.0 % (4.3 )% Total revenue 96.3 95.5 1.3 (0.5 ) (0.5 )% 0.8 % Cost of Sales, excluding depreciation and amortization: Cost of Service (47.4 ) (44.6 ) (1.0 ) (1.8 ) 4.0 % 6.3 % Cost of Product (1.1 ) (1.5 ) 0.1 0.3 (20.0 )% (26.7 )% Total cost of sales (48.5 ) (46.1 ) (0.9 ) (1.5 ) 3.3 % 5.2 % Selling, general and administrative expenses (28.4 ) (25.4 ) (0.1 ) (2.9 ) 11.4 % 11.8 % Stock-based compensation (1.0 ) (0.6 ) - (0.4 ) 66.7 % 66.7 % Depreciation and amortization (11.6 ) (13.5 ) - 1.9 (14.1 )% (14.1 )% Net operating Income (Loss) 6.8 9.9 $ 0.3 $ (3.4 ) (34.3 )% (31.3 )% Exchange Rate - $ to £ 1.25 1.23 Note: Exchange rate in the table is calculated by dividing the USD total revenue by the GBP total revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
“Revenue per machine unit per week” represents the average weekly participation or rental revenue recognized during the period. 50 Leisure, Results of Operations For the Twelve-Month Period ended Variance December 31, 2024 vs December 31, 2023 (In millions) December 31, 2024 December 31, 2023 Variance Attributable to Currency Movement Variance on a Functional currency basis Total Functional Currency Variance % Total Reported Variance % Revenue: Service $ 99.2 $ 94.1 $ 2.5 $ 2.6 3 % 5 % Product 2.6 2.2 - 0.4 18 % 18 % Total revenue 101.8 96.3 2.5 3.0 3 % 6 % Cost of Sales, excluding depreciation and amortization: Cost of Service (46.9 ) (47.4 ) (1.3 ) 1.8 (4 )% (1 )% Cost of Product (0.8 ) (1.1 ) - 0.3 (27 )% (27 )% Total cost of sales (47.7 ) (48.5 ) (1.3 ) 2.1 (4 )% (2 )% Staff-related selling, general and administrative expenses (16.8 ) (16.7 ) (0.5 ) 0.4 (2 )% 1 % Non-staff related selling, general and administrative expenses (14.8 ) (13.0 ) (0.4 ) (1.4 ) 11 % 14 % Labor costs capitalized 0.8 1.3 0.1 (0.6 ) (46 )% (38 )% Other segment items: Stock-based compensation (0.6 ) (1.0 ) - 0.4 (40 )% (40 )% Depreciation and amortization (12.9 ) (11.6 ) (0.4 ) (0.9 ) 8 % 11 % Net operating Income 9.8 6.8 $ - $ 2.9 44 % 44 % Exchange Rate - $ to £ 1.28 1.25 Note: Exchange rate in the table is calculated by dividing the USD total revenue by the GBP total revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
Net cash (used)/generated by financing activities During the twelve months ended December 31, 2023, net cash generated by financing activities was $16.2 million due to the draw down of £15.0 million ($18.9 million) of the Company’s revolving facility.
During the twelve months ended December 31, 2023, net cash generated by financing activities was $16.2 million due to the draw down of £15.0 million ($18.9 million) of the Company’s revolving facility. This was offset by the Company’s repurchase of its common shares under the Share Repurchase Program, $1.6 million, and finance lease spend of $1.1 million.
As of December 31, 2023, $3.1 million of our $40.0 million of cash were held as operational floats within the machines.
As of December 31, 2024, $2.9 million of our $29.3 million of cash were held as operational floats within the machines.
Gaming, Key Performance Indicators For the Twelve-Month Period ended Variance December 31, 2023 vs December 31, 2022 Gaming December 31, 2023 December 31, 2022 % End of period installed base (# of terminals) (2) 34,500 34,903 (403 ) (1.2 )% Total Gaming - Average installed base (# of terminals) (2) 34,563 34,681 (118 ) (0.3 )% Participation - Average installed base (# of terminals) (2) 30,305 31,268 (963 ) (3.1 )% Fixed Rental - Average installed base (# of terminals) 4,258 3,412 846 24.8 % Service Only - Average installed base (# of terminals) 11,688 16,584 (4,896 ) (29.5 )% Customer Gross Win per unit per day (1) (2) £ 96.5 £ 91.0 £ 5.5 6.0 % Customer Net Win per unit per day (1) (2) £ 70.5 £ 66.5 £ 4.0 6.0 % Inspired Blended Participation Rate 5.6 % 5.7 % (0.1 )% Inspired Fixed Rental Revenue per Gaming Machine per week £ 47.5 £ 48.5 £ (1.0 ) (2.1 )% Inspired Service Rental Revenue per Gaming Machine per week £ 5.1 £ 4.7 £ 0.4 8.5 % Gaming Long term license amortization (£’m) £ 2.6 £ 4.3 £ (1.7 ) (39.5 )% Number of Machine sales 9,475 3,027 6,448 213.0 % Average selling price per terminal £ 4,890 £ 7,843 £ (2,953 ) (37.7 )% (1) Includes all SBG terminals in which the Company takes a participation revenue share across all territories.
Gaming, Key Performance Indicators For the Twelve-Month Period ended Variance December 31, 2024 vs December 31, 2023 Gaming December 31, 2024 December 31, 2023 % End of period installed base (# of terminals) (2) 34,916 34,500 416 1.2 % Total Gaming - Average installed base (# of terminals) (2) 34,863 34,563 300 0.9 % Participation - Average installed base (# of terminals) (2) 29,897 30,305 (408 ) (1.3) % Fixed Rental - Average installed base (# of terminals) 4,971 4,290 681 15.9 % Service Only - Average installed base (# of terminals) 5,770 11,688 (5,918 ) (50.6) % Customer Gross Win per unit per day (1) (2) £ 96.6 £ 96.6 £ - - Customer Net Win per unit per day (1) (2) £ 70.8 £ 70.6 £ 0.2 0.3 % Inspired Blended Participation Rate 5.4 % 5.6 % (0.2 )% Inspired Fixed Rental Revenue per Gaming Machine per week £ 28.6 £ 35.5 £ (6.9 ) (19.4 )% Inspired Service Rental Revenue per Gaming Machine per week £ 5.3 £ 5.1 £ 0.2 3.9 % Gaming Long term license amortization (£’m) £ 2.1 £ 2.6 £ (0.5 ) (19.2 )% Number of Machine sales 3,118 9,741 (6,623 ) (68.0 )% Average selling price per terminal £ 8,044 £ 5,866 £ 2,178 37.1 % (1) Includes all SBG terminals in which the Company takes a participation revenue share across all territories.
Gaming, Results of Operations For the Twelve-Month Period ended Variance December 31, 2023 vs December 31, 2022 (In millions) December 31, 2023 December 31, 2022 Variance Attributable to Currency Movement Variance on a Functional currency basis Total Functional Currency Variance % Total Reported Variance % Revenue: Service $ 83.0 $ 80.4 $ 0.6 $ 2.0 2.5 % 3.2 % Product 59.6 30.9 1.5 27.2 88.0 % 92.9 % Total revenue 142.6 111.3 2.1 29.2 26.2 % 28.1 % Cost of Sales, excluding depreciation and amortization: Cost of Service (24.6 ) (23.7 ) (0.4 ) (0.5 ) 2.1 % 3.8 % Cost of Product (51.5 ) (20.4 ) (0.9 ) (30.2 ) 148.0 % 152.5 % Total cost of sales (76.1 ) (44.1 ) (1.3 ) (30.7 ) 69.6 % 72.6 % Selling, general and administrative expenses (22.5 ) (23.8 ) (0.2 ) 1.5 (6.3 )% (5.5 )% Stock-based compensation (1.5 ) (1.6 ) 0.0 0.1 (6.3 )% (6.3 )% Depreciation and amortization (19.0 ) (19.6 ) (0.1 ) 0.7 (3.6 )% (3.1 )% Net operating Income (Loss) $ 23.5 $ 22.2 $ 0.5 $ 0.8 3.6 % 5.9 % Profit on disposal of trade & assets 0.0 0.9 (0.1 ) (0.8 ) (88.9 )% (100.0 )% Net Income (Loss) $ 23.5 $ 23.1 $ 0.4 $ 0.0 0 % 1.7 % Exchange Rate - $ to £ 1.25 1.23 46 Note: Exchange rate in the table is calculated by dividing the USD total revenue by the GBP total revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
Gaming, Results of Operations For the Twelve-Month Period ended Variance December 31, 2024 vs December 31, 2023 (In millions) December 31, 2024 December 31, 2023 Variance Attributable to Currency Movement Variance on a Functional currency basis Total Functional Currency Variance % Total Reported Variance % Revenue: Service $ 74.7 $ 79.6 $ 2.0 $ (6.9 ) (9 )% (6 )% Product 35.9 62.9 0.1 (27.1 ) (43 )% (43 )% Total revenue 110.6 142.5 2.1 (34.0 ) (24 )% (22 )% Cost of Sales, excluding depreciation and amortization: Cost of Service (20.0 ) (24.6 ) (0.2 ) 4.8 (20 )% (19 )% Cost of Product (21.2 ) (52.4 ) (0.2 ) 31.4 (60 )% (60 )% Total cost of sales (41.2 ) (77.0 ) (0.4 ) 36.2 (47 )% (46 )% Staff-related selling, general and administrative expenses (18.1 ) (17.9 ) (0.4 ) 0.2 (1 )% 1 % Non-staff related selling, general and administrative expenses (10.5 ) (9.3 ) (0.4 ) (0.8 ) 9 % 13 % Labor costs capitalized 4.5 4.5 0.1 (0.1 ) (2 )% - Other segment items: Stock-based compensation (0.9 ) (1.5 ) (0.1 ) 0.7 (47 )% (40 )% Depreciation and amortization (16.8 ) (18.7 ) (0.4 ) 2 .3 (12 )% (10 )% Other selling, general and administrative expenses (3.7 ) - (0.1 ) (3.6 ) 97 % 100 % Net operating Income $ 23.9 $ 22.6 $ 0.4 $ 0.9 4 % 6 % Exchange Rate - $ to £ 1.28 1.25 44 Note: Exchange rate in the table is calculated by dividing the USD total revenue by the GBP total revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.
The Company’s revenue recognition policy, which requires significant judgments and estimates, is fully described in Note 1 “Nature of Operations, Management’s Plans and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report. 61 Goodwill Impairment Assessment In accordance with ASC 350, Intangibles—Goodwill and Other, we allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination.
The Company’s revenue recognition policy, which requires significant judgments and estimates, is fully described in Note 1 “Nature of Operations, Management’s Plans and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.
All variances discussed in the Gaming results below are on a functional currency (at constant rate) basis, which excludes the impact of any changes in foreign currency exchange rates.
All variances discussed in the Gaming results below are on a functional currency (at a constant rate) basis, which excludes the impact of any changes in foreign currency exchange rates. Gaming Revenue During the twelve-month period ended December 31, 2024, Gaming revenue decreased by $34.0 million, or 24%.
The increase was driven by Cost of Service of $2.4 million and a $29.7 million increase in Cost of Product inclusive of Low Margin sales activity. Selling, general and administrative expenses Selling, general and administrative (“SG&A”) expenses for the twelve-month period ended December 31, 2023 increased by $12.5 million, or 13.7% over the twelve-month period ended December 31, 2022.
This was driven by a decrease in cost of service of $6.7 million and a $31.9 million decrease in cost of product, predominantly driven by the decrease in low margin product sales. Non-staff related selling, general and administrative expenses Non-Staff related selling, general and administrative expenses for the twelve-month period ended December 31, 2024 increased by $5.4 million, or 12%.
Other significant judgments include determining whether the Company is acting as the principal or the agent in a transaction. The Company recognized service and product revenue of $261.2 million and $61.8 million, respectively, for the year ended December 31,2023.
Evaluations are conducted each quarter to assess the adequacy of the estimates. Other significant judgments include determining whether the Company is acting as the principal or the agent in a transaction. The Company recognized service and product revenue of $258.6 million and $38.5 million, respectively, for the year ended December 31, 2024.
Interactive, Key Performance Indicators For the Twelve-Month Period ended Variance December 31, 2023 vs December 31, 2022 Interactive December 31, 2023 December 31, 2022 % No. of Live Customers at the end of the period 149 130 19 14.6 % Average No. of Live Customers 142 125 17 13.6 % No. of Live Games at the end of the period 290 270 20 7.4 % Average No. of Live Games 259 254 5 2.0 % Total Revenue (£’m) £ 22.4 £ 16.7 £ 5.7 34.1 % In the table above: “No. of Live Customers at the end of the period” and “Average No. of Live Customers” represent the number of customers from which there is Interactive revenue at the end of the period and the average number of customers from which there is Interactive revenue during the period, respectively.
Interactive, Key Performance Indicators For the Twelve-Month Period ended Variance December 31, 2024 vs December 31, 2023 Interactive December 31, 2024 December 31, 2023 % No. of Live Customers at the end of the period 175 149 26 17.4 % Average No. of Live Customers 167 142 25 17.6 % No. of Games available at the end of the period 323 290 33 11.4 % Average No. of Games available 311 279 32 11.5 % No. of Live Games at the end of the period 303 275 28 10.2 % Average No. of Live Games 292 259 33 12.7 % Total Revenue (£’m) £ 30.8 £ 22.4 £ 8.4 37.5 % In the table above: “No. of Live Customers at the end of the period” and “Average No. of Live Customers” represent the number of customers from which there is Interactive revenue at the end of the period and the average number of customers from which there is Interactive revenue during the period, respectively.
This was driven by higher spend on plant, property and equipment (a $10.6 million increase compared to 2022 driven by the updating of machines in Greece with 2,500 terminals installed) and capitalized software (a $3.9 million increase compared to 2022).
This was driven by a reduced spend on plant, property and equipment $15.0 million decrease compared to 2023, which included the updating of machines in Greece with 2,500 terminals installed, and capitalized software (a $2.9 million decrease to 2023). The twelve months ended December 31, 2023 included a $0.6 million acquisition relating to Lot.to.
For these arrangements that contain multiple promises, judgement is also required to determine the stand-alone selling price (“SSP”) for each distinct performance obligation.
Management applies judgment in evaluating the contractual terms and conditions that impact the identification of performance obligations and the pattern of revenue recognition. For these arrangements that contain multiple promises, judgement is also required to determine the stand-alone selling price (“SSP”) for each distinct performance obligation.
For the Twelve-Month Period ended Variance December 31, 2023 vs December 31, 2022 (In £ millions) December 31, 2023 December 31, 2022 % Gaming Recurring Revenue Total Gaming Revenue £ 114.1 £ 90.4 £ 23.7 26.2 % Gaming Participation Revenue £ 44.3 £ 43.5 £ 0.8 1.8 % Gaming Project Recurring Revenue £ 0.9 £ 0.4 £ 0.5 125.0 % Gaming Other Fixed Fee Recurring Revenue £ 13.7 £ 12.6 £ 1.1 8.7 % Gaming Long-term license amortization £ 2.7 £ 4.3 £ (1.6 ) (37.2 )% Total Gaming Recurring Revenue * £ 61.6 £ 60.8 £ 0.8 1.3 % Gaming Recurring Revenue as a % of Total Gaming Revenue † 54.0 % 67.3 % (13.3 )% Total Gaming excluding VAT -related revenue £ 114.1 £ 89.6 Gaming Recurring Revenue as a % of Total Gaming Revenue (excluding VAT-related revenue) 54.0 % 67.8 % Gaming Recurring Revenue as a % of Total Gaming Revenue (excluding Low Margin Sales) † 68.6 % 67.3 % * Does not reflect Low Margin-related revenue. † Total Gaming Revenue for the twelve-month period ended December 31, 2023 has no VAT-related revenue, the twelve-month period ended December 31, 2022, includes £0.8 million of VAT-related revenue, which is not reflected in Gaming Recurring Revenue for that period.
For the Twelve-Month Period ended Variance December 31, 2024 vs December 31, 2023 (In £ millions) December 31, 2024 December 31, 2023 % Gaming Recurring Revenue Total Gaming Revenue £ 86.7 £ 114.0 £ (27.3 ) (24) % Gaming Participation Revenue £ 41.7 £ 44.3 £ (2.6 ) (6) % Gaming Project Recurring Revenue £ 0.7 £ 0.9 £ (0.2 ) (22) % Other Fixed Fee Recurring Revenue £ 9.1 £ 16.3 £ (7.2 ) (44) % Gaming Long-term license amortization £ 2.2 £ 2.7 £ (0.5 ) (19) % Total Gaming Recurring Revenue * £ 53.7 £ 64.2 £ (10.5 ) (16) % Gaming Recurring Revenue as a % of Total Gaming Revenue † 62 % 56 % 6 % Total Gaming revenue excluding Low Margin Sales 86.7 89.7 (3.0 ) - Gaming Recurring Revenue as a % of Total Gaming Revenue (excluding Low Margin Sales) * 62 % 72 % (10 )% * Does not reflect Low Margin-related revenue. † Total Gaming Revenue for the twelve-month period ended December 31, 2024 includes no Low Margin sales.
Revenue Consolidated Reported Revenue by Segment ● There were no Low Margin sales for the twelve-month period ended December 31, 2022. For the twelve-month period ended December 31, 2023 Low margin-related revenue was $30.6 million. For the twelve month period ended December 31, 2022, revenue on a functional currency (at constant rate) basis increased by $36.9 million, or 13.1%.
Revenue (for the twelve-months ended December 31, 2024, compared to the twelve-months ended December 31, 2023) Consolidated Reported Revenue by Segment ● There were no Low Margin-related sales for the twelve-month period ended December 31, 2024. For the twelve-month period ended December 31, 2023 Low Margin-related revenue was $30.6 million.
Net operating income / Net Income During the twelve-month period ended December 31, 2023 net operating income was $39.9 million, a decrease of $7.0 million over the twelve-month period ended December 31, 2022.
Net operating income During the twelve-month period ended December 31, 2024, net operating income was $30.7 million, a decrease of $8.8 million, compared to the prior year period.
Based on the results of our qualitative impairment assessments, we concluded that it is more likely than not that the fair values of each of our reporting units substantially exceeded their respective carrying values and there were no reporting units requiring further assessment. 62 Long-lived Assets and Finite-lived Intangible Assets We evaluate the recoverability of intangible assets and other long-lived assets with finite useful lives by comparing the carrying value of the asset group to the estimated undiscounted future cash flows that we expect the asset to generate if events or changes in circumstances indicate that these assets are not recoverable.
Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment, if any, for each reporting unit. 60 Long-lived Assets and Finite-lived Intangible Assets We evaluate the recoverability of intangible assets and other long-lived assets with finite useful lives by comparing the carrying value of the asset group to the estimated undiscounted future cash flows that we expect the asset to generate if events or changes in circumstances indicate that these assets are not recoverable.
All variances discussed in the Virtual Sports results below are on a functional currency (at constant rate) basis, which excludes the impact of any changes in foreign currency exchange rates.
All variances discussed in the Virtual Sports results below are on a functional currency (at constant rate) basis, which excludes the impact of any changes in foreign currency exchange rates. Virtual Sports revenue During the twelve-month period ended December 31, 2024 revenue decreased by $12.0 million, or 21% driven by a major customer optimizing its customer base.
GAAP (“Non-GAAP financial measures”), including EBITDA and Adjusted EBITDA, to analyze our operating performance. In this discussion and analysis, we present certain non-GAAP financial measures, define and explain these measures and provide reconciliations to the most comparable U.S. GAAP measures. See “Non-GAAP Financial Measures” below.
In this discussion and analysis, we present certain non-GAAP financial measures, define and explain these measures and provide reconciliations to the most comparable U.S. GAAP measures. See “Non-GAAP Financial Measures” below. Results of Operations Our results are affected by changes in foreign currency exchange rates, primarily between our functional currency (GBP) and our reporting currency (USD).
(3) “Cost of Group Restatement” includes accounting advice associated with the restatement of the 2020, 2021 and 2022 annual accounts and the 2023 Q1 and Q2 interim accounts.
(3) “Cost of Group Restatement” includes accounting advice associated with the restatement of the 2020, 2021 and 2022 annual accounts and Q1 and Q2 2023 quarterly accounts. It also includes ongoing costs in 2024 relating to the SEC inquiry that was subsequently concluded in January 2025.
The Company often enters into contracts with customers that consist of a combination of services and products that are accounted for as one or more distinct performance obligations. Management applies judgment in evaluating the contractual terms and conditions that impact the identification of performance obligations and the pattern of revenue recognition.
Specifically, complex arrangements with nonstandard terms and conditions may require significant contract interpretation to determine the appropriate accounting. The Company often enters into contracts with customers that consist of a combination of services and products that are accounted for as one or more distinct performance obligations.
These were partly offset by a relative outflow in prepayments and accrued income, $4.3 million. 58 Net cash used in investing activities Net cash utilized in investing activities increased by $15.8 million, to $48.4 million in the twelve months ended December 31, 2023.
These unfavorable movements were partly offset by favorable movements in prepayments and accrued income $13.8 million, inventory $4.1 million and deferred revenue $2.4 million. 56 Net cash used in investing activities Net cash utilized in investing activities decreased by $17.5 million, to $40.1 million in the twelve months ended December 31, 2024.
Leisure Operating Income/ (Loss) Operating income for the twelve-month period ended December 31, 2023 reduced by $3.4 million, from income of $9.9 million to income of $6.8 million.
Leisure Operating Income Operating income for the twelve-month period ended December 31, 2024 increased by $2.9 million.
Depreciation and amortization increased by $0.3 million, to $43.7 million, with increases of $2.0 million in amortization of intangible assets and $0.3 million in amortization of right of use assets offset by a $2.0 million decrease in machine depreciation. Other net cash utilized by operating activities improved by $35.5 million, to an outflow of $9.0 million.
Depreciation and amortization increased by $4.3 million, to $47.7 million, with increases of $1.7 in million amortization of intangible assets, $1.7 million contract costs amortization, $0.6 million in machine depreciation and $0.6 million in amortization of right of use assets offset by a $0.5 million decrease in software development cost amortization.
Player activity for our holiday parks is generally higher in the second and third quarters of the year, particularly during the summer months and slower during the first and fourth quarters of the year.
Player activity for our holiday parks is generally higher in the second and third quarters of the year, particularly during the summer months and slower during the first and fourth quarters of the year. 38 Revenue We generate revenue in four principal ways: i) on a participation basis, ii) on a fixed rental fee basis, iii) through product sales and iv) through software license fees.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeExcluding intercompany balances, our Euro functional currency net assets total approximately $18.3 million, and our USD functional currency net liabilities total approximately $7.4 million. We use a sensitivity analysis model to measure the impact of a 10% adverse movement of foreign currency exchange rates against the USD.
Biggest changeWe use a sensitivity analysis model to measure the impact of a 10% adverse movement of foreign currency exchange rates against the US Dollar.
The majority of the Company’s trading is in GBP, the functional currency, although the reporting currency of the Company is the USD. As such, changes in the GBP:USD exchange rate have an effect on the Company’s results.
The majority of the Company’s trading is in GBP, the functional currency, although the reporting currency of the Company is the US Dollar. As such, changes in the GBP:USD exchange rate have an effect on the Company’s results.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our principal market risks are our exposure to changes in foreign currency exchange rates. Interest Rate Risk Following the Company’s refinancing of its debt in May 2021, the external borrowings of £235.0 million ($299.6 million) are provided at a fixed rate.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our principal market risks are our exposure to changes in foreign currency exchange rates. Interest Rate Risk Following the Company’s refinancing of its debt in May 2021, the external borrowings of £235.0 million ($294.4 million) are provided at a fixed rate.
To estimate our foreign currency exchange rate risk, we identify material Euro and USD trading and balance sheet amounts and recalculate the result using a 10% movement in the GBP:USD exchange rate.
To estimate our foreign currency exchange rate risk, we identify material Euro and US Dollar trading and balance sheet amounts and recalculate the result using a 10% movement in the GBP:US Dollar exchange rate.
A 10% weakening of GBP against the USD would change the trading operational results unfavorably by approximately $1.6 million and would result in unfavorable translation adjustments of approximately $8.6 million, recorded in other comprehensive loss. For further information regarding the new external borrowings, see Note 13 to the Consolidated Financial Statements, “Long Term and Other Debt”. 64
A 10% weakening of GBP against the US Dollar would change the trading operational results unfavorably by approximately $6.56 million and would result in unfavorable translation adjustments of approximately $4.4 million, recorded in other comprehensive loss. For further information regarding the external borrowings, see Note 13 to the Consolidated Financial Statements, “Long Term and Other Debt”. 62
A hypothetical 10% adverse change in the value of the Euro and the USD relative to GBP as of December 31, 2023, would result in translation adjustments of approximately $1.1 million favorable and $2.2 million unfavorable, respectively, recorded in trading operations.
A hypothetical 10% adverse change in the value of the Euro and the US Dollar relative to GBP as of December 31, 2024, would result in translation adjustments of approximately $1.1 million favorable and $1.6 million unfavorable, respectively, recorded in trading operations.
A hypothetical 10% adverse change in the value of the Euro and the USD relative to GBP as of December 31, 2023, would result in translation adjustments of approximately $1.7 million favorable and $0.7 million unfavorable, respectively, recorded in other comprehensive loss. Included within our trading results are earnings outside of our functional currency.
A hypothetical 10% adverse change in the value of the Euro and the US Dollar relative to GBP as of December 31, 2024, would result in favorable translation adjustments of approximately $2.2 million and $1.6 million respectively, recorded in other comprehensive loss. Included within our trading results are earnings outside of our functional currency.
Retained gains from Euro based entities earned in Euros and retained losses from USD based entities earned in USD in the twelve months ended December 31, 2023, were €10.8 million and $23.7 million, respectively.
Retained gains from Euro based entities earned in Euros and retained losses from USD based entities earned in US Dollars in the twelve months ended December 31, 2024, were €11.0 million and $17.1 million, respectively.
For the trading figures the 10% movement is based on the average exchange rate throughout the reported period and for the balance sheet figures the 10% movement is based on the exchange rate used at December 31, 2023.
For the trading figures the 10% movement is based on the average exchange rate throughout the reported period and for the balance sheet figures the 10% movement is based on the exchange rate used at December 31, 2024. Excluding intercompany balances, our Euro and US Dollar functional currency net assets total approximately $22.8 million and $15.6 million respectively.

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