INSE Q1 Earnings Call: Digital Growth Offsets Retail and Regulatory Headwinds

June 09, 2025 at 09:27 AM EDT

INSE Cover Image

Gaming company Inspired (NASDAQ: INSE) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 3% year on year to $60.4 million. Its non-GAAP profit of $0.13 per share was significantly above analysts’ consensus estimates.

Is now the time to buy INSE? Find out in our full research report (it’s free).

Inspired (INSE) Q1 CY2025 Highlights:

Revenue: $60.4 million (3% year-on-year decline)
Adjusted EPS: $0.13 vs analyst estimates of -$0.16 (significant beat)
Operating Margin: 2.6%, up from -3.4% in the same quarter last year
Market Capitalization: $217.9 million

StockStory’s Take

Inspired attributed first quarter performance to continued momentum in its Interactive (iGaming) business and the initial impact of several operational shifts in its retail businesses. Management discussed the effect of the U.K. Easter holiday shifting into Q2, which impacted Leisure segment revenues, and noted that new regulatory taxes in Brazil temporarily weighed on the Virtual Sports segment. Executive Chairman Lorne Weil described these as “unexpected negatives” but highlighted that adjusted EBITDA grew nearly 20% year-over-year, underscoring the scalability of the Interactive business. CEO Brooks Pierce emphasized strong growth in North America, driven by new game launches and expanded partnerships, especially in the U.S. market, where Interactive revenues rose 90% year-over-year against a market growing at 20%.

Looking ahead, Inspired’s management is prioritizing the acceleration of its digital transformation and the planned divestiture of its capital-intensive holiday park business. Weil stated, “Once we finalize the sale of our holiday park business, we will have divested the part of our business with the highest relative capital intensity,” aiming to shift toward a more capital-light model. The company is preparing to launch new products, including Hybrid Dealer derivatives and additional market entries in North America and abroad. Management expects stabilization in Virtual Sports following regulatory changes in Brazil and anticipates that digital will contribute an even larger share of profitability by year-end. The team remains focused on improving free cash flow conversion through deleveraging and lower capital expenditures.

Key Insights from Management’s Remarks

Management identified digital business growth, regulatory impacts in Brazil, and product expansion as primary factors shaping first quarter results and near-term priorities.

Interactive segment outperformance: The Interactive (iGaming) division posted 49% revenue growth and expanded margins, with U.S. revenues up 90% year-over-year due to strong content and new partnerships, notably with Rush Street in Delaware and new product launches.
Hybrid Dealer scaling: Hybrid Dealer products, which combine live dealer and virtual features, are now live with major operators including BetMGM and Caesars in multiple U.S. states. Management described this category as scaling rapidly, with further launches expected in West Virginia, South Africa, and Canada later in the year.
Virtual Sports stabilization: The Virtual Sports segment faced headwinds from new Brazilian regulations and taxes, causing volatility and a step-down in volumes early in the quarter. However, management stated volumes have stabilized and expect renewed growth as localized content, such as Brazil-specific soccer games, are rolled out.
Retail and Leisure transition: The Leisure and Gaming segments were affected by timing shifts (notably the U.K. Easter holiday falling in Q2) and softness among some U.K. retail customers. Inspired is transitioning its U.K. pub business to a more capital-light, content-driven model, aligning with its strategy in other retail segments.
Deleveraging and refinancing: Inspired negotiated a new five-year floating rate debt facility to replace its 2026 bonds, with plans to use proceeds from the planned holiday park sale for further deleveraging. Management expects this to further reduce capital intensity and increase free cash flow.

Drivers of Future Performance

Inspired expects future performance to be shaped by digital expansion, capital-light business transitions, and the recovery of Virtual Sports.

Digital expansion and product launches: Management is focused on accelerating growth in Interactive and Hybrid Dealer offerings, with additional launches planned in new U.S. states, Canada, and South Africa. The company sees significant opportunity in scaling Hybrid Dealer, citing partnerships with top-tier operators and robust early performance.
Retail business model shift: Inspired aims to reduce capital expenditures by divesting its holiday park business and transitioning the U.K. pub segment to a content- and service-fee model, minimizing equipment ownership. Management believes these steps will improve margins and cash flow while aligning the organization with higher-growth, capital-light digital markets.
Virtual Sports recovery and market entry: The team expects Virtual Sports to return to year-over-year growth in the second half of the year as new localized games roll out in Brazil and additional product launches occur in North America and Greece. However, management noted that regulatory changes and delayed integrations in Brazil may slow the pace of recovery.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will watch (1) the pace and breadth of Hybrid Dealer and Interactive product launches in new markets; (2) execution of the holiday park divestiture and the shift to a capital-light model in retail; and (3) the stabilization and growth trajectory of Virtual Sports, especially in Brazil and North America. Additional attention will be paid to updates on free cash flow conversion and margin expansion as these strategies progress.

Inspired currently trades at a forward EV-to-EBITDA ratio of 2.1×. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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