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Good morning, everyone, and welcome to the Inspired Entertainment Third Quarter 2024 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Please note, today's event is being recorded. Please refer to the company's safe harbor statement that appears in the third quarter 2024 earnings press release, which is also available in the Investors section of the company's website at www.inseinc.com. These safe harbor statements also applied in today's conference call as the company's management will be making certain statements that will be considered forward-looking under securities laws and rules of SEC. These statements are based on management's current expectations or beliefs and are subject to risks, uncertainties and changes in circumstances. In addition, please note that the company will discuss both GAAP and non-GAAP financial measures. A reconciliation is included in the earnings press release. With that completed, I would now like to turn the call over to Lorne Weil, the company's Executive Chairman. Mr. Weil, please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining our call today. We understand there's some pretty stiff conference call competition this morning. So, we definitely appreciate having you with us. In a few minutes, Brooks will take us through the businesses in some detail, highlighting the primary growth drivers, our underlying plans to exploit them and the trends we're seeing, but from 30,000 feet, I would summarize things as follows. The Interactive business continues on a growth tier, where we're seeing the compound effect of accelerating revenues and expanding margins. Virtual Sports is maintaining extraordinary margins, while revenues continue to tread water. We think revenue is approaching an inflection point as the previously discussed customer concentration impact flattens out. The rest of the customer base experiences healthy growth, especially in the digital space. Brooks will talk about this more in a minute. And we see the impact of important new products. And lastly, our retail-oriented businesses are performing very nicely, benefiting from normal business as usual conditions in our various markets. Overall, year-to-year EBITDA growth in the third quarter was 13% and our EBITDA margins are reaching closer to our 40% target. Entering a period of normalcy is having a particularly positive impact on our cash performance. As you can see in the earnings release, we ended the third quarter with a cash balance of $36.5 million, up from $23.5 million at the end of the second quarter, reflecting, among other things, the fact that the enormous cost of the accounting restatement is now behind us. We don't normally provide forward guidance, as you know, but I think we'll make an exception here and mention that we expect our cash balance to be between $50 million and $55 million at the end of the first quarter of '25, with this year's fourth quarter being somewhere in between. Well, it's a bit of an oversimplification of the accounting. The increase in cash over the nine-month period ended in March 2025 will, therefore, have been roughly $30 million, representing, in our mind, an appropriate cash conversion percentage of the underlying nine-month EBITDA. As our cash approaches at these levels, we can once again consider asset allocation alternatives. The matter of cash is also informing our thinking concerning our holiday park business about which we get asked obviously quite often. When we first began to consider the sale of holiday parks, we challenged ourselves to develop a plan to consolidate and reengineer the remaining retail businesses so as to recapture through cost reduction, all the EBITDA being sold. We have indeed successfully developed this plan and have begun to implement it. So that regardless of what happens to holiday parks per se, we will see this benefit fully in 2025. As for the holiday parks business itself, we're currently projecting free cash flow of at least $5 million in 2025, a coupon we're quite happy to keep clipping until further developments. Lastly, as we announced in the press release issued yesterday, James Richardson is joining us as our new CFO starting on January 1, 2025. As hopefully you read in the press release we put out yesterday, James has an extensive background in financial reporting and governance across multiple companies in different industries, including perhaps most importantly at William Hill, where he served as the Global Finance Director for their online gaming business. James' leadership and technical accounting expertise will be of great value to the company. So, I look forward to welcoming James on our next conference call early next year. I'd also like to take this time to thank Marilyn Jentzen, who has been our Interim CFO since the end of last year and has done a genuinely tremendous job over the last 12 months. Marilyn has agreed to stay on as our Transformation Officer through the middle of next year. And so, we thank her for her continued commitment to the company. And with that, I'll hand it over to Brooks.

Thank you, Lorne. And I echo your remarks about Marilyn, she's been terrific to work with for the last year or so. So, I'll try to expand on the comments on the individual segments as well as the progress on some of our operating initiatives to progress towards our goal of the 40% EBITDA margins, which I'm happy to report, reached 38.6% in the third quarter, which was up 3% -- 3 percentage points from quarter three of last year. Our Interactive business continued its strong performance with revenue increasing 40% over Q3 of 2023 and EBITDA increasing 47% year-over-year, even with increased costs as we prepare for the full launch in Brazil by the end of the year. Our adjusted EBITDA margin in this segment is now up to 67.6%. This growth was fairly well spread out between performance in the UK and North America, and is due in large part to the continuation of strong and consistent game roadmaps, and we're starting to see good growth in some of our other key markets such as Italy. We expect to add both Peru and South Africa in the fourth quarter this year and expect that these markets will also help the growth profile. Just to give you some sense of that, October set a new all-time high for monthly revenue in this segment, largely driven by some of our seasonal content around Halloween, including our best-performing game in the month, Golden Halloween Winner. Very proud of our reputation as being a seasonal games leader, and we have a great lineup of Christmas theme games ready for December, typically our peak month of the year. We plan to add additional studio capacity in the next quarter or two with one of the studios focused primarily on the North American market, exclusively to support our growth and to continue to deliver the quantity and quality of games to this expanding segment. We also continue to refine our iLottery content strategy and game deployment, and we'll be updating progress on that on our next call. We showed some of our major enhancements to the Hybrid Dealer category at G2E, including a standard roulette game, Brazil roulette game and a very exciting side bet roulette game called 4-Ball Extra Bet with a two-wheel configuration leading to an exciting innovation for roulette. This product set shows the unique configurability of Hybrid Dealer and offers a gameplay that you can't experience with physical wheels. We also showed the new Caesars bonus game called Caesars Palace Wheel of Wins and expect to get this game and the other roulette games live this year or early next year. We also announced new contracts with both FanDuel and Loto-Québec and expect to be live in additional states, provinces and countries over the next quarter or two as our pipeline of customers and products and jurisdictions continues to build. Needless to say, we're very bullish on the Interactive segment, continuing to be a primary driver of the growth of our digital business. The other part of our digital business, Virtual Sports, continues to be impacted by the decline of our largest customer in the segment. However, all other customers recurring revenue grew 11% year-over-year, with 21% of that growth coming from the online segment of that customer base. We still firmly believe that the combination of new licensed products like our NFL, NBA and our recently announced NHL license, along with new geographies like Brazil, we'll get this segment back into growth mode, but we've been beset by delays due to customer resource issues, technical integrations and regulatory approvals, which frankly have just slowed the process down more than we'd like. For example, we're live with only two customers with our NFL product, but the NFL game is actually performing very well with those two customers, neither of which happens to be in North America, which we ultimately believe will be the biggest market for the NFL game. It's now looking more like the end of the year and the beginning of 2025 before we'll solve some of these issues. Our Gaming segment had a solid quarter with revenue, excluding low-margin sales, up modestly at 4% year-over-year, but with EBITDA increasing 29% year-over-year. It's always difficult to make exact comparisons in this segment due to the nature of timing, revenue mix and one-time sales, but we're starting to see the impact of some of our cost savings initiatives coming through the income statement, and we'll see that accelerates in the fourth quarter with the shutdown of our manufacturing facility in Wales and going to a fully outsourced manufacturing model. We have a number of deliverables in the fourth quarter and the first quarter of '25, including 720 terminals to WCLC, the installation of close to 5,000 Vantage terminals to evoke, formerly William Hill, and the start of the installation of up to 4,000 terminals to OPAP in Greece. We expect to see the benefit of the conversion of the evoke terminals modestly in Q4 and the biggest impact starting in Q1, and I'm happy to announce that the first site conversion happened in late October. We also introduced a new cabinet at G2E, the Valiant, which is our first portrait cabinet, specifically designed for the North American market. The response we received from our customers and potential customers was overwhelming, and we're already starting to take orders for this product largely on the improved performance we're seeing in our North American installed base. This success is driving us to explore leveraging our cabinet, content and system capabilities for adjacent markets like Class II and HHR, and we'll update as we finalize our review. Lastly, our Lottery Systems business, which is reported in our Gaming segment, grew 8% year-over-year, and we're making tremendous progress on our new cloud-based lottery system that we'll deploy and start to market in 2025. The Leisure segment performed well in its historically busiest quarter with revenue up 5% year-over-year and EBITDA increasing by 17% year-over-year, demonstrating the benefit of the operating leverage in this business and the impact some of our operating efficiencies are having on our financial results. Although we are still reviewing strategic options in regard to the holiday parks business, we firmly believe our content, cabinet and service strategies in the pub, bingo and motorway service segments are bearing fruit, and we continue to believe that they are key components of our land-based business, and frankly, leverage the combined technology and content development function that supports all of our business. The third quarter EBITDA of $30.1 million, with close to 40% EBITDA margins, along with the product and geography expansions that I outlined earlier in my remarks, gives us confidence both in our strategy and the ability to deliver improving results in Q4 and going into 2025. And with that, I'll hand it back over to Lorne for any final remarks before we open up to Q&A.

Thanks, Brooks. No, I don't have any final remarks at this time. So, operator, if you would please open the program up to Q&A?

Absolutely. [Operator Instructions] And your first question comes from the line of David Bain with B. Riley Securities. David, please go ahead.

Great. Thank you. Hi, Lorne and Brooks, thanks for all the info. I'm trying to ask this the best way I can, but it just seems like a large collective 2025 impact, I mean, the William Hill Vantage cabinet uplift, Hybrid contribution, Interactive growth, now the structural margin improvement, consensus has you up 9%, $8 million or so. In the past, you've sometimes responded if you're comfortable with consensus. I'm just hoping you can maybe speak to that today because it just looks like there's a lot of levers that can impact next year, and I'm hoping to just get broad-based thoughts.

Yeah. I'm surprised you asked that question, David.

Forgive me, please.

You won't be surprised by my answer either. Well, what you said is definitely right. I mean, we've got plenty of what look like we were certainly sitting here right now, the Hill's contract is the organic growth in the Interactive business, the potential of Hybrid Dealer to -- I mean, the tremendous potential of Hybrid Dealer to really accelerate that, the restructuring program that I and Brooks both referred to. So, I think if you put all those things together, I'm comfortable saying we're comfortable with the consensus certainly. I don't think right this minute, I would want to go beyond that in terms of, let's say, guidance, but maybe as we get early into next year and a few things that right now are not 100% clear, clarify, we might be inclined to be more explicit in terms of where we see 2025. But I think right now, I can say we're comfortable with the consensus, but I wouldn't want to have a recording saying that I was saying anymore.

Okay. Perfect. Fair enough. And then, as a follow-up, I mean, you mentioned the opportunity to relook at capital allocation given your expected cash position. Just given what you're seeing today from an acquisition standpoint and thinking about your own valuation, is there a skew in balance between M&A and share -- potential share repurchases? Where do you think the focus may be?

I don't think -- so right now, our balance sheet is in pretty good shape. And as I mentioned, our cash is getting better and better and better. I mean, the strategy of more and more of the growth coming from businesses that have very little capital intensity in relation to their profitability is really beginning to work. So, I think any acquisition that we would seriously consider or are seriously considering, I think we can very comfortably debt finance. And therefore, I don't think using cash to buy back stock and enhancing our organic growth through acquisition are necessarily in conflict with one another.

Okay. Very good. Thanks, guys. Good morning. Have a good morning.

Thanks, David.

And your next question comes from the line of Barry Jonas with Truist Securities. Barry, please go ahead.

Hey, guys. Good morning. Thanks for the very helpful commentary as always in the remarks. Just a few follow-ups. Can you give maybe some update or more color rather on the uplift you're seeing with some of the product refreshes in the gaming market, specifically maybe Vantage with William Hill? Just trying to understand what that uplift is relative to overall market trends.

Yeah. Well, I'll answer the William Hill part, but also probably talk a little bit about what we're seeing in Illinois and some of the other markets in North America. So, you remember, with our uplift from both the Betfair and Paddy Power business when we converted them to Vantage was in kind of 12% to 15%, and we fully expect the same thing to be happening once we get the William Hill conversion done, which we'll have done by the end of the first quarter. So that obviously kind of playing on Lorne's recent remarks on Dave's question, that obviously gives us comfort that the Gaming segment business will have that uplift. But also, I think, frankly, our Illinois strategy and broadly, our North American strategy is working out exactly as we had hoped. The performance in that part of the business is probably at its all-time high. And how we know that the strategy is working is that we continue to get additional orders, but more importantly, we're getting pretty much subscription orders from all of our customers in Illinois, refreshing their content on an ongoing basis. So, I think in regards to kind of gaming cabinet performance really across the estate, things are all going pretty well.

Great. And then, just as a follow-up, you had the announcement with FanDuel about bespoke content. You've done other stuff before on the Interactive side. Just curious if you could talk more about the bespoke business model. Like, what does pricing margins look like on those deals versus more off the shelf? Is that something we'll see more of with customers of varying sizes?

Yeah. I think what we want to do, ideally, particularly in the Hybrid Dealer segment is have a blend of both. A customer kind of with the cache and size of a FanDuel and frankly, with the creativity of their team has come up with a pretty amazing concept, and we've built a demo of it for them. So, they're perfect for bespoke content. But we have tons of customers that, quite frankly, want to have the capability of Hybrid Dealer, don't want to spend the upfront money to do the advanced work and really just kind of want to turn it on for the recurring revenue opportunity. So, I think what you'll see as 2025 rolls out and we start reporting on Hybrid Dealer, it's going to be a blend of -- all of it will be recurring revenue, but some of the bespoke content will be getting paid upfront fees to develop that for them. Obviously, as you can imagine, it takes longer to do the bespoke work versus just rolling out standard products. So, I think for us, ultimately having a mix of both is the right way to go.

Great. Thank you.

Sure. Thanks, Barry.

And your next question comes from the line of Chad Beynon with Macquarie. Chad, please go ahead.

Hi. Good morning, Brooks, Lorne. Thanks for taking my question. I wanted to start with the Interactive segment, particularly focused on UK and Ireland based on what some of your partners have reported so far, and we'll see more over the next couple of days, it looks like that market has stabilized and starting to grow again. Can you just talk broadly in terms of where things are from a regulatory standpoint if that should grow? And then, more importantly, what you've seen in your market share as some smaller players have exited the market? Thanks.

Yeah, that's a good question. And we are seeing growth in the UK, both from a macro sense, but frankly, from a market share percentage. So, one of the nice advantages of the UK is that, that data is public. So, we can actually literally track how we're doing from a market share basis as opposed to in North America, where we have to try and estimate it from conversations with our customers. So, yeah, we're, frankly, very happy with how the UK business is developing. As you say, it's consolidating a bit. We're certainly excited about the Brazil market coming on in January. So, yeah, I mean, the Interactive business in particular, and I kind of go into my comments, it's really driven by the quality of the games, the quantity of the games and being able to deliver when you say you're going to deliver so the customers can kind of plan that out. So, we seem to be doing a pretty good job in that area.

Well, what I would add to that, too, Chad, is that specifically with respect to your question about the UK is, in the UK, we're able to have considerably higher market share and growing market share because we have a strong machine base in retail. So, the people all see our games in the pubs and betting shops and so forth, and then they play them on their phone or on their computer when they get home. So, it's not surprising that our market share in the UK is considerably higher than it is in other places.

Okay. Great. Next, in terms of the 40% margin goal, Brooks, that you've talked about, that's not going to come overnight just because the hardware business is doing well, but you talked about some improvements just in that. When should we expect to see more of a 40% consolidated margin? Is that something in the back half of '25 or '26? Just kind of thinking about the digital growth versus gaming. Thank you.

Yeah. Well, I'll comment and I'll let Lorne comment on how he feels about guidance, but I think you guys all probably have a sense of how he feels about that. But clearly, in terms of as the business continues, and we've been talking about this kind of quarter after quarter, but you're seeing it in the results, as the business becomes more and more digital-focused and particularly the growth initiatives like Hybrid and frankly, Virtuals at very high margins, that's going to be pushing things over to the 40% and over. Probably more than any other factor is really the mix. The timing of which I defer to Lorne, if he wants to comment on when we think that's going to happen.

I actually would prefer not to comment on that, but certainly what Brooks said that the main driver is the swing in the business mix from retail to digital, obviously, with the margins being as high as they are and in the case of Interactive and growing even within Interactive. So, there's a certain inevitability to the margins moving into the 40%s, but it's a little difficulty to pinpoint the timing. I think, again, as we get through the end of this year and early into next year, some things might be happening that would again give us more confidence about being more precise about when we think that 40%-plus will happen.

Okay. Thank you, both. Nice quarter.

Thanks, Chad.

And your next question comes from the line of Jordan Bender with Citizens JMP. Jordan, please go ahead.

Good morning, everyone. I want to start on Hybrid Dealer. With a couple of quarters now under your belt with that product in the market, are you able to parse out kind of who those customers are? Are they splitting time between live dealers? Is it helping grow that overall market? I guess, ultimately, what are the data points that you bring to new conversations, new operators to show this is kind of how the product helps?

Yeah. I mean, I think it would probably be -- MGM could probably answer that better than I can on some of it, but what we do get from MGM in terms of the data is the fact that they have not only the active player numbers continue to kind of grow, but the repeat. So, you've got people that are playing this game on a daily basis, which obviously bodes well for -- typically, if you were comparing it to a slot game, a slot game has a certain life cycle. It kind of starts out, then it kind of moderates and then kind of tails off. We haven't actually seen that at all in Hybrid Dealer. And frankly, we've always said, Jordan, that we thought roulette was going to be a bigger game than the wheel game that we've introduced. So obviously, we're pretty excited to get that out in the market this quarter or in the beginning of next quarter to see if it really does drive the kind of behaviors that we've seen in the wheel game. But thus far, what we look at is obviously what the GGR is, but how many active players are playing and how many repeat players are playing. So, all of those metrics so far are very good. And remember, we only have one game in two jurisdictions at this point. So, we'll obviously know a lot more about player behavior over the next quarter or two.

Helpful. And then just a follow-up. We talked about capital allocation, balance sheet, M&A, buybacks. I guess I'll try a different combination here, but would you look to use debt at this point to buy back some of your shares?

Well, it's a complicated question because part of the reason we have as much cash as we do, obviously, is because we have debt. So, even if we didn't incur any incremental debt, using any of the cash that we have right now or that we might generate over the course of the next six months because we expect to generate a significant amount of cash, if we use that cash to buy back stock in effect, we're using debt because we have debt. So, it's kind of a complicated question. If the question is, would we incur any incremental debt to buy back stock, I think the answer to that is absolutely no.

Yeah. I guess the latter was more of the question of would you look to add leverage to buy back shares, but that was loud and clear.

No, that we would not do.

Okay. Thank you very much.

[Operator Instructions] And your next question comes from the line of Ryan Sigdahl with Craig-Hallum Capital Group. Ryan, please go ahead.

Hey, good morning, guys. One quick one for me. If I look at -- I know the struggles and challenges with your largest Virtual Sports customer, but if I'm just looking at the absolute number of customers, Interactive continues to be up and to the right and grow really nicely. You're at 172. Virtuals are at 57. And if I look over the last couple of years, Virtuals is basically flat. Interactive, again, has doubled and tripled. So, I guess what's the biggest challenge in getting customers to integrate Interactive content and games, but not add the Virtual Sports with it?

Yeah. Well, you mentioned one of it is integrations, but it's really more -- I guess it's really two things. One is regulatory, getting markets to improve Virtual Sports relating to iGaming. And quite frankly, and we've said a number of times, particularly in North America, we expect to go live with the fully integrated product with BetMGM here in the next quarter or two. But quite frankly, we need to get DraftKings and FanDuel onboard to have a meaningful contribution because they're 70%-plus of the sports betting market. And we believe that this content works best with sports players more so than casino players. So, it's a -- now look, Brazil will end up being a very good test market for us. Obviously, soccer, as you know, is the biggest product for us. Brazil is going to be a soccer-crazy market. It's a pretty liberal from a regulatory perspective. So, really Brazil right now is about just signing up customers and getting them live. So, the North American challenges, hopefully will convince DraftKings and FanDuel on the virtues of Virtual Sports, but Brazil is probably the next big market where we're going to see a lot of operators and we'll have more kind of a sense, if that answers your question.

Yeah. Again, it's Lorne. The other thing I would add to that is the one opportunity to expand the customer base for Virtual Sports is I happen to think that the lottery world is still a tremendous opportunity for Virtual Sports. We're working on a couple of things right now, which we won't probably be able to talk about until early next year. In terms of Virtual Sports in the lottery space, that's actually very, very exciting.

Thanks, guys. Good luck.

Thank you.

There is no further question at this time. I would now turn the call back over to Lorne Weil with closing remarks. Lorne?

Thanks, operator. Again, thanks, everyone, for joining. We're just slightly past 8:30, which I think is when some other calls are going to begin. So, I'll just wrap it up by saying thanks for being with us this morning. We're pretty happy with the third quarter. The rest of this year and next year is beginning to look very, very good. And so, we look forward to talking to you in a few months. Thank you.