Lorne Weil - Executive Chairman Brooks Pierce - Chief Operating Officer and President.

Good morning, everyone, and welcome to the Inspired Entertainment’s First Quarter 2021 Conference Call. All participants will be in a listen-only mode for the duration of the call. There will not be an opportunity to ask questions. [Operator Instructions]. Please note that today’s even is being recorded.

I'll begin today's conference call by referring you to the company's safe harbor statement that appears in the first quarter 2021 earnings press release, which is also available in the Investors Section of the company's website at www.inseinc.com.

This safe harbor statement also applies to today's conference call as the company's management will be making certain statements that will be considered forward-looking under securities laws and rules of the SEC.

These statements are based on management's current expectations or beliefs and are subject to risks, uncertainties and changes in circumstances. In addition, please note that the company will discuss both GAAP and non-GAAP financial measures. A reconciliation is included in the earnings press release.

With that completed, I would now like to turn the conference over to Lorne Weil, the Company's Executive Chairman. Mr. Weil, please go ahead..

Than you, operator. Good morning everyone and thank you for joining our first quarter conference call.

As you might have read earlier this morning, we are launching the capital markets transaction today, actually this morning and as such we will depart from our normal practice of doing Q&A at the end of these conference calls and not be doing Q&A today.

That being the case, we’ll try to provide as much information in our prepared remarks as we can, again recognizing the sensitivities. Let me also apologized for starting our call so close to the scientific games call, but again because we're launching the transaction this morning and given the time change between here and the U.K.

we need to get going on that, literally the second we're done with this call.

Given the constant refraining of COVID, COVID, COVID that has for months been a feeling, depressingly reminiscent of the film which I'm sure you've all seen Groundhog Day, but lately given where we pretty confidently believe we are in the COVID cycle, it's beginning to feel more like the moment Dorothy steps out of the monochromatic nightmare of Kansas, and finally into the technical world of ours.

In this connection, I might also mention that the landscape is further brightened this morning by the U.K. pound, which is trading at a little over $1.41, so a lot of very good news.

As we have outlined more times than we care to, we haven't had a normal quarter which will define as one that was unaffected by COVID since the first quarter of 2019, when consolidating the automatic [ph] results for the first time, we are a little under $20 million in EBITDA.

By the middle of the first quarter of 2020, we were already sliding into lockdown and we were in full lockdown throughout the second quarter of 2020. We began to ramp up in the third quarter of 2020, earning about $16 million in EBITDA for that quarter, but importantly ending the quarter considerably ahead of where we had started it.

This ramp up continued into October 2020, at which point we were performing at a level equal to or ahead of where we were in the fourth quarter of 2019, notwithstanding the continued existence at that time of certain meaning for our restructurings, and we were projecting to go considerably higher as we moved into 2021.

But then as we all know we went back into lockdown the November, December and remained in lockdown through the first quarter of 2021. The U.K.

finally began to reopen in April and as Brooks will discuss in more detail in a moment, expects to fully open beginning May 17, and by the end of June as we move into the third quarter, we believe that all of our markets will be opened.

While our retail bricks and mortar business was meshed in this 15 month version of Groundhog Day, some very important dynamics were otherwise taking place in the company. First and foremost was the evolution of our online business. At no time during the COVID lockdown did we cut back our spending in support of this business.

In response, monthly revenues in the combination of our legacy virtual sports and Interactive more like gaming businesses about tripled over the course of 2020 and has continued to grow strongly year-over-year so far in 2021.

At the same time, reflecting the tremendous scalability of this business, our margins have expanded very significantly during the same period. Developed months sell-off is our mantra in this business and as growth and revenue and profitability has been driven by a lethal combination of new products sold into new geographies and new customers.

We continue to believe that our greatest opportunity is in North America and indeed just this past Friday we launched iGaming in Michigan, a new market that is showing phenomenal growth.

At the same time we have continued to implement the synergies inherent in the Novomatic acquisition, which we now expect to approach $20 million a year, a substantial majority of which has already been actioned.

In addition to cost synergies in the areas of content development, manufacturing, back office functions and field operations, we have begun to see positive revenue synergies as we market the game libraries of each company to the other vertical customer base in both retail and online.

So where does all this bring us right now? Historically we've chosen not to provide quarterly guidance, instead preferring to get overall color on the state of the business.

However, we have just gone through an unprecedented 15 month period, at the end of which we recognize that investors would benefit from having some incremental visibility as to near term outlook.

It's very difficult to project the exact slope of the ramp up that we will experience as our markets reopen in the second quarter, but assuming our markets are fully open as we enter the third quarter, and we have a pretty clear confident picture of what the third quarter will look like.

Essentially, we can take the roughly $80 million base stabilized annual EBITDA level that we believe we have established at two or three different points in time over the last 15 months, and add to that the benefits of both the growth in our online business and the realized synergies on the Novomatic acquisition.

And on this basis, we would arrive to the third quarter EBITDA guidance of $28 million to $30 million, about 50% ahead of where we left off at the end of 2019.

As we mentioned in our press release, it is not our intention to initiate regular quarterly guidance, because this is something we continue to philosophically believe does not make sense for this business, but given the craziness of the past five or six quarters, we felt it was important to make an exception at this particular time.

And with that, I'll turn it over to Brooks to give us a little more color on the activities of the individual businesses. .

So our online virtual sports continued to grow in Q1, with revenues increasing by 18% compared to Q4, 2020 and by 51% compared to Q1, 2020.

We continue to see organic growth from a number of key customers and successfully launched our VPP product online with our partner Sisal Sans in Turkey in the fourth quarter of 2020, with 11 channels of scheduled virtual sports via our proprietary RGS platform into their existing website.

Following the initial success we’ve since deployed two channels of Soccer Match Day, providing players with the ability to bet on eight concurrent matches every two minutes across both English and Turkish soccer leagues. More products will launch by the end of the second quarter and in time for the Euro 2021 soccer tournament.

This VVP product that I just outlined is what we'll be using our key North American markets and our first launch will be with BetMGM scheduled to go live yet this quarter. In Virtual Sports our retail business was limited in the U.K.

with virtuals allowed, but without screens being allowed to be turned on, which obviously impacted the business substantially. We expect to have the screen's turned on with a full reopening with betting shops on the 17th and importantly the Republic of Ireland, which is another key market for us will also return on May 17.

As mentioned previously, Greece has returned almost completely and we have several new products that will be released in both Greece and Italy before the start of quarter three, which we expect will accelerate our growth in those markets. Moving on to the Interactive or our gaming business.

The Interactive business continued to grow as Lorne mentioned in Q1, with revenue growth of 22% compared to Q4, 2020 and 143% growth compared to Q1, 2020.

We originally forecasted some softening of the interactive business with the retail business being reopened in mid-April, but the numbers have continued to grow, which gives us encouragement to the stickiness and sustainability of this segment of our business.

North America’s quickly grown to be our second largest market with companies such as BetMGM, Golden Nugget, Lotto Quebec, Caesar's, DraftKings and others, all showing consistent growth validating our content, resonating with players on a global basis.

We look forward to launching and growing our footprint in Michigan, which as Lorne mentioned just went live last week. We expect West Virginia next quarter and then obviously Pennsylvania once we have successful license here in Pennsylvania.

Moving lastly to our Leisure business, we are anxiously awaiting our opening of all of the segments of the leisure business starting in mid-May and look forward to a full summer season for the first time since our acquisition of the Novomatic U.K. business in October of 2019.

Along with our increased revenue from this segment we have delivered beyond the original expectations in terms of synergy and look forward to having increased scale and margins from this segment of the business going forward.

Finally, I share Lorne’s bullish sentiment about the earnings power of the business going forward coming out of the lockdowns, and we would expect to see the third quarter and the second half of the year to clearly illustrate the momentum we see internally. And with that, I'll hand it back to Lorne for closing remarks. .

Okay, thanks Brooks. That was a terrific review, and thank you again everyone for joining this morning. Again, I'm sorry that we are not going to be able to take Q&A today, but I hope you can appreciate the sensitivity of the issue, and again I also apologize for scheduling hopefully not too close to the completion of the scientific games call.

But as Brooks said and as I indicated earlier, I think we are really on the cusp of something fantastic in this company. I really don't think we've ever been more bullish or felt more volume [ph] about what is happening, basically because really everything we've been working on for the last two or three years is coming to fruition.

It's obviously, as I've said a few times before, tried our patience because of the stop and start nature of a lot of the stuff becoming obvious, but I think we really are at the point now where it is all becoming very clear and over the next couple of quarters I think the league results will validate that.

So, thank you all again for joining this morning, and we look forward to speaking with you it another quarter. Thanks. Operator, you can now end the call..