Virtuals and gaming equipment provider Inspired Entertainment is set to cut costs in its leisure division after the business reported $74.9m (£69.6m/€79.2m) in revenue for the third quarter of the year, a decrease of 3.4% year-on-year.
The Inspired leisure division accounted for the highest portion of the revenue, at $30.5m, but this was down by 8.6%.
Gaming revenue came to $24.1m, a decline of of 12.6%, and virtual sports brought in $14.6m – up by 39.0% and a new record for the vertical. Virtual sports was also the driver behind Inspired’s revenue increase in H1.
The smallest contributor was Inspired’s interactive segment, which stood at $5.7m.
Inspired cutting costs
Stewart Baker, executive vice president and chief financial officer at Inspired, said that the quarter had been strong – but added that the company faced “cost pressures” within its Holiday Parks business, which supplies amusement and gaming machines across the UK.
“We are pleased to report another strong quarter in the face of an uncertain economic environment,” said Baker. “Our online business was relatively unimpacted by inflation or supply chain issues, however, we did experience significant cost pressures in the Holiday Parks business.”
Baker said that Inspired was prepared to cut costs due to these pressures.
“We have experience reducing costs significantly when we have needed to and will do so again here as we are highly focused on mitigating the impact and improving our cost efficiency.”
The vast majority of overall revenue was from services, which came to $69.2m. Product sales made up the remaining amount – $5.7m.
The total earnings before interest, tax, depreciation and amortization (EBITDA) came to $56.8m. This consisted of $14.2m in cost of services and $3.9m in cost of product sales.
Selling, general and administrative and transaction expenses were $37.7m, a decrease of 3.9% year-on-year. Transaction expenses related to integration and acquisitions accounted for $100,000, while depreciation and amortization expenses were $8.8m.
This brought the operating income to $16.2m, an upturn from $14.9m in Q3 2021.
Interest expense for the quarter came to $6.2m. Meanwhile, other finance income was $300,000. This brought the pre-tax loss to $10.3m.
Following tax expenses of $100,000, the total net income for the quarter was $10.2m – down by 59.2% year-on-year.
Strength and resilience
“Looking forward, we continue to see solid results from our retail and digital businesses, demonstrating the strength and resilience of our business,” said Lorne Weil,” executive chair of Inspired.
“We remain mindful of the potential for a shifting macro environment, and are diligently managing cost containment efforts, but rely on the healthy underlying momentum, diversification of our business model and our strong development pipeline and believe we are well positioned to deliver further progress against our strategy.”
For the first nine months of the year, revenue was $206.8m – a significant rise of 45.7% year-on-year. Net operating income stands at $36.5m, compared with a year-on-year loss of $700,000.
Net income for the first nine months is $19.2m, up by 45.9%.
During the quarter, Inspired and PlayAGS ended speculation that Inspired would take over the gaming machine provider. In August, PlayAGS confirmed that it had been approached by a then-unnamed party with a $370m takeover offer.