Good morning, everyone, and welcome to the Inspired Entertainment Fourth 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 fourth quarter 2024 earnings press release, which is also available in the Investors section of the company's website at www.inseinc.com. This safe harbor statements 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 statements 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 will now turn the conference 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 fourth quarter earnings call. First, let me say, I'm sorry that due to circumstances beyond our control, the press release went out later than it usually does, and I hope that hasn't caused too much consternation. With me as usual are Brooks Pierce and Eric Carrera, and we welcome today our new CFO, James Richardson. James joined at the beginning of the year just as we were knee-deep into the audit process. And with this call today, we successfully conclude his baptism by fire. Adjusted EBITDA for the fourth quarter was $30.9 million, up 22% from last year. The full year adjusted EBITDA of $100.1 million, and $99.3 million for '24 and '23, respectively, reflect minor revisions to prior results due to the timing, but not the total amount of revenue recognition. We can discuss this more in Q&A, if anybody wants to understand it more clearly. As a result of these revisions, we intend to file our 10-K by Wednesday this week or by the end of the week at the very latest. Additionally and perhaps more importantly, as we'll be disclosed in the 10-K, we recently received a letter from the SEC, informing us that our inquiry is now closed and that they would be taking no further action. We are, of course, very pleased with this outcome. The results for the fourth quarter and full year are in line with expectations, and we feel that the -- all the business areas are in very good shape. The Interactive business continues to be the star of the show with fourth quarter revenue and EBITDA growth of 45% and 105%, respectively. Interactive accounted for approximately 22% of overall company EBITDA after corporate cost allocation in the fourth…

Okay. Thank you, Lorne. And I usually do, I'll try to give some more color to the fourth quarter and year end, and what we're seeing thus far with the first quarter of 2025. So let's start with our digital business segments, Interactive, which includes Hybrid Dealer and Virtual Sports, where we've seen consistent growth. Our Interactive segment grew revenue by over 13% quarter-over-quarter, and we're seeing the operating leverage within this segment with adjusted EBITDA margins increasing to 65% for the full year from 55% last year. We've seen those trends continue into the first quarter of the year with February actually being the second highest daily average revenue month we've ever seen. These revenue and EBITDA trends are broad based from both a geographic basis and from a customer basis, with no specific concentrations in either, but the growth we're seeing with Tier 1 customers, in particular is very gratifying. We're seeing all of this with very little contribution thus far from the Brazil market launch in January and we expect that to be a very good market for us. This performance is really a testament to the great work done by the product team in concert with strong account management and our road map for the year looks very strong. Moving over to Hybrid Dealer. We're now live with three customers, including BetMGM, bet365 and Caesars. We continue to see strong performance from this group across multiple geographies, but we still believe the best is yet to come. We expect to launch our next branded Roulette game with Loto-Quebec in the second quarter, along with an expected launch of our 4 Ball Extra Bet game. Both of these are significant in their own right, and we look forward to reporting on their progress in the near future.…

[Operator Instructions] The first question comes from Barry Jonas from Truist Securities. Your line is open.

Hey, guys. Good morning. It's Patrick Keel (ph) on for Barry this morning. To start-off, on Virtual Sports, I think we understand the struggles with your largest customer, but could you dive any deeper into the challenges that segment is facing? Thanks.

Yeah. I think as well, if you -- in looking at the numbers, it really is driven by one customer, but we're starting to see, I think, as we mentioned, some stabilization with that customer, which actually gives us some great comfort in the rest of the business, has shown modest growth in the same periods. So -- and I talked to -- in large part about this reorganization of the product group, and we've brought it into the main-fold. And we've come up with some pretty interesting new innovations really playing on some of the success that we've seen in Sports Betting and same game parlays, and things like that. And we've taken that out to show to our two biggest customers, both of which really thought it was a great innovation and want to get it live as soon as possible. So we feel confident that the margins, I think, as Lorne mentioned, the margins are extremely high, over 70% EBITDA margins. So we still feel very bullish about the Virtual Sports business on a going forward basis.

Okay. Great to hear. Thank you for that. As my follow-up, have there been any updates to how you're thinking about M&A, either from a buy or a sell side perspective here? Including any thoughts on the strategic review of holiday parks. Thanks, again.

Well, on the strategic review of holiday parks, where we have been, which is that we're seriously exploring the sale of holiday parks. We're cautiously optimistic that we're going to come to a favorable conclusion. But until something is firm, obviously, there's not much more we can say, but it's certainly moving in the right direction. And we've been working on restructuring the rest of the business in anticipation of doing that. Beyond that, I don't think we have any intention or any reason to be thinking about divestment because the rest of the businesses are performing extremely well, as Brooks talked about a second ago. As far as on the A side of M&A, we're always looking for something that makes sense. We have an active program doing that. Our balance sheet is in very good shape in terms of having capacity to do something. We have a fairly rigid set of criteria for anything we might do. Right now, there is nothing on the horizon, but we continue to look. And it's something comes along that fits the criteria, then we'll go ahead with it. But right now, again, there's nothing beyond that, that I can say.

Great. Appreciate it.

The next question comes from Jordan Bender from Citizens. Your line is open.

Good morning, everyone. I was wondering, if we could get an update on where the U.K. white paper sits today and are there any noticeable impact we should expect in the market or for your business in 2025?

Yeah. Probably there's one development that's going to happen and one that we actually hope will happen. In terms of the stakes limits. So that's a fact, and that's going to happen. And we've assumed that in all of our budgeting and forecasting, and we think it will have a minimal impact because we'll continue to innovate from a game standpoint to deal with that. But we expected that new (ph) it was coming and it's -- I think it starts in April. Probably the part that we're waiting for is the liberalization of B3 cabinets, so that we could get, there's a restriction now in the number of B3 cabinets that you can have in the U.K. And there's been a lot of talk about that being liberalized a little bit, which would obviously be very good for us in terms of some of our one-time sales in the U.K., but that's still to be determined.

Thank you for that. And on the follow-up, the cash balance is dipping quarter-on-quarter. Should we still expect, I think you gave guidance of 1Q cash of $50 million to $55 million. Is that still the right way to think about it?

I would say, it's going to be a little bit lower than that because I think as Lorne talked about, there's been some delay in the receivables. So I think directionally it's right, and we'll have to see as we get a little bit further along. But I'd say, it's probably a little higher than we would expect. It's probably going to be a little bit lower than that.

Yeah. Just wanted to add to that, Eric. We also, just at the time, I don't think we -- the timing of the cash payments for certain suppliers like for the William Hill deployments, we actually accelerated that. We're going to get that done by the end of March. I think earlier, we guided, it’s going to be early Q2, but we'll have that done by the end of this quarter. So there has been some supply-related payments that just sort of accelerated.

Thanks, everyone.

The next question comes from Ryan Sigdahl from Craig-Hallum Capital Group. Your line is open.

Hey, guys. I want to stay on Virtual Sports. So given the high-single digit growth outside of your top customer there, it implies pretty big declines from that customer, which we know. But I guess what gives you the confidence to say that your past that inflection point, I feel like we've heard that for several quarters now that the business was plateauing and it continues to drift lower. So curious what you've seen year-to-date in 2025 and kind of real time?

Yeah. Well, I can definitely give some comfort on that since I have seen real-time data in the first quarter and at least halfway through March, it really has kind of leveled out. A lot of that is in part, probably the only difficulty that we've seen is in Brazil. This transition starting January 1, where everybody had to kind of shut their accounts down and bring their accounts back up. So January was just a little bit soft, but February actually recovered from that. And look, we still happen to believe that on a going-forward basis, Brazil, in particular, is going to be a very significant market for us. Two of our biggest customers bet365 and Betano in Brazil, which represent right now about 40% of the market in Brazil are seeing very strong results. And as we start adding more and more customers, I think we've done press releases on our partnership with Kambi, our partnerships with Altenar, plus some of our individual deals. We expect Brazil by the time it's all said and done to probably end up being the biggest market we have. So first quarter pretty stabilized, but certainly we think there's a lot of potential for growth in Virtual Sports still.

Helpful. Hybrid Dealer, you mentioned three customers you're live with Caesars, MGM, bet365. You had a press release from FanDuel, launching a Hybrid Dealer game back in October. I guess, curious where that stands because presumably, it's not live yet.

No. It's not live yet. And it's a pretty big bespoke project. FanDuel has been great to deal with on this. And we would expect this product not to go out until right before the launch of football season in 2025. So it won't be before this then, but I think it will be, frankly, with FanDuel's participation, I think it will be a pretty significant product launch.

Great. Thanks, guys. Good luck.

Thank you.

[Operator Instructions] The next question comes from Chad Beynon from Macquarie Group. Your line is open.

Hey, guys. Good morning. This is Aaron on for Chad. Thanks for taking our question. First wanted to ask about given additional Vantage machines and other retail opportunities, can you just talk about CapEx needs and what that means for cash flow?

Yeah. Well, I think in terms of CapEx, we mentioned the Moto and Welcome Break renewals, which will require some CapEx. We're in the midst of upgrading a number of our pub customers, and that will also take CapEx. But I think all of that's been planned for and budgeted for, so nothing has come out of the woodwork that unexpected. So I think from a CapEx standpoint, Eric, can jump in if he wants to add anything to this. But it's going to be roughly the same as what we've seen in the last couple of years. So nothing out of the ordinary.

Got you. Okay. That's helpful. I also wanted to ask about the lottery business. Can you just talk about where you see the opportunities in 2025 to drive growth or sign new contracts and how should we be thinking about the benefits from the new cloud based lottery system? Thank you.

Yeah. Thanks. No. That's a good question. So we are planning to hand over to our customer. Hopefully, by the end of this month, it looks like or maybe just in the beginning of April, for their part of it, the customer acceptance testing. So the development is largely done. And I think when we get that and when we put it into the DR, we think it will be the most advanced lottery system anywhere, and Lorne can comment about the potential for the sale of a system like this around the world. But we look at lottery in a couple of different vectors. So one is, obviously, the systems business that we just talked about. We're super excited about this launch of Virtual Sports with the Virginia Lottery and Aristocrat at the end of April because we think that's the first time -- we think that will be the first time that it's an online lottery product in the U.S. And for those that don't know, Virginia Lottery is a very successful iLottery state with doing over $1 billion in sales. So we're super excited about that product in both Virginia lottery and Aristocrat have been very involved in the delivery of that. And we still believe, lastly, on the lottery segment that e-instant is a natural advancement for using some of our content that’s been successful kind of around the world. So I’d say, the e-instant development is probably a little behind where I would like it to be, but we still think that’s a very viable opportunity to us. So lottery is a very key segment or a channel for us that we probably don’t talk about as much as we should, but we do think that over the next couple of quarters, we’ll start seeing some pretty significant opportunities in the lottery segment.

Great. Thank you. Appreciate the color.

No problem.

That concludes our Q&A session. I will now turn the call over to Lorne Weil, the company's Executive Chairman for closing remarks.

Thank you very much, operator. I don't really have much to add. I think Brooks gave a very comprehensive overview of where each of the businesses is. I do agree with him that everything we're seeing seems to suggest that the Virtual Sports business is -- it has passed an inflection point. I think the most important point is as far as Virtual Sports goes as we put a significantly renewed focus on product development and product enhancement. I think for a while because we had a tiger by the tail with Interactive. We were throwing everything but the kitchen sink at the Interactive. And you can see by the phenomenal growth in both revenue and profitability that, that focus in that development has really paid off. And I think, to be honest, for a period of time, we're probably under investing in product development in Virtual Sports just because the Interactive opportunity was so huge. But now I think we're not diverting resources. We're adding resources, and I feel cautiously -- more than cautiously optimistic that we can duplicate in Virtual Sports, what we've been seeing with Interactive now that we've got the focus on product enhancements. And I think we'll start to see this in the next few quarters. Other than that, I don't really have anything else to say. Everything else is in very good shape. Balance sheet is in good shape. Cash is in good shape and we look forward to talking to you in a few months. Thank you

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.