Good morning, everyone, and welcome to the Inspired Entertainment Fourth Quarter and Full Year 2020 Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I'll begin today's conference call by referring you to the company's safe harbor statement that appears in the fourth quarter 2020 earnings press release, which is also available in the Investors section of the company's website. This safe harbor statement also applies to today's conference call as the company's management will make 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 Mr. Lorne Weil, the Company's Executive Chairman. Mr. Weil, please go ahead.

Thank you very much, operator, and good morning, everyone. And thank you for joining our fourth quarter and year-end conference call. I'm joined as usual by Brooks Pierce, Stewart Baker, and Dan Silvers. At the risk of stating the obvious, let me begin by saying that the fourth quarter of 2020 tried our patience like no other quarter I can recall over the course of my career in this industry and I'm sure Brooks feels the same as well as those of you who might have followed us going back to our Scientific Games years or even before that to our Autotote years. You'll know that we've dealt with some pretty strange quarters. We began the fourth quarter with a predictably strong October continuing the month-to-month ramp-up that began in the third quarter of 2020 following the worldwide lockdown that had occurred in the second quarter. In October, we earned $6.8 million in EBITDA, a pretty healthy margin of 32% and revenues of $21.2 million. Most importantly, October EBITDA was nearly 20% above the EBITDA from October 2019. Yet, as mentioned in the press release, the October performance itself was well below what we feel its potential was because we were dealing with pub curfews from the beginning of the month and then the introduction of the tiered system with UK closures in the latter half of the month which significantly impacted both pub and betting shop revenues against which there was very little cost offset possible. Therefore, I think we can say, with a high degree of confidence that absent these factors, October revenue, EBITDA, and especially margins would have been considerably higher than the October actuals. This begins to give us some sense of the true earnings power of this business. This is further underscored by the fact that at least 90% of our business is derived from recurring revenues and therefore sustains itself from month-to-month except when there is a mandated government shutdown. Yet despite the handicaps mentioned above, October performance was strong and it was largely because of the realization of increased synergies from the Novomatic acquisition and most importantly the tremendous growth in our online business which, as mentioned in the press release, doubled between the fourth quarter of 2019 and the fourth quarter of 2020. The vast majority of this growth comes from multi-year recurring revenue contracts. To refresh everyone's memory, we were at about $19 million at current exchange rate in EBITDA in the fourth quarter of 2019, which is important because that was the first quarter following the completion of the Novomatic acquisition. But before the issue of COVID had struck, we talked about having a high degree of confidence that we had established a baseline annual EBITDA level of about $80 million. I think we referred to that at the time as our par EBITDA. Given the impact of increased synergies we've seen since then and of course the tremendous growth in our online business, we would have expected the fourth quarter of 2020 to come in well ahead of 2019. Just this October, we had been well ahead of October 2019, to therefore establish an annualized EBITDA baseline that was proportionately greater than that $80 million baseline. But of course, this is where the strange and turbulent quarter kicked in and our one step forward was quickly followed by the proverbial two steps back. The month of November saw the UK go back into complete lockdown and an increasingly complicated and disrupted tiered system was reintroduced that significantly impacted revenues and made effective cost management almost impossible. Notwithstanding the convoluted nature of the fourth quarter, we ended the year with above $47 million in cash and an undrawn revolver of nearly $28 million for total liquidity of about $75 million aided of course by the value-added tax refunds that we have discussed previously. I can say that our year-end cash balance would have been significantly higher had we not used a good part of that refund to repay debt. So we entered the first quarter lockdown with a strong liquidity cushion. Because the ground rules were clear and simple from the outset and aided by the continuation of the UK furlough scheme, which I believe now has been extended until September 2021, we were able to get our cost structure well aligned with the shutdown, as was the case during the lockdown in 2020. In the first quarter, we continue to spend very heavily in support of our online business and the business continues to grow. Based on the most recent announcement by the UK government, we're planning on the reopening process beginning in April and our retail business will be back essentially to normal at the end of June just as we begin the third quarter. During the third quarter of 2020, which is seasonally by far the strongest quarter for our Holiday Park business, the contribution from that business was minimal because of severe restrictions that were in effect throughout last summer. Conversely, we're cautiously optimistic that this summer will be much stronger for the Holiday Park business with far fewer restrictions other than travel restrictions in the UK, which ironically will be very beneficial to us. In addition, we project that synergies from the Novomatic acquisition will have increased further. And finally, as discussed at length previously, but will nevertheless be discussed in greater detail in a moment by Brooks, our online business comprising both virtual sports and iGaming will in the second and third quarters of 2021 be far ahead of comparable periods in 2020. Taking all these factors together, the impact of the summer, the increasing synergies, and the tremendous growth in the online business give us a way to think about not only the second and third quarter of this year 2021 once the lockdown ends but also an annualized EBITDA level that will go far beyond the $80 million baseline we've discussed at the end of 2019 prior to the COVID interruptions. And with that, I'll hand the program over to Brooks.

Thanks, Lorne. I'll add some more details to your commentary in the new reporting format we've outlined in the release; mainly starting with gaming then virtual sports, then interactive and then leisure. So I'll update on the businesses that we're operating in the fourth quarter and are currently in the first quarter of 2021, which are the interactive business as well as the online part of our virtual sports business. But also try to give some perspective on the reopening of our retail businesses and key markets like the UK where the government has laid out a very specific timeline for segments of the industry that can open and the operating conditions under which we will be able to open. Starting with gaming, the retail aspects of our business in key operating markets such as the UK, Greece, Italy, and North America have been closed since November and continue to be largely locked down as of today, other than Illinois. The UK has announced that betting shops will be allowed to open as of April 12th, albeit with some restrictions on the number of machines per shop and the dwell times in the facilities. Greece and Italy have yet to confirm when their betting shops will reopen, but we project that during the second quarter, capacity will be back to normal by the time we reach the second half of the year. As experienced in all territories, after the first and second lockdown since 2020, we expect turnover to return to prior levels quickly, achieving 100% going into the second half of the year. As you'll see in the release, we're migrating our business in Italy into a recurring revenue model for game content and platform only and will not be providing service to this market going forward, with Sisal being the first customer to move to this new model. We expect to increase our margin significantly by doing this and play to our strengths in providing leading content and an open platform that we will be working to migrate our Italian gaming machine business to this model. Please note that this will not change our operating models in Italy for both our virtual sports business and our interactive business. We're also pleased to deliver the first hundred terminals to our second North American customer, the Western Canada Lottery Corporation, and we believe that there are further opportunities in the Canadian Provincial markets going forward. Our games continue to perform well in Illinois, and we expect accelerating sales in that market as operations build back to a steady state. Moving onto our virtual sports business, as Lorne commented previously, the online segment grew dramatically and we increased that part of the business' recurring revenue by 90% in the fourth quarter and 58% for all of 2020. This growth was due in part to retail virtual being closed in those supermarkets and real sports either being shut down or reduced. In this environment, we accelerated development on a key product initiative of ours, the launch of our Virtual Plug & Play or VPP, as we call it. This is a product that seamlessly integrates into customers' existing websites with all 14 of our sports currently. This product went live with several customers in the fourth quarter of 2020 and we'll be going live in 2021 with key new customers including BetMGM, Caesars, and others. To give you an example, our launch in Turkey with this product has been very successful and is on a run rate of producing over $1 million in annual revenue for us. We just launched our Matchday product, which allows players to bet on eight simultaneous virtual soccer games, creating interesting wagering options similar to what you would see with parlays and sports betting in the states. The early results have exceeded our expectations. In terms of our land-based virtual customers, we're happy to report that the Pennsylvania Lottery has shown dramatic growth in 2020 with sales increasing by 255% compared to 2019, despite sports bars in Pennsylvania being closed for a large part of the year. We believe that these outlets will start to reopen, and we're looking to launch an updated football product alongside our horse racing product later this year. We're also excited to be launching our second North American lottery, the DC Lottery, which will go live in the second quarter and interestingly, it will be the first installation in North America where we'll be replacing an existing product. Thus, we will have a measuring stick for performance. We signed an agreement with Larry Collmus, the announcer for all the Triple Crown races, to be the voice of our virtual horse racing product in North America, which aligns with our strategy to localize our content. Moving onto the interactive segment, this has shown tremendous growth, doubling in size in 2020 and we are continuing to see strength in this segment in the first quarter of the year thus far. This stems from several key drivers, including successful integration with 42 new customers and five new aggregators added in 2020 across multiple geographies. We increased our pipeline of new content by delivering new games and adding successful titles such as Centurion Megaways, Reel King Megaways, and our entire line of Cash Pots games. We have new titles in the pipeline for release this year, including Cops 'N' Robbers Megaways, and we are creating bespoke content specifically for the North American, Greek, Belgian, and Italian markets. This omnichannel strategy has proven effective, evidenced by the strong performance of our number one online game being the same as our number one retail game in Greece. Lastly, we are excited to see new markets come online in 2021, including Michigan and West Virginia, and we have recently gone live in both Spain and Germany, with key international markets like the Netherlands, Romania, and Colombia also being added this year. In summary, our online business remains a key focus for growth, and while we expect our retail businesses to rebound quickly in 2021, we anticipate a significant increase in demand across a reduced cost base for the leisure business. The UK government has advised that indoor hospitality and leisure can open from May 17, and advance bookings are extremely strong, with many locations already sold out for peak holiday weekends, indicating a robust recovery.

Thanks, Brooks. That was great. I think operator now we can turn the program over to Q&A, please.

The first question comes from David Bain with B. Riley. Please go ahead.

Great, thank you and congratulations on what looks like an excellent run rate as we normalize. My first question would be some of the checks that we're speaking with their citing, the potential online restrictions from the UK that could actually come in tandem with pruning of gray area sites, and our assumption would be that would boost traffic to regulated sites that carry your content. Understand there could be headline risk and other risks to consider. Can you discuss your view as to what we may see out of the UK as it relates to regulations?

Brooks, you want to talk about that.

Sure. I think your thesis is right in terms of directing more business to the regulated markets, and that I think will benefit us in terms of the potential regulations on the UK Gambling Commission has sought our input as they form what will probably be a revision of the Gambling Act coming at some point this summer. So we've had a voice in this and we're very mindful of responsible gaming. But we don't think that the changes we believe are going to come down will materially impact our business going forward. In terms of stake limits or game design theories, many of these aspects have already been incorporated into our operations.

I would just add to that slightly. If you look at the pattern of the maximum bet on our online business, particularly in virtuals, what tends to happen is players make large bets on a few live events, like one soccer game, which takes 90 minutes. They might bet $1,000 or $5,000 on that and then they will play a bunch of virtual soccer games with $1 or $2 while that game is playing out. If what we are reading indicates that one of the main ideas being considered is lowering the maximum bet on online betting, I think this might impact the segment of the business where people are betting very large amounts of money on live sports events. However, not only would it not impact our segment, we might actually benefit from a potential switch from those large bets to the smaller size bets typically made on virtuals.

Okay, great. That's very helpful. I guess my next one would be to better understand the forward strategy on route penetration domestically. As you are aware, Pennsylvania distributing gaming could arise from budget negotiations. Are there strategies for partnering and prepping for new routes as the primary plan, or is the primary plan to penetrate existing or more mature routes? What do you think we'll see as we go through 2021 and 2022?

While we'll certainly be going after the existing routes aggressively, as we talked about going in, WCLC will help us with performance data that we'll probably be able to report on next quarter. In Canada, everyone knows what everyone else is doing, so it will be interesting to see how we stack up live. Similar to when we entered Illinois, if we can get our games to perform as they did in every venue, we feel confident about that. Regarding new markets like Pennsylvania, it will be interesting to see how it develops. If it develops like Illinois and involves route operators like Cell and JNJ, and if it happens to be operators that are already in Illinois entering Pennsylvania, then certainly, we have a relationship with them. But if it involves existing casino operators like Penn National or Parks, Lorne and I have extensive experience in this industry and know these folks well, and will certainly take a look at our performance in Illinois and Canada. From the operator side, I believe there is significant interest in having new entrants whose proven performance can make the market more competitive.

Very good, thank you, guys.

The next question comes from Ryan Sigdahl with Craig-Hallum. Please go ahead.

Congrats on all the customer wins and execution, challenging quarters to say the least. I want to start with the UK markets. So we now have visibility to reopening, what are you hearing from your key customers regarding when we come back online? Are you expecting steady state going forward, potentially with new business or operators looking to streamline operations, etc.?

I would say our key customers have experience with the prior lockdown, and we were very happy to see how quickly things rebounded. As you read in the UK papers, the country has been locked down for quite a while and there is a coil effect that they are expecting from people having saved significant amounts of money. So we view the return of retail positively. As you are aware, there is the whole situation with William Hill and who may buy that part of the business, still to be determined, but we feel good about the retail business returning.

Then just shifting to the online business, the sequential growth is impressive. Looking at October, November, December sequentially, how do you foresee that potentially continuing to grow in 2021? The exit trends on 2020 suggest another near triple-digit growth in 2021. Is that reasonable?

I'll give my perspective, and if Stewart wants to jump in, he can. What we're seeing in January and February is the pace is continuing to accelerate. Certainly, we're not sure how retail will impact numbers, but we are encouraged by the number of new markets we are entering and some recent entries like Greece. The numbers from Michigan thus far are very promising, and while we are not participating in Pennsylvania at this point, we believe our pipeline is solid. Any softening caused by retail returning will likely be more than offset by the potential of new markets and the game releases we continue to develop.

I don’t have much to add to that. Brooks made great points.

Last one from me just point of clarification. I guess Lorne, I thought you mentioned significant debt was paid down that proceeds. It looks like debt was relatively unchanged sequentially. Were you talking after the quarter or am I missing something?

Stewart, can you clarify just exactly when we paid down that standalone revolver?

I think the key point is that we paid down the revolver during the quarter. We are now not utilizing any revolver and had also made a six-month interest payment, which reduced our liability to lenders.

Great, thanks, guys. Good luck.

Your next question comes from Chad Beynon with Macquarie. Please go ahead.

This is Aaron on for Chad. Thanks for taking my question. I appreciate the comments on the Holiday Park business and the recovery in the second half. Can you give any details about your recovery in your other markets and how you think about seasonality there?

Just to clarify, are you referring to the leisure part of the business or the return of all parts of the business in other markets?

Yes, sorry. I mean all parts of the business.

The dynamic is probably less about seasonality than it is about when retail comes back and how strongly it comes back. We have a thesis for that based on our past experiences, and what impact it will have on both the online virtual sports and online slot content. We expect to see some softening, but coming from a significantly higher baseline than before. In terms of the leisure business, the third quarter is when we see the lion's share of our revenue, and we haven't had a clean season since the Novomatic acquisition. We're looking forward to that.

Brooks, can you discuss potential timing or trajectory of the market in Italy or Greece?

Sure. We think Greece is likely to recover before Italy. From what we're hearing, we expect Greece to come back in the second quarter and if history is any indicator, it should reach a 100% run rate in the second half of the year.

Got it, thank you. It's very helpful.

This concludes our question-and-answer session. I would now like to turn the conference back over to Lorne Weil for any closing remarks.

Thank you, operator. I don't have too much to add to what Brooks and I have already talked about or for the Q&A. I think you can sense from our comments that the trends we're seeing across the business have never been more positive or optimistic regarding the earnings power of the business. As the retail part of the business reopens, along with the continued tremendous growth we see in online business, we anticipate reaching income levels that considerably exceed anything we've done before or discussed. The other point I'll make is the emergence of the omnichannel or multi-channel strategy where major operators are engaged in both retail and online is an increasingly powerful phenomenon. The results of major operators show this in their revenue growth and profitability. While we may see some attenuation in the growth of our online business as retail comes back on, I believe there will be an acceleration as so many of our major customers are omnichannel players cross-promoting between their retail and online businesses. Though we won't know until it happens, I'm confident that we will see an acceleration. Thank you all for your support, and we look forward to talking to you again in another quarter. Thanks, and operator, you can wrap it up now.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.