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. 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 apply 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 intense competition in conference calls 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 a high-level perspective, I would summarize things as follows. The Interactive business continues on a growth trajectory, where we're seeing the compound effect of accelerating revenues and expanding margins. Virtual Sports is maintaining extraordinary margins, while revenues continue to remain stagnant. We believe revenue is approaching an inflection point as the previously discussed customer concentration impact flattens out. The rest of our customer base is experiencing healthy growth, especially in the digital area. Brooks will elaborate on this shortly. Additionally, we see the impact of important new products. Lastly, our retail-oriented businesses are performing very well, benefiting from normal business conditions in our various markets. Overall, year-to-year EBITDA growth in the third quarter was 13%, and our EBITDA margins are approaching our 40% target. Entering a period of normalcy is positively impacting 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, 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. It is a bit of an oversimplification, but the increase in cash over the nine-month period ending March 2025 will roughly be $30 million, representing an appropriate cash conversion percentage of the underlying nine-month EBITDA. As our cash approaches these levels, we can once again consider asset allocation alternatives. This matter of cash is also informing our thinking concerning our holiday park business, which we get asked about quite often. When we first began to consider the sale of holiday parks, we challenged ourselves to develop a plan to consolidate and streamline the remaining retail businesses to recapture through cost reduction all the EBITDA being sold. We have successfully developed this plan and have begun to implement it, so that regardless of what happens with the holiday parks, 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 arise. 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 would 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 tremendous job over the last 12 months. Marilyn has agreed to stay on as our Transformation Officer through the middle of next year, and we thank her for her continued commitment to the company. And with that, I'll hand it over to Brooks.

Thank you, Lorne. I echo your remarks about Marilyn, she's been great to work with over the last year. I'll elaborate on the individual segments as well as the progress on some of our operating initiatives to achieve our goal of 40% EBITDA margins. I'm happy to report that we reached 38.6% in the third quarter, which was up 3 percentage points from the same period 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, largely due to the continuation of strong and consistent game roadmaps, and we are also beginning 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 anticipate that these markets will also enhance our growth profile. To give you a sense of that, October set a new all-time high for monthly revenue in this segment, largely driven by some seasonal content around Halloween, including our best-performing game of the month, Golden Halloween Winner. We are proud of our reputation as being a leader in seasonal games and have a great lineup of Christmas-themed games ready for December, which is 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, specifically to support our growth and continue delivering the quantity and quality of games to this expanding segment. Furthermore, we continue to refine our iLottery content strategy and game deployment, and we will provide updates on that in our next call. We showcased some of our major enhancements to the Hybrid Dealer category at G2E, including a standard roulette game, a Brazil roulette game, and a new side bet roulette game called 4-Ball Extra Bet with a two-wheel configuration, leading to exciting innovations in roulette. This product set demonstrates the unique adaptability of the Hybrid Dealer and offers gameplay not possible with physical wheels. We also presented the new Caesars bonus game called Caesars Palace Wheel of Wins and expect to launch this game along with the other roulette games either this year or early next year. We announced new contracts with both FanDuel and Loto-Québec and expect to go live in additional states, provinces, and countries in the next quarter or two as our pipeline of customers and products continues to grow. We're very optimistic about the Interactive segment, which remains a primary driver of our digital business growth. On the other hand, our Virtual Sports segment continues to be impacted by the decline of our largest customer in the segment. However, all other customer recurring revenue grew 11% year-over-year, with 21% of that growth stemming from the online portion of that customer base. We firmly believe that the combination of new licensed products like our NFL, NBA, and recently announced NHL license, along with new geographies like Brazil, will lead this segment back into growth mode, although we've been delayed by customer resource issues, technical integrations, and regulatory approvals, which have slowed the process more than we'd like. For example, we are live with only two customers using our NFL product, but it is performing very well with those two customers, neither of which is in North America, which we ultimately believe will be the largest market for the NFL game. It is now looking more like the end of the year and the beginning of 2025 before we can resolve some of these issues. Our Gaming segment had a solid quarter, with revenue, excluding low-margin sales, up modestly at 4% year-over-year, while EBITDA increased by 29% year-over-year. It's always tough to make direct comparisons in this segment due to timing, revenue mix, and one-time sales, but we are beginning to see the positive impact of some of our cost-saving initiatives reflected in the income statement, and we expect that to accelerate in the fourth quarter with the shutdown of our manufacturing facility in Wales and transitioning to a fully outsourced manufacturing model. We have several deliverables in the fourth quarter and the first quarter of '25, including 720 terminals for WCLC, the installation of close to 5,000 Vantage terminals to evoke, formerly William Hill, and the start of installation of up to 4,000 terminals to OPAP in Greece. We expect to recognize some benefit from the conversion of the evoke terminals in Q4, with the major impact beginning in Q1, and I’m pleased to announce that the first site conversion happened in late October. We also introduced a new cabinet at G2E called the Valiant, our first portrait cabinet specifically designed for the North American market. The response from our customers and potential customers has been overwhelming, and we're already starting to take orders for this product largely due to the improved performance we've seen in our North American installed base. This success is encouraging us to explore leveraging our cabinet, content, and system capabilities for adjacent markets like Class II and HHR, and we will update you as we finalize our review. Lastly, our Lottery Systems business, which is included in our Gaming segment, grew 8% year-over-year, and we're making significant progress on our new cloud-based lottery system that we plan to deploy and 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 benefits of operational leverage in this business and the impact of our operating efficiencies on financial results. While we are reviewing strategic options regarding the holiday parks business, we firmly believe that our content, cabinet, and service strategies in the pub, bingo, and motorway service segments are showing positive results, and we continue to view these as key components of our land-based business model, leveraging a combined technology and content development function to support all of our business areas. The third quarter EBITDA stood at $30.1 million, with nearly 40% EBITDA margins, coupled with the product and geography expansions I discussed earlier, gives us confidence in our strategy and ability to deliver improving results in Q4 and into 2025. With that, I'll hand it back to Lorne for any final remarks before we open up the floor to Q&A.

Thank you, Brooks. I don’t have any final remarks at this time. So, operator, if you would please open the program up to Q&A?

Absolutely. 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 get broad-based thoughts.

Yeah. I'm surprised you asked that question, David. 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 bright prospects ahead of us. The Hill's contract is an organic growth opportunity in the Interactive business, the tremendous potential of Hybrid Dealer to accelerate growth, and the restructuring program that both Brooks and I 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 now I would want to go beyond that in terms of guidance, but maybe as we get early into next year, and a few unclear elements clarify, we might be inclined to be more explicit about where we see 2025. But I think for now, I can say we're comfortable with the consensus, but I wouldn't want to have a recording indicating that I was saying anything more than that.

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

I believe our balance sheet is in strong condition right now, and as I've noted, our cash situation is getting better. The approach of pursuing growth through businesses that require less capital relative to their profitability is starting to pay off. Consequently, I think any acquisition we would seriously explore could be easily financed through debt. Therefore, I don't see a conflict in using cash for share buybacks while also boosting our organic growth through acquisitions.

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 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 address the William Hill part, but I will also mention some developments we're seeing in Illinois and some other markets in North America. As you remember, the uplift from both the Betfair and Paddy Power business when we converted them to Vantage was in the range of 12% to 15%, and we fully expect the same uplift with the William Hill conversion, which we plan to complete by the end of the first quarter. So, this obviously reinforces Lorne's recent comments on your question. This gives us confidence that the Gaming segment business will realize that uplift. Additionally, I think our strategy in Illinois and, broadly, our North American strategy is working out exactly as we had hoped. The performance in that segment is likely at an all-time high. We've noted that the strategy is yielding additional orders from all our customers in Illinois, refreshing their content on an ongoing basis. Consequently, I believe overall gaming cabinet performance is quite strong.

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

Yeah. Ideally, particularly in the Hybrid Dealer segment, we want to have a blend of both. A customer with the market presence and creativity like FanDuel can come up with a valuable concept, and we’ve built a demo for them. They are perfect for bespoke content. However, tons of customers want the capability of Hybrid Dealer but do not want to spend the upfront money to develop advanced work and merely wish to turn it on for a recurring revenue opportunity. Thus, as we move into 2025, you'll see our reporting on Hybrid Dealer show a mix of both. All of it will be recurring revenue, but some bespoke content will bring upfront fees for development. As you can imagine, bespoke work takes longer than standard product rollouts, so ultimately having a mix of both is the right approach for us.

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 focusing on the 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 is starting to grow again. Can you just talk broadly about where things stand from a regulatory perspective if that growth is expected? More importantly, what have you observed in your market share as smaller players have exited the market?

Yeah, that's a good question. We are indeed seeing growth in the UK, both from a macro sense and from market share percentage. One advantage of the UK is that this data is public, allowing us to track our performance in terms of market share, as opposed to North America, where we estimate it based on customer discussions. We're happy with how the UK business is evolving. As you mentioned, the market is consolidating a bit, and we're excited about the Brazil market coming on board in January. The Interactive business, in particular, is driven by the quality and quantity of the games as well as the reliability of delivery, allowing customers to plan effectively. So far, we are performing well in this area.

What I would add to that is that specifically regarding your question about the UK, we are able to achieve significantly higher market share because we have a strong machine base in retail. Customers see our games in pubs and betting shops and subsequently play them on their phones or computers when they get home. Hence, it is not surprising that our market share in the UK is considerably higher than in other regions.

Okay. Great. Next, regarding the 40% margin goal that Brooks has mentioned, which won't arrive overnight due to the hardware business doing well, but you talked about some improvements. When should we expect to see more of a 40% consolidated margin? Is that something expected in the back half of '25 or in '26? I'm considering the digital growth versus gaming.

Well, I’ll comment, and then I’ll defer to Lorne concerning guidance. You likely already understand how Lorne feels about this. Clearly, as the business continues— as we’ve discussed quarter after quarter, you’re witnessing it in the results— the business is becoming increasingly digital-focused, particularly through growth initiatives like Hybrid, and frankly, Virtuals with high margins. This will push the margins above 40%. Probably more than any other factor is the mix. For timing, I defer to Lorne on that.

I would prefer not to comment on that, but certainly what Brooks said—that the main driver is the transition in the business mix from retail to digital—is correct, especially with margins being high and growing even within Interactive. So, there is a certain inevitability to margins moving into the 40% range, but it is somewhat difficult to pinpoint the timing. Again, as we navigate through this year and early next year, some developments may arise that will clarify things further, allowing us to be more precise about when we expect to reach that 40%-plus mark.

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 identify the customer base? Are they splitting time between live dealers? Is it helping to grow the overall market? Ultimately, what data points do you provide to new conversations with operators to show how this product assists?

Yeah. It may be better addressed by MGM, but based on what we hear from MGM, they report that their active player numbers continue to grow, along with repeat players. Customers are engaging with this game on a daily basis, which bodes well for performance. Typically, if it were compared to a slot game, a slot game’s lifecycle tends to start strong, moderate, and then taper off. We haven't observed that in Hybrid Dealer. We always anticipated that roulette would be a bigger game than the wheel game we initially introduced. Therefore, we are excited to release that to the market this quarter or at the beginning of the next quarter, as it could drive the kind of behaviors we’ve seen with the wheel game. Our current data metrics, such as GGR and player engagement, are looking strong. Keep in mind that we only have one game in two jurisdictions right now, so we’ll gather more insights on player behavior soon.

Helpful. And then just a follow-up. We discussed capital allocation, balance sheet, M&A, buybacks. I guess I’ll try a different angle. Would you consider using debt to buy back some of your shares?

It’s a complex question because part of the reason we have as much cash as we do is because we have debt. Even if we do not incur any additional debt, using the cash we currently have or generate over the next six months translates to using debt indirectly, since we have existing debt. To clarify, if the question is whether we would incur any additional debt to buy back stock, my answer is absolutely no.

Yeah. I guess the latter was more about would you look to add leverage to perform share buybacks, but that is clear.

No, we would not do that.

Hey, good morning, guys. One quick one for me. If I look at the struggles and challenges with your largest Virtual Sports customer, if I focus on the total number of customers, Interactive continues to trend upward and grow nicely. You're at 172, while Virtuals are at 57, and if I review the last few years, Virtuals have largely remained flat, while Interactive has doubled and tripled. What are the main challenges in getting customers to integrate Interactive content and games while not adding Virtual Sports as well?

Well, you mentioned integration, which is one factor, but there are mainly two things. One is regulatory hurdles affecting the integration of Virtual Sports with iGaming. Moreover, we anticipate going live with a fully integrated product with BetMGM in the next couple of quarters. We need to onboard DraftKings and FanDuel for meaningful contributions since they account for over 70% of the sports betting market. We believe this content performs better with sports players compared to casino players. Brazil presents an excellent opportunity for us, given its soccer-centric nature and a relatively liberal regulatory environment. Therefore, our focus in Brazil is currently on signing customers and launching.

Additionally, one opportunity to expand Virtual Sports' customer base is in the lottery sector. We are working on a couple of exciting initiatives in that area, but we will likely not be able to discuss those until early next year.

Thanks, guys. Good luck.

Thank you.

There are no further questions at this time. I would now turn the call back over to Lorne Weil for closing remarks.

Thanks, operator. Again, thanks, everyone, for joining. We're just slightly past 8:30, which is when some other calls are starting. So, I will wrap up by saying thanks for being with us this morning. We're quite happy with the third quarter performance. The outlook for the rest of this year and next year is beginning to look very positive, and we look forward to talking with you in a few months. Thank you.

That concludes today's call. Thank you all for joining. You may now disconnect.