Q2 2024 Inspired Entertainment Inc Earnings Call
Speaker Change: [music]
Speaker Change: [music]
Speaker Change: Thanks for watching!
Speaker Change: and i have
Speaker Change: Good morning, everyone, and welcome to the Inspired Entertainment second quarter 2024 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, we will have a question and answer session. If you would like to ask a question at that time, please press one.
Speaker Change: Please press star followed by 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. Please note that today's event is being recorded.
Unknown Executive: Please refer to the company's safe harbor statement that appears in the second quarter 2024 earnings press release, which is also available in the investor section of the company's website at www.inseinc.com. In addition, please note that the company will discuss both GAAP and non-GAAP financial measures.
Unknown Executive: Please refer to the company's safe harbor statement that appears in the second quarter 2024 earnings press release, which is also available in the investor 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.
Speaker Change: Please refer to the company's safe harbor statement that appears in the second quarter 2024 earnings press release, which is also available in the investor section of the company's website at www.inseinc.com.
Speaker Change: 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.
Speaker Change: These statements are based on management's current expectations or beliefs and are subject to risk, uncertainties, and changes in circumstances.
Speaker Change: In addition, please note that the company will discuss both GAAP and non-GAAP financial measures.
Unknown Executive: 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 call over to Lorne Weal, the company's executive chairman. Mr. Weal, please go ahead. Thank you.
Speaker Change: A reconciliation is included in the earnings press release. With that completed, I would now like to turn the conference call over to Lorne Wheel, the company's Executive Chairman. Mr. Wheel, please go ahead.
Lorne Weal: Thank you, operator. Good morning, and thanks for tuning in to our second quarter conference call. Joining me this morning are CEO Brooks Pierce, CFO Marilyn Jentzen, and VP of Corporate Development Eric Carrera. I'll start with an overview to try and frame how we're thinking about the second quarter. And then I turn it over to Brooks to elaborate on a number of very interesting and exciting initiatives that will be driving growth in the second half of this year and beyond.
Lorne Wheel: Thank you, operator. Good morning, and thanks for tuning in to our second quarter conference call. Joining me this morning is our CEO , Brooks Pierce.
Lorne Wheel: CFO Marilyn Jentzen and VP of Corporate Development Eric Carrera. I'll start with an overview to try and frame how we're thinking about the second quarter.
Speaker Change: And then turn it over to Brooks to elaborate on a number of very interesting and exciting initiatives that will be driving growth in the second half of this year and beyond.
Lorne Weal: In our first quarter conference call, we shared that we thought our second quarter EBITDA would grow sequentially by at least 50% from the first quarter, and we ended the quarter about 56.5% ahead, which I think is ahead of consensus as well and reflects the fact that pretty much all areas of the business are hitting on eight cylinders. The interactive business was once again the star of the show, with revenue and EBITDA of 40% and 69% respectively ahead of Q2 2023, meaningfully outpacing the growth in the market. Market share gains were driven by new customers, new geographies, and most importantly, the launch of new products in a moment.
Speaker Change: In our first quarter conference call, we shared that we thought our second quarter EBITDA would grow sequentially by at least 50% from the first quarter.
Unknown Executive: and We ended the quarter about 56.5% ahead, which I think is ahead of consensus as well. The interactive business was once again the star of the show. Brooks will discuss in some detail our Harvard Dealer Initiative, but as Brooks will elaborate upon in a moment, and as mentioned in the press release. Similarly, the injection of significantly more vantage cabinets into the top tier pubs sets in motion a cascading replacement process throughout the entire pub estate that will be an important driver of revenue in EBITDA as well. As mentioned previously, this is the key component of our plan to get our overall EBITDA margins comfortably into the forecast.
Brooks Pierce: And we ended up the quarter about 56.5% ahead.
Speaker Change: which I think is ahead of consensus as well and reflects the fact that pretty much all areas of the business are hitting on eight cylinders.
Speaker Change: The interactive business was once again the star of the show with revenue and EBITDA 40% and 69% respectively ahead of Q2 2023, meaningfully outpacing the growth in the market.
Margaret: Margaret's share gains were driven by new customers, new geographies, and most importantly the launch of new products. In a moment...
Lorne Weal: Brooks will discuss in some detail our Harvard Dealer Initiative, which we forecast will grow to become by far the largest component of our interactive portfolio as we add new products to the category, broaden our customer base, and expand into new geographies throughout the world, again, which Brooks will discuss in a moment. In terms of profitability and cash flow, virtual sports continues to be our highest performing business, with EBITDA margins in excess of 80% and cash conversion even higher.
Brooks Pierce: Brooks will discuss in some detail our Harbor Dealer Initiative.
Brooks Pierce: which we forecast will grow to become by far the largest component of our interactive portfolio as we add new products to the category, broaden our customer base, and expand into new geographies throughout the world, again which Brooks will discuss in a moment.
Speaker Change: In terms of profitability and cash flow, virtual sports continues to be our highest performing business with EBITDA margins in excess of 80% and cash conversion even higher.
Lorne Weal: I don't think I have ever seen another business perform at these levels in all my years of doing this. Following a lengthy period of sustained growth, revenues have recently been treading water, due in part to the absence of meaningful product and geographic expansion, along with a user-based optimization exercise, which we have discussed previously. But as Brooks will elaborate upon in a moment, and as mentioned in the press release, we anticipate that revenue and EBITDA in the second half of this year will exceed the first half as we begin to see the impact of recent product and geographic expansion.
Speaker Change: I don't think I have ever seen another business perform at these levels in all my years of doing this.
Speaker Change: Following a lengthy period of sustained growth, revenues recently have been treading water, due in part to the absence of meaningful product and geographic expansion, along with a user-based optimization exercise which we have discussed previously.
Brooks Pierce: But as Brooks will elaborate upon in a moment, and as mentioned in the press release, we anticipate that revenue and EBITDA in the second half of this year will exceed the first half as we begin to see the impact of recent product and geographic expansion.
Lorne Weal: There were so many one-time or non-recurring events in our core gaming business in the second quarter of both the 23 and 24, it's nearly impossible to understand the strong underlying momentum in this part of the business. Two of our three largest betting shop operators, Betfred and Patty Power, are showing strong year-to-year growth. A pattern we now expect to see replicated with William Hill as we begin to deliver the first of 5,000 new Vantage cabinets in the fourth quarter of this year.
Brooks Pierce: There were so many one-time or non-recurring events in our core gaming business in the second quarter of both the 23 and 24, it's nearly impossible to understand the strong underlying momentum in this part of the business.
Speaker Change: Two of our three largest betting shop operators, Betfred and Patty Power, are showing strong year-to-year growth.
Speaker Change: The pattern we now expect to see replicated with William Hill as we begin to deliver the first of 5,000 new Vantage cabinets in the fourth quarter of this year.
Lorne Weal: So this is an important growth driver for 2025. Similarly, the injection of significantly more vantage cabinets into the top tier pubs sets in motion a cascading replacement process throughout the entire pub estate that will be an important driver of revenue in EBITDA as well. Lastly, I should mention that our plan to rectify the below-average profitability of our Holiday Park business is well on the way to fruition, and hopefully, we will have more to discuss in the coming weeks. As mentioned previously, this is the key component of our plan to get our overall EBITDA margins comfortably into the future. And with that, I'll hand it over to Brooks.
Speaker Change: So, this is an important growth driver for 2025.
Speaker Change: Similarly, the injection of significantly more vantage cabinets into the top-tier pubs.
Speaker Change: sets in motion a cascading replacement process throughout the entire pub estate that will be an important driver of revenue and EBITDA as well.
Speaker Change: Lastly, I should mention that our plan to rectify the below-average profitability of our Holiday Park business.
Speaker Change: is well on the way to fruition and hopefully we will have more to discuss in the coming weeks.
Speaker Change: As mentioned previously, this is the key component of our plan to get our overall EBITDA margins comfortably into the 40s.
Brooks Pierce: Okay, thank you, Lauren. And I'll give a little bit more color on the individual business segments and some perspective on the second half of 2024 and the drivers for the business going into 2025. The interactive segment continued its strong growth trajectory and increased revenue by 40% year-over-year and 69% adjusted EBITDA growth year-over-year and sequential quarter-over-quarter growth in revenue of 16% and adjusted EBITDA growth of 39%, showing the operating leverage that exists in this segment of the business.
Speaker Change: And with that, I'll hand it over to Brooks.
Brooks Pierce: Okay, thank you, Lorne, and I'll give a little bit more color to the individual business segments and some perspective on the second half of 2024 and the drivers for the business going into 2025.
Brooks Pierce: The interactive segment continued its strong growth trajectory and increasing revenue by 40% year-over-year and 69% adjusted EBITDA.
Brooks Pierce: growth year-over-year and sequential quarter-over-quarter growth in revenue of 16% and adjusted EBITDA growth of 39% showing the operating leverage that exists in this segment of the business.
Brooks Pierce: The momentum is carried through with July being our highest revenue in history and the first week of August actually being the highest individual revenue week we've ever recorded. There are several factors that are leading to this performance, including a great content roadmap with consistent delivery of high-quality games, the addition of key customers in markets, and our ability to gain market share in mature markets like the UK. So, let me give you some examples of what I'm talking about.
Brooks Pierce: The momentum is carried through with July being our highest revenue in history and the first week of August actually being the highest individual revenue week we've ever recorded.
Speaker Change: There are several factors that are leading to this performance, including a great content roadmap with consistent delivery of high-quality games, the addition of key customers and markets, and our ability to gain market share in mature markets like the U.K. So let me give some examples of what I'm talking about.
Brooks Pierce: We introduced 40% more games in Q2 versus Q1, with many exclusive games with key customers in the quarter. We launched FanDuel in Connecticut and now serve 100% of that market, and we have added Fanatics and Parks in key states and serve above 90% of customers in the three biggest markets of New Jersey, Pennsylvania, and Michigan. And we expect to go live in both West Virginia and Delaware before the end of the year.
Brooks Pierce: We introduced 40% more games in Q2 versus Q1, with many exclusive games with key customers in the quarter.
Speaker Change: We launched FanDuel in Connecticut and now serve 100% of that market and have added Fanatics and Parks in key states and serve above 90% of customers in the three biggest markets of New Jersey, Pennsylvania, and Michigan. And we expect to go live in both West Virginia and Delaware before the end of the year.
Brooks Pierce: We reached 8% market share for slots in the UK, the highest we've ever been and quadruple what we were just several years ago, and grew our blended share of table games and slots in the UK from 5.4% a year ago to 7% in Q2, representing 30% growth in a very mature market. The largest component of this increase is due to the success of our content across the flutter. We've also recently introduced our first progressive game in the North American market, Rush Street, and expect to roll out more of our content in this key game mechanic to all of our customers in the North American market.
Speaker Change: We reached 8% market share for slots in the UK, the highest we've ever been and quadruple what we were just several years ago, and grew our blended share of table games and slots in the UK from 5.4% a year ago to 7% in Q2, representing 30% growth in a very mature market.
Speaker Change: The largest component of this increase is due to the success of our content across the Flutter group.
Speaker Change: We've also recently introduced our first progressive game in the North American market with Rush Street and expect to roll out more of our content in this key game mechanic to all of our customers in the North American market.
Brooks Pierce: We're encouraged by the performance of this segment but still see plenty of runway for growth opportunities, both in product innovation and performance and key new geographies like Brazil and South Africa. So let's talk about a hybrid dealer.
Speaker Change: We're encouraged by the performance of this segment, but still see plenty of runway for growth opportunities, both in product innovation and performance, and key new geographies like Brazil and South Africa.
Brooks Pierce: So hybrid dealer, which we'll report in the interactive segment, is really starting to hit its stride after its full launch in New Jersey in Q1. In New Jersey, the monthly turnover has doubled since going live, and the number of active players has increased more than 50% in that period, and repeat players is the highest we've seen since launch. We think that proves that this product appeals across a broad spectrum of the player base and is sticky, and BedMGM has been great in supporting this with marketing and great placement on the site.
Speaker Change: So let's talk about a hybrid dealer. So a hybrid dealer, which we'll report in the interactive segment, is really starting to hit its stride after its full launch in New Jersey in Q1.
Unknown Executive: In New Jersey, the monthly turnover has doubled since going live, and the number of active players has increased more than 50% in that period, and repeat players is the highest we've seen since launch. We think that proves that this product appeals across a broad spectrum of the player base and is sticky, and BedMGM has been great in supporting this with marketing and great placement on the site. We went live with our second state with BadmGM in Michigan, and although it's still early days, the results have been terrific.
Speaker Change: In New Jersey, the monthly turnover has doubled since going live, and the number of active players has increased more than 50% in that period, and repeat players is the highest we've seen since launch.
Speaker Change: We think that proves that this product appeals across a broad spectrum of the player base and is sticky and Bed MGM has been great and supporting this with marketing and great placement on the site.
Brooks Pierce: We went live with our second state with Bad MGM in Michigan, and although it's still early days, the results have been terrific. We're seeing active players and turnover in Michigan that's significantly higher than what we saw in New Jersey. And the average stakes are 40% larger in Michigan than what we're seeing in New Jersey.
Speaker Change: We went live with our second state with BED-MGM in Michigan and although it's still early days, the results have been terrific.
Speaker Change: We're seeing active players and turnover in Michigan that's significantly higher than what we saw in New Jersey and the average stakes are 40% larger in Michigan than what we're seeing in New Jersey
Brooks Pierce: Interestingly, we're seeing increased play over time with Bonus City, whereas most slot games tend to drop off after launch and over time. Needless to say, it's early days in both markets, but we're very encouraged by the results we are seeing. As we've discussed on previous calls, we fully expect roulette to be even more successful than our wheel games, and we'll be launching multiple versions of this game to customers in North America and the UK and the rest of the world over the next couple of quarters.
Speaker Change: Interestingly, we're seeing increased play over time with Bonus City, whereas most slot games tend to drop off after launch and over time.
Speaker Change: You'll say it's early days in both markets, but we're very encouraged by the results we are seeing.
Speaker Change: As we've discussed on previous calls, we fully expect Roulette to be even more successful than our Wheel games and we'll be launching multiple versions of this game to customers in North America and the UK and the rest of the world over the next couple of quarters.
Brooks Pierce: We'll launch a generic roulette game, a double zero roulette game, and a bespoke branded roulette game in an area we're super excited about with some unique side bit games that can only be created through the hybrid dealer technology we deploy.
Speaker Change: We'll launch a generic roulette game, a double zero roulette game, a bespoke branded roulette game, and an area we're super excited about with some unique side bet games that only can be created through the hybrid dealer technology we deploy.
Brooks Pierce: We expect that the rest of 2024 will be about getting these customers and products live and believe that this part of the interactive segment will be a meaningful contributor to the company in 2025. The other segment of our digital business, virtual sports, continues to see some headwinds, primarily with our largest customer and delays and going live with some other customers with some of our latest content, including the NBA and NFL. We plan to have these products in a number of customers throughout Q3 and Q4, and in the North American, UK, and Brazil markets, and expect that to improve performance in the second half of the year versus the first half of the year in terms of both revenue and EBITDA contributions.
Speaker Change: We expect that the rest of 2024 will be about getting these customers and products live and believe that this part of the interactive segment will be a meaningful contributor to the company in 2025.
Unknown Executive: The other segment of our digital business, virtual sports, continues to see some headwinds, primarily with our largest customer and delays and going live with some other customers with some of our latest content, including the NBA and NFL. We plan to have these products in a number of customers throughout Q3 and Q4, and in the North American, UK, and Brazil markets, and expect that to improve performance in the second half of the year versus the first half of the year in terms of both revenue and EBITDA contributions. The leisure segment is in the midst of its large seasonal period, particularly in the holiday parks part of the business.
Speaker Change: The other segment of our digital business, virtual sports, continue to see some headwinds, primarily with our largest customer and delays and going live with some other customers with some of our latest content, including the NBA and NFL.
Speaker Change: We plan to have these products in a number of customers throughout Q3 and Q4 and in the North American, UK, and Brazil markets and expect that to improve performance in the second half of the year versus the first half of the year in terms of both revenue and EBITDA contribution.
Brooks Pierce: We recently launched our eSports virtual game with Batano and have seen very positive uptake, with turnover approaching the same levels that we would see on a single stream of soccer. We plan to roll this out to additional markets and see this as a potential new source of attracting a different type of player than perhaps we've seen in the past. We remain bullish on virtual sports, even with this small dip in performance. Moving over to land-based businesses.
Speaker Change: We recently launched our eSports virtual game with Batano and have seen very positive uptake with turnover approaching the same levels that we would see on a single stream of soccer.
Speaker Change: We plan to roll this out to additional markets and see this as a potential new source of Attracting a different type of player than perhaps we've seen in the past We remain bullish on virtual sports even with this small dip in performance
Brooks Pierce: The gaming segment included two significant events in Q2 with the signing of a new service agreement with all our long-term partners Evoque, formerly William Hill, will be installing approximately 5000 vantage terminals across their betting shops in the UK, starting in Q4 and expect to complete the install by April of 2025. We believe that the combination of the new deal structure, as well as the performance uplift we've seen from Vantage Terminals being deployed, and our other two largest customers in the UK, will improve this segment of the business meaningfully in 2025.
Speaker Change: Moving over to the land-based businesses, so the gaming segment.
Speaker Change: Included two significant events in Q2 with the signing of a new service agreement.
Speaker Change: with all our long-term partner Evoque, formerly William Hill. We'll be installing approximately 5,000 Vantage terminals across their bedding shops in the UK starting in Q4 and expect to complete the install by April of 2025.
Speaker Change: We believe that the combination of the New Deal structure, as well as the performance uplift we've seen from Vantage Terminals being deployed, and our other two largest customers in the UK, will improve this segment of the business in a meaningful way in 2025.
Brooks Pierce: The second big event was the successful completion of a rigorous performance-based evaluation of 150 terminals with Alberta, so AGLC in Canada, that converted into a sale in the quarter. This is our second Canadian province and we think it validates our competitive position in G2S markets, and we expect AGLC to be a meaningful customer going forward. We also have seen our performance with our installed base of customers in Illinois indexing at the highest levels since we went live there.
Speaker Change: The second big event was the successful completion of a rigid performance-based evaluation of 150 terminals.
Speaker Change: with Alberta, so AGLC in Canada, that converted into a sale in the quarter. This is our second Canadian province and we think validates our competitive position in G2S markets and we expect AGLC to be a meaningful customer going forward.
Speaker Change: we also have seen our performance with our installed-based customers in illinois indexing at the highest levels since we went live there
Brooks Pierce: We believe that's in large part due to the new content we have deployed in that market, and it validates our view that a subscription-based content deployment strategy on a recurring basis is key to sustainable growth in the VLT market. Finally, we're in final discussions with OPAP, our large customer in Greece, to replace some of our original cabinets with Vantage cabinets, as well as a newly developed slant-top cabinet. The leisure segment is in the midst of its large seasonal period, particularly in the holiday parks part of the business.
Speaker Change: We believe that's in large part due to the new content we have deployed in that market.
Speaker Change: And it validates our view that a subscription-based content deployment strategy on a recurring basis is key to sustainable growth in BLT markets.
Speaker Change: Finally, we're in final discussions with OPAP, our large customer in Greece, to replace some of our original cabinets with Vantage cabinets as well as a newly developed slant top cabinet.
Speaker Change: The leisure segment is in the midst of their large seasonal period, particularly in the holiday parks part of the business.
Lorne Weal: We're seeing a mix of performance across the segment, with some of the customers overperforming and some facing headwinds, but with strong bookings in August and September. We're rolling out more vantage terminals to the pub sector of the business, and this cabinet is proving to be the highest performer in pubs, just as it has been in the betting shop business. Moving over a little bit to the cost side, in terms of operating efficiencies and cost reductions that we discussed in our first quarter call, we continue to make good progress towards improving our margins.
Speaker Change: We're seeing a mix of performance across the segment with some of the customers overperforming and some facing headwinds But with strong bookings in August and September
Speaker Change: We're rolling out more Vantage terminals to the pub sector of the business, and this cabinet is proving to be the highest performer in pubs, just as it has been in the betting shop business. Moving over a little bit to the cost side in terms of operating efficiencies and cost reductions that we discussed in our first quarter call.
Lorne Weal: We've completed plans to move fully to outsource manufacturing, and we'll be shutting down our facility in Wales by the end of the year, with annualized savings of approximately $3 million. We are also consolidating our logistics facilities into a shared facility with our contract manufacturer close to our operating headquarters in the Midlands in the UK, which we expect to generate meaningful savings. Lastly, we've leveraged our purchasing power and a number of areas to reduce costs across. Overall, we saw very good momentum in the second quarter from Q1, with top performance across the business up by 57%.
Speaker Change: We continue to make good progress towards improving our margins.
Speaker Change: We've completed plans to move fully to outsource manufacturing and we'll be shutting down our facility in Wales.
Speaker Change: by the end of the year with annualized savings of approximately $3 million and are also consolidating our logistics facilities into a shared facility with our contract manufacturer close to our operating headquarters in the Midlands in the UK, which we expect to generate meaningful savings.
Speaker Change: Lastly, we've leveraged our purchase power in a number of areas to reduce costs across the business.
Speaker Change: Overall, we saw very good momentum in the second quarter from Q1, with EBITDA performance across the business up by 57%.
Lorne Weal: And we're excited about some of the initiatives that are being deployed in the second half of the year, particularly in interactive, including hybrid dealer, and obviously with William Hill that we think will benefit not only in H2, but moving strongly into 2025. So with that, I'll now hand it back to Lorne for final remarks before opening up to Q&A. Thanks, Brooks. I don't really have any...
Speaker Change: And we're excited about some of the initiatives that are being deployed in the second half of the year, particularly in interactive, including hybrid dealer, and obviously with William Hill that we think will benefit not only H2, but moving strongly into 2025.
Speaker Change: So with that, I'll now hand it back to Lorne for final remarks before opening up to Q&A. Thanks, Brooks. I don't really have any...
Lorne Weal: Thanks Brooks, I don't really have any further remarks at this time, so operator, if you could please open the program for Q&A. Yes, certainly.
Lorne Wheel: No further remarks at this time, so operator, if you could please open the program to Q&A.
Unknown Executive: Yes, certainly.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one on your keypad. If you would like to withdraw your question, again, press star 1. The first question comes from the mind of Barry Jonas with Truist Securities. You may go ahead.
Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one on your keypad.
Speaker Change: If you would like to withdraw your question, again, press star 1.
Speaker Change: The first question comes from the line of Barry Jonas with Truist Securities. You may go ahead.
Barry Jonas: M&A and, specifically, take privates happening in the gaming tech space right now. Really curious to get your thoughts on how you see Inspired's position.
Barry Jonas: and specifically take privates happening in the gaming tech space right now. Really curious to get your thoughts on how you see Inspired's positioning here. Thanks.
Operator: Hey, Barry, could you please, for some reason, you got cut off at the beginning of the question. I think we got the gist, but would you mind just repeating it? Repeat it, please.
Operator: Barry, could you please, for some reason, you got cut off at the beginning of the question. I think we got the gist, but would you mind just repeating it?
Speaker Change: Hey Barry could you um for some reason you got cut off at the beginning of the question I think we got the gist yeah well my just repeating it repeat it please
Barry Jonas: just wanted to get your take on all the M&A and take privates happening in the space now and, you know, inspired positioning and installation.
Speaker Change: Just wanted to get your take on all the M&A and take privates happening in the space now and, you know, inspire its positioning and install this.
Lorne Weal: Our positioning is To... run the business as well as we possibly can and focus on the kind of performance and creation of initiatives that Brooks and I talked about just now, and we're not really worrying about... The M&A and take private activity other than we continue, obviously, to look for an acquisition for ourselves, but, Um... Our focus is on growing a business.
Barry Jonas: Our positioning is
Barry Jonas: to
Speaker Change: to run the business as well as we possibly can and focus on
Unknown Executive: The kind of performance and creation of initiatives that would be an acquisition for ourselves, but
Speaker Change: The kind of performance and creation of initiatives that Brooks and I talked about just now, and we're not really worrying about
Speaker Change: The M&A and take private activity other than we continue, obviously, to look at acquisition for ourselves.
Speaker Change: Our focus is on growing a business.
Unknown Executive: Got it makes sense. And then, you know, obviously, you've outlined a lot of exciting initiatives for next year, but I'm curious how you're thinking about capital allocation or specifically shared purchase.
Lorne Weal: Got it makes sense. And then, you know, obviously, that were a lot of exciting initiatives for next year. But curious how you're thinking about capital allocation here, specifically share a purchase. Yeah, well.
Speaker Change: Got it. Makes sense. And then, you know, obviously you've outlined a lot of exciting initiatives into next year, but curious how you're thinking about capital allocation here, specifically share of purchases.
Lorne Weal: Obviously, we think our stock is almost laughably undervalued, and Buying Back Stock is something we want to do. I think we all know that our liquidity has been significantly impacted by this whole restatement mess that, thank God, we're done with. But we'd probably by now have something close to $20 million more cash on the balance sheet than we have this second. So I think right now.
Speaker Change: Yeah, well...
Speaker Change: Obviously we think our stock is...
Speaker Change: is almost laughably undervalued and
Speaker Change: Buying back stock.
Speaker Change: It's something we want to do. I think we all know that our liquidity
Speaker Change: has been significantly impacted by this whole restatement mess that, thank God, we're done with.
Speaker Change: But we'd probably by now have something close to $20 million more cash on the balance sheet than we have this second.
Lorne Weal: Prudence would say to focus, you know, capital allocation on rebuilding our cash. Our internal forecast is that as we get into the fourth quarter. Uh, maybe the latter part of the third quarter, we'll see a very, very significant increase in our cash balances because the businesses are performing beautifully, and we're coming into our strongest period. I think, Uh..., as we get into the latter part of the year. And if our cash builds the way our forecasts are indicating that it is, then, without question, our capital allocation focus would shift to going back to share repurchase.
Speaker Change: so i think right now
Speaker Change: prudence would say to
Unknown Executive: focus, you know, capital allocation on rebuilding our cash. Our internal forecast is that as we get into the fourth quarter, as we get into the latter part of the year. And if our cash
Speaker Change: to focus, you know, capital allocation on rebuilding our cash.
Speaker Change: Our internal forecast is as we get into the fourth quarter,
Speaker Change: Maybe latter part of the third quarter, we'll see a very, very significant increase in our cash balances.
Speaker Change: because the businesses are performing beautifully and we're coming into our strongest period.
Speaker Change: I think...
Speaker Change: Uh
Speaker Change: as we get into the latter part of the year and if our cash
Speaker Change: builds the way our forecasts are indicating that it is
Speaker Change: Then, without question, our capital allocation focus would shift to going back to share repurchase.
Unknown Executive: Great. Thanks so much. I appreciate it. Share.
Speaker Change: Great. Thanks so much. Appreciate it.
Speaker Change: Sure.
Operator: The next question comes from the line of Jordan Bender with Citizens JMP.
Speaker Change: The next question comes from the line of Jordan Bender with Citizens JMP. You may go ahead now.
Jordan Bender: Good morning, everyone. Thanks for taking my question. Nice to see you launch content agreements with several companies during the quarter. Can you help us frame how much more runway do you have with customers or operators that you're currently not working with in the US gaming market?
Jordan Bender: Good morning, everyone. Thanks for taking my question. Nice to see you launch content agreements with several companies during the quarter. Can you help us frame how much more runway do you have with customers or operators that you're currently not working with in the US gaming market?
Brooks Pierce: Yeah, not too many, to be honest, Jordan, when I mentioned in my remarks that you were now 100% in Connecticut and over 90% in all the other big three markets, there's not a lot of customers left, and those that are relatively small that we don't live with.
Speaker Change: Yeah, not too many to be honest, Jordan, when I mentioned in my remarks that you are now 100% in Connecticut and over 90%.
Speaker Change: in all the other big three markets. There's not a lot of customers left and those that are relatively small that we're not live with. So, you know, this has been something we've talked about for quite a while. We wanted to get
Brooks Pierce: So this has been something we've talked about for quite a while. We wanted to get coverage in the markets. So we're pretty close to being there. Now, obviously, that doesn't talk about some of the new geographies, particularly like Brazil, where the operators are starting to get their licensing in line. And obviously, we'll do the same kind of thing that we did in the States, which is we want to cover every market as it goes live. But yeah, in the States, we're pretty close to being where we need to be.
Speaker Change: you know, the the coverage of the markets. So we're pretty close to being there. Now, obviously, that doesn't talk about some of the new geographies, particularly like Brazil, where the operators are starting to, you know,
Speaker Change: Get their licensing in line and and obviously we'll do the same kind of thing that we've done in the states Which is we want to cover all of that market As it goes live, but yeah in the states where we're pretty close to being where we need to be
Brooks Pierce: And then just kind of a follow-up, it may be a consumer or market-related question, but I think Greece has been kind of a headwind for the company, or at least it was in the first queue. Is there any update there in terms of what you're seeing from a market perspective?
Speaker Change: Great, and then just kind of a follow up, it may be a consumer or market related question, but I think Greece has been kind of a headwind for the company, at least it was in the one queue. Is there any update there in terms of what you're seeing from a market perspective?
Brooks Pierce: Yeah, I think it has been a headwind for everybody. We're still number one in performance in Greece, but kind of everybody has seen a little bit of a softening in the Greek market. One of the things that I talked about was, you know, we expect to be installing some new equipment in Greece. Some of our competitors have actually already put some new equipment in, so it took a little bit of time, but we'll be putting in some new equipment in Greece, you know, at the end of this year, and the beginning of next year, that we hope will actually propel our share of the market to maybe even a bigger lead.
Speaker Change: Yeah, I think it has been a headwind for everybody. We're still the You know number one by performance in Greece, but kind of everybody has seen a little bit of softening in the Greek market
Speaker Change: One of the things that I talked about was, you know, we expect to be installing some new equipment in Greece. Some of our competitors have actually already put some new equipment in. So it's a
Speaker Change: a little bit of time, but we'll be putting in some new equipment in Greece, you know, end of this year, the beginning of next year, that we hope will actually propel our share of the market.
Brooks Pierce: But that's probably the biggest driver. But yeah, Greece in general has just been a little bit soft, you know, kind of circa four or five euros a day in what we call inspired share over the last kind of six months. Great, thank you very much.
Speaker Change: to maybe even a bigger lead. But that's probably the biggest driver. But yeah, Greece in general has just been a little bit soft, you know, kind of circa four or five euros a day in what we call inspired share over the last kind of six months.
Unknown Executive: Great, thank you very much.
Speaker Change: Great, thank you very much.
Operator: The next question comes from the line of Chad Beynon from Macquarie, New Mexico.
Speaker Change: Sure thing.
Speaker Change: The next question comes from the line of Chad Beynon from Macquarie.
Chad Beynon: Good morning. Thanks for taking my question. Brooks, on the hybrid dealer, and Lauren, you kind of touched on this as well, just in terms of it being, you know, potentially the biggest component of growth and, maybe, long term, kind of the biggest contributing factor for your earnings. How should we expect this to ramp up? Do you think this will be a, you know, an evolution for the next few years in terms of customer acceptance?
Operator: Good morning, everyone, and welcome to the Inspired Entertainment Second Quarter 2024 conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, we will have a question and answer session. If you would like to ask a question at that time, please press one. Please press star followed one on your telephone keypad. If you would like to withdraw your question, please press star one again. Please note that today's event is being recorded.
Speaker Change: You may go ahead.
Chad Beynon: Good morning. Thanks for taking my question.
Speaker Change: Thank you.
Brooks Pierce: Brooks, on the hybrid dealer, and Lauren, you kind of touched on this as well, just in terms of it being, you know, potentially the biggest component of growth and maybe long term, kind of the biggest contributing factor for your earnings.
Chad Beynon: Or do you think hybrid dealer, you know, adjacent to live dealer, can become as big of a component of, maybe North American revenues? I think in the United Kingdom and some other European markets, it's 30%. But yeah, how do you see the evolution of the segment? And, more importantly, for you guys? Thanks.
Speaker Change: How should we expect for this?
Operator: Please refer to the company's safe harbor statement. That appears in the second quarter 2024 earnings press release, which is also available in the investor section of the company's website at www.inse.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 current expectation or beliefs in our subject to risk uncertainties and changes circumstances. In addition, please note that the company will discuss both gap and non-gap financial measures. A reconciliation is included in the earnings press release.
Speaker Change: Do you think this will be an evolution for a few years in terms of a customer acceptance, or do you think hybrid dealer, adjacent to live dealer, can become as big of a component of...
Speaker Change: maybe North American revenues, I think in the United Kingdom and some other European markets, it's 30%. But yeah, how do you see the evolution for this segment and then more importantly for you guys? Thanks.
Brooks Pierce: Yeah, I mean, it's an interesting question. I think in the short term, we probably have more demand than we have capacity right now. Obviously, we're rolling out BetMGM into multiple markets. And, you know, we announced the deal with Caesars.
Speaker Change: Yeah, I mean, that's an interesting question. I think, in the short term, we probably have more demand than we have capacity right now. Obviously, we've, you know, we're rolling out BetMGM into multiple markets. And, you know, we announced the deal with with Caesars.
Brooks Pierce: But quite frankly, the pipeline of deals that we've got across the business, not only in North America but around the world, is more than we can actually handle. Because we're also building products, as we talked about, we've got the roulette product and multiple variations of the roulette product. But from a strategy standpoint, we ultimately want to get to a fairly generic roulette product and a fairly generic side bet roulette product, so we don't have to spend as much time on the bespoke side.
Lauren Wheel: With that completed, I would now like to turn the conference call over to Lauren Wheel, the company's executive chairman. Mr. Wheel, please go ahead. Thank you, operator. Good morning, and thanks for tuning into our second quarter conference call. Joining me this morning are CEO Brooks Pierce, CFO Marilyn Jensen, and VP of Corporate Development, Eric Carrera. I'll start with an overview to try and frame how we're thinking about the second quarter and then turn it over to Brooks to elaborate on a number of very interesting and exciting initiatives that will be driving growth in the second half of this year and beyond.
Speaker Change: but quite frankly the pipeline of deals that we've got across the business.
Speaker Change: Not only in North America, but around the world.
Lauren Wheel: In our first quarter conference call, we shared that we thought our second quarter, EBITDA, would grow sequentially by at least 50% from the first quarter, and we ended up the quarter about 56.5% ahead, which I think is ahead of consensus as well, and reflects the fact that pretty much all areas of the business are hitting on eight cylinders. The interactive business was once again the star of the show with revenue and EBITDA 40% and 69% respectively ahead of Q2 2023, meaningfully outpacing the growth in the market.
Speaker Change: is more than we can actually handle. Because we're also building product, as we talked about. We've got the roulette product and multiple variations of the roulette product. But from a strategy standpoint, we ultimately want to get to...
Speaker Change: a fairly generic.
Speaker Change: Roulette product and a fairly generic side bed roulette product So we don't have to spend as much time on the bespoke side, but going forward so
Brooks Pierce: But going forward, so the third quarter and fourth quarter of this year is going to be all about getting these games built and getting these customers live. And then I think, rolling into 2025, there's kind of endless opportunities for us, both in derivatives of the roulette game, we hope to do a craps game, which will obviously broaden our distribution to customers. And I think that's part of what both Lauren and I, you know, have talked about having this be such a meaningful contribution.
Speaker Change: Third quarter and fourth quarter of this year is going to be all about getting these games built and getting these customers live.
Speaker Change: and then I think rolling into 2025.
Speaker Change: There's kind of endless opportunities for us, both in derivatives of the roulette game, we hope to do a craps game, we'll obviously broaden our distribution to customers, and I think that's.
Speaker Change: Part of what both Lauren and I have talked about, having this be such a meaningful contributor.
Brooks Pierce: You know, the sequencing was developing the product, getting it out there, seeing if there was customer acceptance and seeing if the take-up was what we'd hoped for, and that it was sticky, and that players returned to it. And all of that, we've kind of checked all of those boxes. So now it's really all about building the product as fast as we can and rolling it out as fast as we can. One other...
Lauren: You know, the sequencing was developing the product, getting it out there, seeing if there's customer acceptance and seeing if the take up is what we'd hope for and that it was sticky and that players return to it. And all of that, we've kind of checked all of those boxes.
Lauren Wheel: Barger Chair gains were driven by new customers, new geographies, and most importantly the launch of new products. In a moment, Brooks will discuss in some detail our Harvard dealer initiative, which we forecast will grow to become by far the largest component of our interactive portfolio, as we add new products to the category, broaden our customer base, and expand into new geographies throughout the world. Again, Brooks will discuss in a moment. In terms of profitability and cash flow, virtual sports continues to be our highest performing business with EBITDA margins and excess of 80% in cash conversion even higher.
Lorne Weal: One other point to add there, Chad, is in terms of your question about, you know, how big the hybrid dealer business can be relative to the, you know, traditional live dealer business. You know, there are dozens, if not hundreds, of online caving operators around the world who simply can't afford the traditional live dealer product just because the cost of producing it is just so, so much higher than ours. So right now, obviously, we're focused on the top tier operators, because they're the ones that want it.
Lauren: So now it's really all about building the product as fast as we can and rolling it out as fast as we can. One other point to add there, Chad, is...
Chad Beynon: In terms of your question about, you know, how big can the hybrid dealer business be relative to?
Chad Beynon: the traditional livedeal er business
Chad Beynon: You know, there are dozens, if not hundreds.
Speaker Change: of
Speaker Change: Online.
Speaker Change: Gaming operators around the world who simply can't afford
Speaker Change: The traditional live dealer product, just because the cost of producing it is just so much higher than ours.
Lauren Wheel: I don't think I have ever seen another business perform at these levels in all my years of doing this. Following a lengthy period of sustained growth, revenues recently have been treading water, due in part to the absence of meaningful product and geographic expansion, along with a user-based optimization exercise which we have discussed previously. But as Brooks will elaborate upon in a moment, and as mentioned in the press release, we anticipate that revenue and EBITDA in the second half of this year will exceed the first half, as we begin to see the impact of recent product and geographic expansion.
Speaker Change: So, right now, obviously, we're focused on...
Brooks Pierce: on the top tier operators because they're the ones that want it but as Brooks talked about that as we develop a generic product that's not
Lorne Weal: As Brooks talked about, as we develop a generic product that's not, you know, branded for MGM or branded for C. Then, for the very first time, there is a product that's available to, you know, the second and third tier operators who simply don't participate in that business right now. So we see that as a huge potential to expand the overall size of the market.
Brooks Pierce: knowbranded for ngm or branded for caars
Unknown Executive: available to, you know, the second and third tier operators who simply don't participate in that business right now.
Brooks Pierce: Then now for the very first time there's a product that's
Brooks Pierce: available to you know the second and third tier operators who simply don't participate in that business right now. So we see that as
Lauren Wheel: There were so many one-time or non-recurring events in our core gaming business in the second quarter of both the 23 and 24, it's nearly impossible to understand the strong, underlying momentum in this part of the business. Two of our three largest betting shop operators, Bet Fred and Patty Power, are showing strong year-to-year growth. At Patty and we now expect to see replicated with William Hill, as we begin to deliver the first of 5,000 new vantage cabinets in the fourth quarter of this year.
Speaker Change: A huge potential to expand the overall size of the market.
Brooks Pierce: Thank you both. And then, shifting to the lottery segment, any updates in terms of what you guys are doing there, or how you kind of view the opportunities within that category?
Speaker Change: yeah
Speaker Change: It's helpful, thank you both. And then shifting to the lottery segment, any updates in terms of what you guys are doing there or how you kind of view the opportunities within that category?
Brooks Pierce: Yeah, I mean a couple things. We're working pretty actively with a number of lotteries. You probably saw that we announced a deal with Cy Games to get our content through their content integration hub. Obviously, Lauren in particular, but you know me included, have had a lot of experience in the lottery industry, and we think our product would work very well, and frankly, we think Hybrid Dealer would work very well in the lottery segment as well.
Speaker Change: Yeah, I mean, a couple things. We're working pretty actively with a number of lotteries, you probably saw that we announced a deal with Cygames to get our content through their content integration hub. Obviously, Lauren in particular, but you know,
Lauren Wheel: So this is an important growth driver for 2025, similarly the injection of significantly more vantage cabinets into the top tier pubs, sets in motion a cascading replacement process throughout the entire public state that will be an important driver of revenue and EBITDA as well.
Lauren: Me included have had a lot of experience in the lottery industry and we think our product
Speaker Change: would work very well, and frankly we think Hybrid Dealer would work very well in the lottery segment as well.
Brooks Pierce: You know, a company of our size, there's only so many of these things that you can do simultaneously, but we are very bullish on the lottery market, and we think we'll have some announcements about some additional customers in that segment coming up in the next quarter or two. Thanks, Brooks. Appreciate it. Okay, Chad.
Speaker Change: You know, a company of our size, there's only so many of these things that you can do simultaneously, but we are very bullish on the lottery market and we think we'll have some announcements about some additional customers in that segment, you know, coming up in the next quarter or two.
Lauren Wheel: Lastly, I should mention that our plan to rectify the below average profitability of our holiday park business is well on the way to fruition, and hopefully we will have more to discuss in the coming weeks.
Operator: Okay, Chad, thanks.
Brooks Pierce: As mentioned previously, this is the key component of our plan to get our overall EBITDA margins comfortably into the 40s, and with that I'll hand it over to Brooks.
Speaker Change: Thanks, Brooks. Appreciate it. Okay, Chad. Thanks.
Operator: The next question comes from the line of Ryan Sigdahl with Craig Hallow. You may now go ahead.
Operator: You may now go ahead.
Speaker Change: The next question comes from the line of Ryan Sigdahl with Craig Hallam. You may now go ahead.
Brooks Pierce: Okay, thank you Lauren, and I'll give a little more color to the individual business segments and some perspective on the second half of 2024 and the drivers for the business going into 2025. The interactive segment continued its strong growth trajectory in increasing revenue by 40 percent year over year and 60 percent adjusted EBITDA growth year over year and sequential quarter over quarter growth in revenue of 16 percent and adjusted EBITDA growth of 39 percent showing the operating leverage that exists in the segment of the business.
Ryan Sigdahl: Two, on interactive One, you guys have had strong growth; a lot of that is market expansion, customer expansion, etc. Through most of that in the U.S., you have hybrid dealers now coming in, but what's your confidence that you can maintain this level of revenue growth for the next several quarters? And then secondly, on hybrid dealer, do you have any player insights on the kind of demographics and who is playing the game thus far? I know it's a small sample size, but is it the traditional live dealer player that's now playing both? Does it want someone that doesn't play live dealer and an R&G player, etc., etc.? But any player... any help you can give would be good.
Ryan Sigdahl: Hey, good morning, guys.
Ryan Sigdahl: Two on interactive. One, you guys have had strong growth. A lot of that is market expansion, customer expansion, etc. through most of that in the U.S.
Ryan Sigdahl: You have Hybrid Dealer now coming in, but what's your confidence to maintain this level of...
Speaker Change: Revenue Growth for the next several quarters, and then secondly on Hybrid Dealer. Do you have any player insights on demographics and who is playing the game thus far? I know it's a small sample size, but is it the traditional live dealer player that's now playing both?
Brooks Pierce: The momentum is carried through with July being our highest revenue in history and the first week of August actually being the highest individual revenue we've ever recorded. There are several factors that are leading to this performance including a great content roadmap with consistent delivery of high-quality games, the addition of key customers in markets, and our ability to gain market share and mature markets like the UK. So let me give some examples of what I'm talking about.
Speaker Change: Want someone that didn't play a live dealer and an RNG player etc, etc, but any player
Unknown Executive: Thanks. Sure. Sure. Yeah, in terms of
Brooks Pierce: Sure, sure. Yeah, in terms of the iGaming stuff, like I mentioned, July's been the, you know, the highest month we've ever had in. Last week, which August is typically actually a slower period, was the highest revenue week we've ever had. So I'm, you know, encouraged by that.
Speaker Change: help you can give would be good. Thanks. Sure. Sure. Yeah, in terms of the iGaming stuff,
Speaker Change: You know, like I mentioned, July's
Speaker Change: It's been the highest month we've ever had, and last week, which August is typically actually a slower period, was the highest revenue week we've ever had.
Brooks Pierce: And as I also mentioned in my remarks, we're now rolling out progressive games for the first time, and we think there's some more headway, or there's some more opportunity there. Clearly, Brazil's a big market that's going to come on. So, you know, we see the growth trajectory, circa 30% or higher, to be sustainable here for, you know, for the foreseeable future.
Brooks Pierce: We introduced 40 percent more games in Q2 versus Q1 with many exclusive games with key customers in the quarter. We launched FANDULE in Connecticut and now serve 100 percent of that market and have added fanatics and parks and key states and serve above 90 percent of customers in the three biggest markets of New Jersey, Pennsylvania and Michigan and we expect to go live in both West Virginia and Delaware before the end of the year.
Speaker Change: So I'm, you know, encouraged by that and as I also mentioned in my remarks, we're now rolling out progressive games for the first time and we think there's some more headway or there's some more opportunity there.
Speaker Change: Clearly, Brazil's a big market that's going to come on, so, you know, we see the growth trajectory, you know, circa 30% or higher to be sustainable here for, you know, for the, at least for the foreseeable future.
Brooks Pierce: In terms of your question about hybrid dealers, the interesting thing about the mix of hybrid dealers is that the main thing we wanted our players returning to is that we have a, we have a very interesting mix of players that are betting lots of money. You know, the so-called whales, but we also have a huge number of players that are playing on an everyday basis. So the granularity of what else those customers are doing, that's really with our operators.
Speaker Change: In terms of your question about a hybrid dealer.
Brooks Pierce: We reached 8% market share for slots in the UK. The highest we've ever been and quadruple what we were just several years ago, and grew our blended share of table games and slots in the UK from 5.4% a year ago to 7% in Q2 representing 30% growth in a very mature market. The largest component this increases due to the success of our content across the flutter group. This is a progressive game in the North America market with Rush Street and expect to roll out more of our content in this key game mechanic to all of our customers in the North America market.
Speaker Change: So the interesting thing about the mix of hybrid dealer is that
Speaker Change: The main thing we wanted are players returning.
Speaker Change: But we have a very interesting mix of players that are betting lots of money, you know, so-called whales, but we also have a huge number of players that are playing on an everyday basis.
Speaker Change: So, the granularity of what else those customers are doing, that's really with our operators.
Brooks Pierce: And frankly, we probably need to sit down with BetMGM in particular and talk about that, because that will probably drive a little bit of product enhancement. But what we're seeing that we care about the most is the number of players, active players, and the number of returning players, and the mix of how they play, you know, big players versus small players. This is kind of exactly what we would hope for. It goes really across the full spectrum.
Speaker Change: and frankly we'll probably need to sit down with mgm in particular and talk about that because that will probably drive a little bit of product enhancement but what we're seeing that we care about the most is the number of players active players and the number of returning players and the mix
Brooks Pierce: We're encouraged by the performance of this segment but still see plenty of runway for growth opportunities both in product innovation and performance and key new geographies like Brazil and South Africa.
Speaker Change: of how they play, you know, big players versus small players is kind of exactly what we would hope for. It goes really across the full spectrum.
Brooks Pierce: So let's talk about hybrid dealer. So hybrid dealer which will report in the interactive segment is really starting to hit its stride after its full launch in New Jersey and Q1. In New Jersey the monthly turnover has doubled since going live and the number of active players has increased more than 50% in that period and repeat players is the highest we've seen since launch. We think that proves that this product appeals across a broad spectrum of the player base and is sticky and Ben MGM has been great in supporting this with marketing and great placement on the site.
Operator: Thanks guys, good luck. Thanks, Ryan.
Unknown Executive: Thanks guys, good luck!
Chad: Thanks guys, good luck!
Speaker Change: That concludes the question and answer session and this concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: Thank you, Operator, and thanks, everybody, for participating this morning.
Chad: You're welcome. Bye.
Brooks Pierce: We went live with our second state with Ben MGM in Michigan and although it's still early days the results have been terrific. We're seeing active players and turnover in Michigan that's significantly higher than what we saw in New Jersey and the average stakes are 40% larger in Michigan than what we're seeing in New Jersey. Interestingly we're seeing increased play over time with bonus city whereas most slot games tend to drop off after launch and over time.
Brooks Pierce: Needless to say it's early days in both markets but we're very encouraged by the results we are seeing. As we've discussed on previous calls we fully expect we let to be even more successful than our wheel games and we'll be launching multiple versions of this game to customers in North America and the UK and the rest of the world over the next couple of quarters. We'll launch a generic roulette game, a double zero roulette game, a bespoke branded roulette game and an area we're super excited about with some unique sidebet games that only can be created through the hybrid dealer technology we deploy. We expect that the rest of 2024 will be about getting these customers and products live and believe that this part of the interactive segment will be a meaningful contributor to the company in 2025.
Brooks Pierce: The other segment of our digital business virtual sports continue to see some headwinds primarily with our largest customer and delays and going live with some other customers with some of our latest content including the NBA and NFL. We plan to have these products in a number of customers throughout Q3 and Q4 and in the North American UK and Brazil markets and expect that to improve performance in second half of the year versus the first half of the year in terms of both revenue and EBITDA contributions.
Brooks Pierce: We recently launched our eSports virtual game with Patano and have seen very positive uptake with turnover approaching the same levels that we would see on a single stream of soccer. We plan to roll this out to additional markets and see this as a potential new source of attracting a different type of player than perhaps we've seen in the past. We remain bullish on virtual sports even with this small dip in performance.
Brooks Pierce: Moving over to the land-based businesses, so the gaming segment included two significant events in Q2 with the signing of a new service agreement with our long-term partner Evoke, formerly William Hill. We'll be installing approximately 5,000 vantage terminals across their betting shops in the UK, starting in Q4 and expect to complete the install by April of 2025. We believe that the combination of the new deal structure as well as the performance uplift we've seen from vantage terminals being deployed and our other two largest customers in the UK will improve this segment of the business in a meaningful way in 2025.
Brooks Pierce: Second big event was the successful completion of a rigid performance-based evaluation of 150 terminals with Alberta, so AGLC in Canada, that converted into a sale in the quarter. This is our second Canadian province and we think validates our competitive position in G2S markets and we expect AGLC to be a meaningful customer going forward.
Brooks Pierce: We also have seen our performance with our installed-based customers in Illinois indexing at the highest levels since we went live there. We believe that's in large part due to the new content we have deployed in that market, and it validates our view that a subscription-based content deployment strategy on a recurring basis is key to sustainable growth in BLT markets.
Brooks Pierce: Finally, we're in final discussions with OPAP, our large customer in Greece, to replace some of our original cabinets with vantage cabinets as well as a newly developed slant off cabinet.
Brooks Pierce: The leisure segment is in the midst of their large seasonal period, particularly in the holiday parts part of the business. We're seeing a mix of performance across the segment with some of the customers over-performing and some facing headwinds, but with strong bookings in August and September. We're rolling out more vantage terminals to the pub sector of the business and this cabinet is proving to be the highest performer in pubs just as it has been in the betting shop business.
Brooks Pierce: Moving over a little bit to the cost side in terms of operating efficiencies and cost reductions that we discussed in our first quarter call. We continue to make good progress towards improving our margins. We've completed plans to move fully to outsource manufacturing and we'll be shutting down our facility in Wales by the end of the year with the annualized savings of approximately 3 million and are also consolidating our logistics facilities into a shared facility with our contract manufacturer close to our operating headquarters in the Midlands in the UK, which we expect to generate meaningful savings. Lastly, we've leveraged our purchase power and a number of areas to reduce costs across the business.
Brooks Pierce: Overall, we saw very good momentum in the second quarter from Q1 with EBITOP performance across the business up by 57%. And we're excited about some of the initiatives that are being deployed in the second half of the year particularly and interactive, including hybrid dealer. And obviously with William Hill that we think will benefit not only H2 but moving strongly into 2025.
Lauren Wheel: So with that, I'll now hand it back to Lauren for final remarks before opening up to Q&A. Thanks, Brooks.
Operator: I don't really have any further remarks at this time, so operator, if you could please open the program to Q&A. Yes, certainly. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one on your keypad. If you would like to withdraw your question, again, press star one.
Barry Jonas: The first question comes from the mind of Barry Jonas with truest securities. You may go ahead. Manet and specifically take private's happening in the gaming tech space right now. Really curious to get your thoughts on how you see inspired positioning here. Thanks. Barry, can you, for some reason, you got cut off at the beginning of the question. I think we got the gist. Yeah, we might just repeat it, please. Just wanted to get your take and all the M&A and take private's happening in the space now and, you know, inspired positioning and install this.
Barry Jonas: Our positioning is to run the business as well as we possibly can and focus on the kind of performance and creation of initiatives that Brooks and I talked about just now and we're not really worrying about the M&A and take private activity other than we continue, obviously, to look at acquisition for ourselves, but our focus is on growing a business. God, it makes sense. And then, you know, obviously, it's out on a lot of exciting initiatives into next year, but curious how you're thinking about capital allocation here, specifically share or purchases.
Barry Jonas: Yeah, well, obviously, we think our stock is almost laughably undervalued and buying back stock is something we want to do. I think we all know that our liquidity has been significantly impacted by the whole, this whole restatement mess that, thank God, we're done with, but we'd probably by now have something close to $20 million more cash on the balance sheet than we have this second. So I think right now, prudence would say to focus, you know, capital allocation on rebuilding our cash, our internal forecast is as we get into the fourth quarter, maybe platter part of the third quarter, we'll see a very, very significant increase in our cash balances because the businesses are performing beautifully and we're coming into our strongest periods.
Barry Jonas: So... I think as we get into the latter part of the year and if our cash builds the way our forecasts are indicating that it is then without question our capital allocation focus would shift to going back to share reverses. Great, thanks so much appreciate it. Sure.
Jordan Bender: The next question comes from the line of Jordan Bender with Citizens JMP. You may go ahead now. Good morning everyone, thanks for taking my question. Nice to see you launch content agreements with several companies during the quarter. Can you help us frame how much more runway do you have with customers or operators that you're currently not working with in the US eye gaming market? Yeah, not too many to be honest on Jordan when I when I mentioned in my remarks that you were now 100% in Connecticut and over 90% in all the other big three markets.
Jordan Bender: There's not a lot of customers left and those that are relatively small that we're not live with. So this has been something we've talked about for quite a while we wanted to get the coverage of the markets. So we're pretty close to being there. Now obviously that doesn't talk about some of the new geographies particularly like Brazil where the operators are starting to get their licensing in line. And obviously we'll do the same kind of thing that we've done in the states, which is we want to cover all of that market as it goes live. But yeah, in the states, we're pretty close to being where we need to be.
Jordan Bender: Great. And then just kind of a fall up. It may be a consumer or market related question, but I think Greece has been kind of a headwind for the company, at least it was in the one queue. Is there any update there in terms of what you're seeing from market perspective? Yeah, I think it has been a headwind for everybody. We're still the number one by performance in Greece, but kind of everybody has seen a little bit of softening in the Greek market.
Jordan Bender: One of the things that I talked about was we expect to be installing some new equipment in Greece. Some of our competitors have actually already put some new equipment in, so it took a little bit of time. But we'll be putting in some new equipment in Greece into this year, the beginning of next year, that we hope will actually propel our share of the market to maybe even a bigger lead. But that's probably the biggest driver.
Jordan Bender: But yeah, Greece in general has just been a little bit soft, kind of circa four or five euros a day. And what we call inspired share over the last kind of six months. Great, thank you very much. Sure thing.
Chad Bannon: The next question comes from the line of Chad Bannon from Macaerie. You may go ahead.
Brooks Pierce: Good morning. Thanks for taking my question. Brooks on the hybrid dealer in Lauren, you kind of touch on this as well, just in terms of it being, you know, potentially the biggest component of growth in maybe long term, kind of the biggest contributing factor for your earnings. How should we expect for this to ramp? Do you think this will be, you know, an evolution for a few years in terms of a customer acceptance?
Brooks Pierce: Or do you think hybrid dealer, you know, adjacent to live dealer can become as big of a component of maybe North American revenues, I think in the United Kingdom and some other European markets that's 30%. But yeah, how do you see the evolution for the segment and then more importantly for you guys? Thanks. Yeah, I mean, it's an interesting question. I think in the short term, we probably have more demand than we have capacity right now.
Brooks Pierce: Obviously, we've, you know, we're rolling out that MGM into multiple markets and, you know, we've announced the deal with with Caesars, but quite frankly, the pipeline of deals that we've got across the business, not only in North America, but around the world is more than we can actually handle because we're also building product as we talked about. We've got the roulette product and multiple variations of the roulette product. But from a strategy standpoint, we ultimately want to get to a fairly generic roulette product and a fairly generic side bet roulette product and so we don't have to spend as much time on the bespoke side, but going forward, so third quarter and fourth quarter of this year is going to be all about getting these games built and getting these customers live.
Brooks Pierce: And then I think rolling into 2025, you know, there's kind of endless opportunities for us both in derivatives of the roulette game. We hope to do a craft game. We'll obviously broaden our distribution to customers. And I think that's part of what both Lauren and I, you know, have talked about having this be such a meaningful contributor. You know, the sequencing was developing the product, getting it out there, seeing if there's customer acceptance and seeing if the take up is what we'd hope for and that it was sticky and that players return to it.
Brooks Pierce: And all of that, we've kind of checked all of those boxes. So now it's really all about building the product as fast as we can and rolling it out as fast as we can. One other point to add there, Chad, is in terms of your question about, you know, how big can the hybrid dealer business be relative to the, you know, the traditional live dealer business. You know, there are dozens, if not hundreds, of online gaming operators around the world who simply can afford the traditional live dealer product just because it's the cost of producing it is just so, so much higher than ours.
Brooks Pierce: So right now, obviously, we're focused on on the top tier operators because they're the ones that want it. But as Brooks talked about that as we develop the generic product that's not branded for MGM or branded for Caesars, then now for the very first time there's a product that's available to the second and third tier operators who simply don't participate in that business right now. So we see that as a huge potential to expand the overall size of the market.
Lauren Wheel: So, Phil, thank you both.
Brooks Pierce: And then shifting to the lottery segment, any updates in terms of what you guys are doing there or how you kind of view the opportunities within that category? Yeah, I mean, a couple of things. And we're working pretty actively with a number of lottery, as you probably saw that we announced a deal with Sy Games to get our content through their content integration hub. Obviously, Lauren in particular, but me included had a lot of experience in lottery industry.
Brooks Pierce: And we think our product would work very well. And frankly, we think hybrid dealer would work very well in the lottery segment as well. You know, a company of our size, there's only so many of these things that you can do simultaneously. But we are very bullish on the lottery market. And we think we'll have some announcements about some additional customers in that segment coming up in the next quarter or two. Thanks, Brooks. Appreciate it. Okay, Chad. Thanks.
Ryan Sigdal: The next question comes from the line of Ryan Sigdal with Craig Hallum. You may now go ahead. Hey, good morning, guys. Two on interactive. One, you guys have had strong growth. A lot of that is market expansion, customer expansion, et cetera, through most of that in the US. You have hybrid dealer now coming in.
Ryan Sigdal: But what's your confidence to maintain this level of revenue growth for the next several quarters? And then secondly on hybrid dealer. Do you have any player insights on kind of demographics and who is playing the game thus far? I know it's a small sample size. But is it the traditional live dealer player that's now playing both? Is it once someone that didn't play live dealer and then RNG player, et cetera, et cetera? But any player help you can give would be good.
Brooks Pierce: Thanks. Sure. Yeah. In terms of the eye gaming stuff, you know, like I mentioned, July's been the, you know, the highest month we've ever had in last week, which August is typically actually a slower period was the highest revenue week we've ever had. So I'm, you know, encouraged by that. And as I also mentioned in my remarks, we're now rolling out progressive games for the first time. And we think there's some more headway or there's some more opportunity there.
Brooks Pierce: Clearly, Brazil is a big market that's going to come on. So, you know, we see the growth trajectory, you know, circa 30% or higher to be sustainable here for, you know, for the, at least for the foreseeable future. And in terms of your question about hybrid dealer, so the interesting thing about the mix of hybrid dealer is that, you know, the main thing we wanted are players returning. But we have a, we have a very interesting mix of players that are betting lots of money, you know, so-called whales, but we also have a huge number of players that are playing on an everyday basis.
Brooks Pierce: So the granularity of what else those customers are doing, that's, that's really with our operators. And frankly, we probably need to sit down with Ben MGM in particular and talk about that because that will probably drive a little bit of product enhancement. But what we're seeing that we care about the most is the number of players, active players and the number of returning players and the mix of how they play, you know, big players versus small players. And this is kind of exactly what we would hope for. It goes really across the full spec.
Ryan Sigdal: Thank you, guys. Good luck. Thanks, Ryan.
Operator: That concludes the question and answer session, and this concludes today's conference call. Thank you for your participation.
Lauren Wheel: You may now disconnect. Thank you, operator. And thanks, everybody, for participating this morning. You're welcome.
Unknown Executive: Bye.