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Inspired Thinking

17th October 2022 9:10 am GMT

Inspired Entertainment had to act fast in response to the Covid-19 pandemic. Executive chairman Lorne Weil and chief operating officer Brooks Pierce explain why the company is much stronger now as a result

Just prior to the onset of the Covid-19 pandemic, Inspired Entertainment was generating around 75 per cent of its $153.4 million a year revenue from gaming in retail. Then the pandemic hit, closing down retail venues and causing the cancellation of sporting events across the globe. This proved to be a turning point for Inspired.

“Needless to say, we were heavily impacted by COVID like most other businesses worldwide,” says Brooks Pierce, president and chief operating officer at Inspired. “We had our land-based business completely shut down and had to rely on our online businesses, including Virtual Sports and iGaming. In the long run, this was very impactful for us as we continued to develop products and enhancements to all our business units. Meanwhile, our online businesses grew substantially during this period.

“When our retail and leisure businesses opened back up, we were able to launch a lot of new content to kick-start our return. Markets returned to pre-COVID levels quickly, and amazingly, our online businesses continued to perform at elevated levels, turning a very bad situation into a positive one for Inspired and its customers,” Pierce explains. 

That recovery has seen the company generate 86 per cent of its 2019 full year revenue in the first six months of this year at $131.9m. This includes Interactive revenue of $11.1m and Virtual Sports revenue of $25.6m, with Virtual Sports revenue climbing 76 per cent year-on-year, although Interactive revenue was flat compared to a strong H1 2021.

“Our online businesses have gained significant momentum in the last two and half years, with the company’s Interactive revenues increasing by 180 per cent year-over-year from 2020 to 2021,” says Pierce. “In response to demand, we’ve increased games cadence; entered new markets and partnered with new customers; created industry-leading mechanics; expanded our portfolio of Interactive RGS aggregators; and made our games available through direct integration as well. 

“We are particularly seeing the benefit of all of these steps in North America, which has quickly grown to be our second biggest market for interactive, with still a lot of growth potential to achieve there.”

“The growth potential is huge,” agrees executive chairman A. Lorne Weil. “In North America, our games are available online in New Jersey, Michigan, Pennsylvania, Connecticut, Ontario, and Quebec. We went live only last quarter with seven operators in Ontario and Rush Street in Pennsylvania, and we expect several additional customer launches in these new jurisdictions before the end of 2022. Early reports are good, and I see many opportunities ahead.”

Pierce believes that Ontario and Pennsylvania will be key contributors to the growth of the digital businesses, which now account for more than 50 per cent of Inspired’s EBITDA on an annualised basis.

“Inspired only entered the North American marketplace in late 2018,” notes Pierce. “Unlike many, we had nothing but room to expand, and that’s what happened for our Gaming, Virtuals and Interactive businesses — particularly in the last two years for our Virtuals and Interactive offerings.  Given the level of interest in our products and our company, we expect to grow even more, extending into new US markets and adding new customers.”

The Pennsylvania State Lottery was the first major North American lottery to launch Inspired’s Virtual Sports content, rolling it out across more than 9,000 retail locations throughout the state, followed by the DC Lottery.

“Many other US lotteries and casinos have sought us out to talk about launching similar products across their retail, casino, sportsbooks and interactive platforms,” says Weil. “US providers see our products as an opportunity to expand their player base, as a complementary product to sports betting, and as a way to add fresh content with a dynamic new revenue growth opportunity.”

Beyond virtual sports, Inspired is leveraging its acquisition of Sportech’s former lottery systems business to grow its share of the lottery market. 

“This acquisition marked Inspired's first in the lottery sector, further diversifying our business model on product, customer and geographic levels,” adds Weil. “We expect it to provide additional growth opportunities in North America, a key strategic territory for the company. It will also bolster our position in the growing iLottery market and enhance our ability to offer a platform with a full turnkey lottery/iGaming solution to new customers in the future, in line with our cross-platform approach.”

The company also recently launched its first iLottery game, Pharaon Réaction, with Loto-Quebec in Canada, taking a top five spot in the operator’s games portfolio at launch. This has led to further collaboration with the operator on digital lottery games that are expected to launch soon. 

“The early results are very strong and validate our strategy, that we have an unbelievable asset in the game library built for our iGaming business that can be leveraged to produce content for the iLottery segment,” says Pierce. “The lottery vertical in particular is very important to us, and we are starting to see real traction with our iLottery content, the buildout of our iLottery platform, and the expansion of Virtual Sports beyond our first two customers in the lottery space. Building great products for the lottery business is in our DNA, and it is a real focus for our business.”

“We continue to view iLottery as a significant potential growth opportunity, poised for broader adoption by lottery operators worldwide,” adds Weil.

Weil has led Inspired Entertainment for six years, seeing it through the 2019 stake reduction on gaming machines, or FOBTs, as they are known in the UK. At the time it seemed like the worst thing that could happen to the business, with that assumption quickly debunked by Covid. The business has adapted by adding new revenue streams, diversifying its portfolio of graphic-rich content, with Weil crediting its success to the dedication and resilience of the people at Inspired.

“We had largely been a retail-based, server-based gaming machine business, and now our business is much more diversified from both a product and geography basis—yet our core strength and focus on content have remained steadfast and drive us every day,” he explains. “Clearly the growth of our interactive businesses, Virtual Sports and iGaming, has been a big driver of our business from the time of my involvement with Inspired. They now represent more than 50 per cent of our company EBITDA and are growing significantly.”

Inspired will be showcasing its new iGaming content, including seasonal games such as Big Scary Fortune launching for Halloween, plus new promotional tools and the latest mechanics at the G2E Expo in Las Vegas in October, alongside more than 200 titles from its growing multi-channel games portfolio. This includes games that leverage Inspired’s partnerships with the likes of the NFL Alumni Association and Major League Baseball Players Alumni Association (MLBPAA). 

Weil is particularly excited about the Home Run Shootout Legends game, which is available online and in retail and allows players to watch some of the legends of baseball step up to bat against each other. 

“These games combine award-winning visual effects with the latest in motion capture technology, and they really bring the MLBPAA greats to life,” he says. “Who would not be excited about that?

“I think that distributed gaming, iGaming, iLottery and Virtual Sports position us very well for where we think the growth is going to be in the industry, and we plan to be at the forefront of innovation to help drive that for our customers!”

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