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Category: Inspired Entertainment (INSE)
Date: 14 March 2021 Stock price of INSE: $9.52 Market Capital of Inspired Entertainment: $221 million We take a look at the 4th quarter 2020 earnings report of Inspired Entertainment (INSE) an entertainment firm with an expanding portfolio of content, technology, hardware and services for regulated gaming, betting, lottery, social and leisure operators across land-based and mobile channels around the world
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October was a stellar month and indicated how quickly we could recover before our land-based businesses went back into lockdown in November and December - Lorne Weil, Executive Chairman of Inspired "
More About Inspired Entertainment
Inspired offers an expanding portfolio of content, technology, hardware and services for regulated gaming, betting, lottery, social and leisure operators across land-based and mobile channels around the world. The Company's gaming, virtual sports, interactive and leisure products appeal to a wide variety of players, creating new opportunities for operators to grow their revenue. The Company operates in approximately 35 jurisdictions worldwide, supplying gaming systems with associated terminals and content for more than 50,000 gaming machines located in betting shops, pubs, gaming halls and other route operations; virtual sports products through more than 44,000 land-based channels; interactive games for 100+ websites; and a variety of amusement entertainment solutions with a total installed base of more than 19,000 devices.
Overview of Inspired Entertainment's 4th quarter 2020 earnings
- Peak 2020 Monthly Revenue and Adjusted EBITDA, excluding VAT-related income, in October, continuing sequential monthly growth trend from third quarter 2020 before COVID-19-related closures in November and December ("COVID-19 Closures")
- Liquidity position remains strong with cash of approximately $47.1 million and fully undrawn revolver availability of approximately $27.4 million at year end¹
- Integration of the Gaming Technology Group of Novomatic UK Ltd. ("NTG") acquisition substantially completed with realized synergies exceeding previously communicated guidance
- Fourth Quarter Revenue of $71.7 million, including $32.5 million of VAT-related revenue
- Fourth Quarter Aggregate Online Revenue² nearly doubled year-over-year; strong forward pipeline of existing opportunities in North America, Europe and South America, including a new online provisional license for Michigan iGaming
- Fourth Quarter Adjusted EBITDA³ of $34.9 million, including $31.7 million of VAT-related income
- Company completes financial segment reclassification – New segments are Gaming, Virtual Sports, Interactive and Leisure
Inspired Entertainment management commentary 4th quarter 2020 earnings report
Inspired Entertainment, Inc. ("Inspired") (NASDAQ: INSE) today reported unaudited financial results4 for the three-month period and fiscal year ended December 31, 2020.
"October was a stellar month and indicated how quickly we could recover before our land-based businesses went back into lockdown in November and December," said Lorne Weil, Executive Chairman of Inspired. "Our October monthly Revenue of $21.2 million6 and Adjusted EBITDA of $6.8 million6, or 32% of total revenue, was nearly 20% above October 2019 and the highest monthly levels we experienced in 2020, excluding the VAT-related income. This follows the general pattern we saw of sequential monthly growth throughout the third quarter 2020 following the second quarter lockdown. Importantly, year to year growth in October occurred despite the fact that October performance was impacted by pub curfews in early October and the introduction of tiered closures in the second half of the month."
Revenue and Adjusted EBITDA were negatively impacted in November and December by the COVID-19 Closures. In November, most of our land-based customers' venues were closed. In December the UK had a tiered lockdown system whereby many of our land-based customers' venues were open but restricted, limiting revenue while incurring near-full service costs. This tiered system is not expected to return in England. The Company's aggregate business across its Online Virtuals and Interactive channels showed strength in the quarter with revenues increasing sequentially from $3.0 million in October to $3.3 million in November to $4.2 million in December. This reflects year-over-year growth of 89%, 95% and 99%, respectively, over $1.6 million, $1.7 million and $2.1 million in the same months in 2019, demonstrating the growing presence and popularity of the Company's online offerings.
Weil continued, "While the UK is expected to remain on lockdown through the first quarter 2021, based on the UK Prime Minister's public statement on February 22nd, and assuming achievement of key goalposts, the UK will ease lockdown restrictions in stages with LBOs reopening in April, pubs and holiday parks reopening in May and an end of the lockdown by June 21st. By the end of the second quarter 2021, assuming the UK ends its lockdown, we would expect our UK business to be on a run rate similar to where we were in the third quarter 2020 when we generated $17.1 million6 in Adjusted EBITDA, excluding VAT-related income, at current exchange rates."
"Furthermore, by the third quarter 2021, we expect to have the added benefit of our online business having grown substantially year over year with continuing expectations for growth from that higher starting point due to a strong business development pipeline, including new commercial agreements in existing territories, jurisdictional expansion in North America, Europe and South America and continued strong product development across both Interactive and Online Virtual Sports. We also expect to have our holiday park business back to pre-pandemic levels, which was not the case in the third quarter 2020 given local restrictions. We're confident that, as we did last time, we will recover quickly once lockdowns are lifted to emerge from this pandemic even stronger than before with a lower cost structure, improved liquidity, a larger customer base and increased growth opportunities," concluded Weil.
"October was a stellar month and indicated how quickly we could recover before our land-based businesses went back into lockdown in November and December," said Lorne Weil, Executive Chairman of Inspired. "Our October monthly Revenue of $21.2 million6 and Adjusted EBITDA of $6.8 million6, or 32% of total revenue, was nearly 20% above October 2019 and the highest monthly levels we experienced in 2020, excluding the VAT-related income. This follows the general pattern we saw of sequential monthly growth throughout the third quarter 2020 following the second quarter lockdown. Importantly, year to year growth in October occurred despite the fact that October performance was impacted by pub curfews in early October and the introduction of tiered closures in the second half of the month."
Revenue and Adjusted EBITDA were negatively impacted in November and December by the COVID-19 Closures. In November, most of our land-based customers' venues were closed. In December the UK had a tiered lockdown system whereby many of our land-based customers' venues were open but restricted, limiting revenue while incurring near-full service costs. This tiered system is not expected to return in England. The Company's aggregate business across its Online Virtuals and Interactive channels showed strength in the quarter with revenues increasing sequentially from $3.0 million in October to $3.3 million in November to $4.2 million in December. This reflects year-over-year growth of 89%, 95% and 99%, respectively, over $1.6 million, $1.7 million and $2.1 million in the same months in 2019, demonstrating the growing presence and popularity of the Company's online offerings.
Weil continued, "While the UK is expected to remain on lockdown through the first quarter 2021, based on the UK Prime Minister's public statement on February 22nd, and assuming achievement of key goalposts, the UK will ease lockdown restrictions in stages with LBOs reopening in April, pubs and holiday parks reopening in May and an end of the lockdown by June 21st. By the end of the second quarter 2021, assuming the UK ends its lockdown, we would expect our UK business to be on a run rate similar to where we were in the third quarter 2020 when we generated $17.1 million6 in Adjusted EBITDA, excluding VAT-related income, at current exchange rates."
"Furthermore, by the third quarter 2021, we expect to have the added benefit of our online business having grown substantially year over year with continuing expectations for growth from that higher starting point due to a strong business development pipeline, including new commercial agreements in existing territories, jurisdictional expansion in North America, Europe and South America and continued strong product development across both Interactive and Online Virtual Sports. We also expect to have our holiday park business back to pre-pandemic levels, which was not the case in the third quarter 2020 given local restrictions. We're confident that, as we did last time, we will recover quickly once lockdowns are lifted to emerge from this pandemic even stronger than before with a lower cost structure, improved liquidity, a larger customer base and increased growth opportunities," concluded Weil.
Inspired Entertainment (INSE) stock price history over the last 5 years
The image below shows the stock price history of Inspired Entertainment (INSE) over the last 5 years. And its not been a good time for Inspired Entertainment stockholders with the stock decreasing by -3% over the last 5 years.
The stock of Inspired Entertainment is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Inspired Entertainment stock is positive at this point in time.
The stock of Inspired Entertainment is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Inspired Entertainment stock is positive at this point in time.
Latest stock valuation of Inspired Entertainment
So what is Inspired Entertain stock worth based on their 4th quarter 2020 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for Inspired Entertainment at $8.20 a stock
We therefore believe the stock of Inspired Entertainment is overvalued at its current price of $9.52
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $17.20, thus a good entry point into Inspired Entertainment would be at $15.50 or below.
We expect the stock of Inspired Entertainment to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued
We therefore believe the stock of Inspired Entertainment is overvalued at its current price of $9.52
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $17.20, thus a good entry point into Inspired Entertainment would be at $15.50 or below.
We expect the stock of Inspired Entertainment to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued
Next earnings release of Inspired Entertainment
It is expected that Inspired Entertainment will release their 1st quarter 2021 earnings report in early June 2021
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