Item 1. Business
ITEM
1. BUSINESS.
Recent
Developments
On March 11, 2020, the World Health Organization
declared COVID-19 to be a global pandemic which affected our retail businesses throughout 2020.
From mid-December 2020 to mid-April 2021, all
retail venues were once again closed due to government-mandated shutdowns. Full restrictions did not fall away in the United Kingdom
until July 2021 and there remains an element of social distancing in venues in Greece and in Italy.
It remains uncertain
as to whether and when further restrictions or closures could happen in each jurisdiction and how long they may last. We continue to
protect our existing available liquidity by pro-actively managing capital expenditures and working capital as well as identifying both
immediate and longer-term opportunities for cost savings.
Overview
Inspired
Entertainment, Inc. (the “Company”, “Inspired”, “we” or “us”)
are a global gaming technology company, supplying content, platform and other products and services to online and land-based regulated
lottery, betting and gaming operators worldwide through a broad range of distribution channels, predominantly on a business-to-business
basis. We provide end-to-end digital gaming solutions (i) on our own proprietary and secure network, which accommodates a wide range
of devices, including land-based gaming machine terminals, mobile devices and online computer applications and (ii) through third party
networks. Our content and other products can be found through the consumer-facing portals of our interactive customers and, through our
land-based customers, in licensed betting offices, adult gaming centers, pubs, bingo halls, airports, motorway service areas and leisure
parks.
Our
customer base includes regulated operators of lotteries, licensed sports bookmakers, gaming and bingo halls, casinos and regulated online
operators, adult gaming centers, pubs, holiday parks, and motorway service areas. Some of our key customers include William Hill, SNAI,
Sisal, Lottomatica, Betfred, Paddy Power, Betfair, Genting, bet365, Sky Bet, Fortuna, the Greek Organisation of Football Prognostics
S.A. (OPAP S.A.), Entain Plc, the Pennsylvania Lottery, Bourne Leisure, Greentube, Stonegate, Mitchells & Butler, Marstons PLC, Greene
King, JD Wetherspoon PLC, Parkdean Resort, Centre Parcs Resorts and Novomatic. Geographically, 71% of our revenues (excluding
VAT-related revenue) for the year ended December 31, 2021 were generated from our UK operations, with the remainder generated from Italy,
Greece and the rest of the world. Our products are designed to operate within applicable gaming and lottery regulations and our customers
are regulated gaming or lottery operators or are otherwise licensed to operate our products.
We
conduct business across different jurisdictions of which Great Britain, Italy and Greece have historically contributed the most significant
recurring revenues. Recently we have begun to conduct a meaningful amount of business in North America as well. We are licensed or certified
(as applicable) by the Gambling Commission in the United Kingdom, and by the Hellenic Gaming Commission in Greece, and registered with
L’Agenzia delle dogane e dei Monopoli (“ADM”) in Italy. We are licensed by regulators in other jurisdictions such as
the Malta Gaming Authority, Licensing Authority of Gibraltar, the Alderney Gambling Control Commission, the Belgian Commission, Autorité
Des Marchés Financiers (Quebec), the Romanian National Gambling Office, Oficiul National pentru Jocuri de Noroc and we hold licenses
with the US States of California, Connecticut, Illinois, Michigan, Nevada, New Jersey, Oregon, West Virginia and the Canadian provinces
of Alberta, Nova Scotia and Saskatchewan. We are currently in the process of applying, or planning to apply, for licensure in additional
North American jurisdictions, where we expect to benefit from any future market growth.
1
We
are headquartered in the United States, with principal operating facilities located in the United Kingdom, India and Italy. As of December
31, 2021, we had approximately 1,600 employees, approximately 1,500 of which were full-time. We generated total revenue of $208.9 million and Adjusted EBITDA of $64.0
million for the year ended December 31, 2021, despite our business being materially impacted by the COVID-19 global pandemic. For the
year ended December 31, 2019 (our last full year prior to COVID-19 impacting our business), we generated total revenue of $153.4 million
and Adjusted EBITDA of $49.0 million.
The
Company is publicly listed on the NASDAQ and had an equity market capitalization of approximately $342.6 million as of December
31, 2021 (based upon a closing stock price of $12.96 on that date).
Certain
product and company names referred to herein are trademarks™ or registered® trademarks of their respective holders.
Our
Products
We
operate in four business segments: Gaming, Virtual Sports, Interactive and Leisure, as further described below.
Gaming
Segment
Our
Gaming segment supplies gaming terminals as well as gaming software and games for the terminals provided to betting offices, casinos,
gaming halls and high street adult gaming centers. It utilizes our Server Based Gaming (“SBG”) technology to supply products
to our customers’ global land-based gaming venues. SBG products offer an extensive portfolio of games through digital terminals.
Our games are currently deployed through more than 31,800 digital terminals. Because our SBG products are fully digital, they interact
with a central server and are provided on a “distributed” basis, which allows us to access a wide geographic footprint through
internet and proprietary networks.
Our
SBG game portfolio includes a broad selection of popular omni-channel slots titles including the Centurion TM game family and
Super Hot Fruits TM (featuring the Sizzling Hot Spins TM game family). These games offer customers a wide range of
volatilities, return-to-player and other special features, which we collectively refer to as “game math.” We also offer a
range of more traditional casino games through our SBG network, such as roulette, blackjack and numbers games.
We
distribute games to devices through different game management systems (“GMS”), each tailored to a specific operator or sector.
Our CORE TM GMS is designed for distributed street-gaming sectors and uses Inspired cabinets in combination with gaming content
from Inspired, as well as a wide portfolio of content from independent game developers. CORE-CONNECT is our American Gaming Association
G2S standard-based VLT GMS, currently deployed in the Greek VLT sector and North America. Our SBG products comply with all requirements
in the UK (B2/B3), Italy (6B), Greece (G2S) and Illinois (G2S).
Our
SBG terminals in the United Kingdom account for a material portion of all SBG terminal placements, and we offer over 100 games for play
across this portfolio. We are also a material supplier to customers in Greece and Italy. Over the past two years, we have grown our business
in North America where we have sold products in Illinois and to the Western Canada Lottery Corporation. We offer SBG terminals such as
the Flex4k curved screen, Eclipse TM , Valor TM , Optimus TM , Blaze TM and Sabre Hydra TM
, each offering a different size terminal, graphics, technology and price proposition.
As
of December 31, 2021, we had a total installed base of 31,891 units, which were operated primarily under participation-based contracts.
We generate revenue by participating, typically as a function of gross revenue from each machine, in a percentage of volumes generated
by these machines. Because we participate in our customers’ revenues under such contracts, we are aligned with our customers in
benefitting from the introduction of our new content, which can drive growth of the win per unit per day of our installed base. Additionally,
we earn revenue through the sale of units, as well as receiving a fixed daily fee for some of our installed units. During 2021, we sold
3,372 machines despite many of our customers having operations which were closed for approximately one quarter of 2021. With our participation-driven business model, approximately 94% of service revenue for our Gaming segment was recurring in nature
in 2021 (excluding $3.1 million of VAT-related revenue) and derived under long-term contracts. We have successfully renewed all of our
key Gaming contracts expiring over the last three years.
For
the year ended December 31, 2021, our Gaming segment generated revenue and Adjusted EBITDA of $81.4 million and $26.1 million, respectively
(excluding VAT related income), as compared to the year ended December 31, 2020, during which we generated $110.5 million and
$57.9 million in revenue and Adjusted EBITDA, respectively (excluding VAT related income). We believe the COVID-19 global pandemic
impacted this segment during the year ended December 31, 2021 (as well as the prior year) due primarily to government-imposed lockdowns
that forced our land-based customers to close during certain periods.
2
Virtual
Sports Segment
Our
Virtual Sports business designs, develops, markets and distributes ultra-high-definition games that create an always-on sports wagering
experience in betting shops, other locations and online. Our Virtual Sports product comprises a complex software and networking package
that provides fixed odds wagering on an ultra-high definition computer rendering of a simulated sporting event, such as soccer, football
or basketball. Players can bet on the simulated sporting event, in both a streaming and on-demand environment, overcoming the relative
infrequency of live sporting events. We have developed this product using an award-winning TV and film graphics team with advanced motion
capture techniques.
We
believe we are one of the most innovative suppliers of Virtual Sports gaming products in the world. We offer a wide range of sports and
numbers games to approximately 32,000 retail venues as well as through various online websites. Our products are installed in over 20
gaming jurisdictions worldwide, including the UK, Italy, Greece, Turkey, Morocco, and the U.S.
Our
Virtual Sports game portfolio includes titles such as V-Play Soccer, V-Play Football, V-Play Basketball, V-Play Baseball, Virtual Grand
National and V-Play NFLA, as well as greyhounds, other horse racing products, tennis, motor racing, cycling, cricket, speedway, golf
and darts. We have also licensed the use of images of certain sports brands in our games, including with the NFL Alumni. We also entered
into a partnership with the UK Jockey Club to create the Virtual Grand National, which has aired on live UK television since 2017. In
2021 we entered into an exclusive licensing agreement with the Major League Baseball Players Alumni Association to create and license
a new V-Play HomeRun Shoot-out Legends virtual baseball product.
Our
customers are many of the largest operators in lottery, gaming and betting worldwide. We are contracted to supply Virtual Sports to mobile
and online operators in the United Kingdom; the U.S. states of Nevada, Pennsylvania and New Jersey; Gibraltar and other regulated
EU sectors, including Italy, Greece and Poland; and other jurisdictions such as Turkey and Morocco. Virtual Sports can be adapted to
function in sports betting, lottery, or gaming environments and is therefore available to a wide range of customers in both public and
private implementations.
The
Virtual Sports events are capable of being offered to millions of our customers’ customers, through retail, online and mobile
platforms, many of them available 24 hours per day, 7 days per week, and often concurrently within the same location or interactive platform.
We have multiple hosting solutions capable of fulfilling the product delivery needs of our customers including our proprietary Virtual
Plug and Play end to end online and mobile turnkey solutions. In addition, a cloud-based solution is available to customers who require
an XML sportsbook integration that is fully hosted and operated by Inspired.
Our
Virtual Sports products are typically offered to operators on a participation basis, whereby we receive a portion of the gaming revenues
generated, plus an upfront software license fee. With our participation-driven business model, our Virtual Sports segment produces approximately
94% of total revenue on a recurring basis under long-term contracts for which our standard term is three years in duration. We have successfully
renewed all of our key Virtual Sports contracts expiring over the last three years.
For
the year ended December 31, 2021, our Virtual Sports segment generated revenue and Adjusted EBITDA of $36.0 million and $28.4
million, respectively, as compared to the year ended December 31 2020, during which we generated $32.4 million and $25.1 million
in revenue and Adjusted EBITDA, respectively. We believe the COVID-19 global pandemic impacted retail revenue for this segment during
the year ended December 31, 2021 (as well as the prior year) due primarily to government-imposed lockdowns which forced our retail customers
to close during certain periods. We believe that the COVID-19 global pandemic accelerated the market adoption of Virtual Sports through
online channels, which enabled us to benefit from market trends in this business during a period in which our retail customers
were not operating due to government-imposed lockdowns. Virtual Sports revenue generated through online and mobile channels has increased
from $20.2 million in 2020 to $26.1 million in 2021.
3
Interactive
Segment
Our
Interactive business uses unique interactive-only content as well as offerings from our Gaming and Virtual Sports segments to create
games that are hosted on remote gaming servers to allow online gaming operators to use our games and content online and on mobile devices
worldwide. Our interactive content includes a wide range of premium random number generated casino content from feature-rich bonus games
to European-style casino free spins and table games incorporating well-known first and third-party brands including Space Invaders TM ,
20p Roulette TM , Jagr’s Super Slot TM , Super Hot Fruits TM and Reel King Megaways TM . Inspired
releases several new titles per month and new games can be seamlessly deployed to the full estate of operators and aggregators through
its proprietary Virgo RGS™. Games are available on over 300 websites across much of regulated Europe including the UK, Gibraltar,
Malta, Spain, Sweden, Italy, Germany, the Netherlands, Romania, Greece and Belgium as well as in New Jersey, Michigan and Quebec. We
expect to next go live in West Virginia, Pennsylvania, Ontario, Alberta and Connecticut during 2022.
Inspired’s
Virgo RGS™ is integrated with a number of best known casino brands, including William Hill, Entain, bet365, Flutter, 888, Kindred,
Gamesys, BetFred, Rank, Leo Vegas, OPAP and Stoiximan. We are also now live with ten North American operators: Bet MGM, Draft Kings,
Caesars, Resorts/Mohegan, Rush Street Interactive, Wynn, Unibet, 888 and Golden Nugget and with Loto Quebec in Canada.
Our Interactive products are
typically offered to operators on a participation basis, whereby we receive a percentage of total amount of stakes wagered or a percentage
of net gaming revenue. For the year ended December 31, 2021, our Interactive segment generated revenue and Adjusted EBITDA of $22.8
million and $13.0 million, respectively. With our participation-driven business model, approximately 100% of revenue
for our Interactive segment is recurring in nature and derived under long-term contracts for which our standard term is three years in
duration. We have successfully renewed all of our key Interactive contracts expiring over the last three years. We believe the COVID-19
global pandemic accelerated the market adoption of interactive gaming by end-users, and that our EBITDA margins in this segment will
expand as our revenue grows due to the low variable costs we expect to incur on incremental revenue, versus our existing base of revenue.
4
Leisure
Segment
We
are a supplier of gaming terminals and amusement machines to the Leisure and Hospitality sectors and one of the largest operators of
“pay to play” gaming terminals and amusement machines in the UK. As of December 31, 2021, we supplied and operated over 11,600
gaming terminals and 7,000 pool tables, prize vending and jukeboxes located in pubs, bingo halls, and adult gaming centers. We also service
approximately 2,200 gaming terminals under maintenance only contracts. The increasing majority of gaming terminals we operate are server
based, allowing us to distribute content supplied by our “in house” design studios as well as some of the most popular content
titles from our strategic partners. We also manufacture and sell analog machines.
In
addition, we also supply and operate approximately 9,300 amusement machines and 2,200 gaming terminals in family entertainment centers
and adult gaming centers located in holiday parks, bowling centers and other entertainment venues. These include virtual reality simulators
and arcade games, redemption and skill with prize games, basketball, air hockey and cue sports. Commercial arrangements are typically
structured as either revenue participations or rental agreements.
Our
customers in this segment include the vast majority of recognizable brands that participate in the geographies and sectors in which we
operate. These customers include large pub operators JD Wetherspoons, Stonegate Pub Company, Marstons PLC, Greene King, Mitchells and
Butler, Punch Taverns, Whitbread and Star Pubs and Bars (Heineken). In the Bingo sector, we supply gaming terminals and services to Buzz
Bingo and Mecca. We supply gaming terminals and services to transport hub operators, Moto and Welcome Break and major airports,
including Heathrow. We also operate our own adult gaming centers under the Quicksilver brand in Extra Motorway Services. We have joint
venture agreements with holiday park operators Parkdean Resorts and Bourne Leisure across their Haven, Butlins and Warner Hotels brands,
where we supply machines and trained staff to manage and operate family entertainment centers.
Overall,
our Leisure segment had, as of December 31, 2021, an installed base of over 16,000 gaming terminals, which were operated primarily under
participation-based contracts. We generate revenue by participating, typically as a function of gross revenue from each machine, in a
percentage of volumes generated by these machines. Because we participate in our customers’ revenues under such contracts, we are
aligned with our customers in benefitting from the introduction of our new content, which can drive growth in the win per unit per day
of our installed base. Additionally, we earn revenue through the sale of units, as well as a fixed daily fee for certain of our installed
units. With our participation-driven business model, approximately 96% of revenue for our Leisure segment is recurring in nature
and derived under long-term contracts. Since the NTG Acquisition, we have successfully renewed all of our key Leisure contracts expiring
over the last three years.
For
the year ended December 31, 2021, our Leisure segment generated revenue and Adjusted EBITDA of $68.7 million and $15.7
million, respectively. We believe the COVID-19 global pandemic impacted this segment during the year ended December 31, 2021 due
primarily to government-imposed lockdowns, which forced our land-based customers to close during certain periods.
5
Our Strengths
We
believe key factors that give us an advantage in the gaming technology space include:
Established
presence across multiple Product Verticals
We
have a substantial installed base across each of our product verticals, including over 31,800 digital terminals in the Gaming segment
located across key jurisdictions in the United Kingdom, Greece, Italy and South America, with approximately 13,700 terminals installed
in UK Licensed Betting Offices and approximately 8,700 installed in Greek video lottery terminals (“VLTs”). In our Leisure
segment, we supply and operate an installed base of approximately 16,000 gaming terminals (including approximately 2,200 gaming
terminals under maintenance only contracts) and 7,000 pool tables, prize vending and jukeboxes to pubs, bingo halls and adult gaming
centers. In addition, we also supply and operate approximately 9,300 amusement machines and 2,200 gaming terminals in family entertainment
centers located in holiday parks, bowling centers and other entertainment venues. We have award winning content and products in our Virtual
Sports segment, which offers a wide range of sports and numbers games through approximately 32,000 retail venues as well as through various
online channels. Our Virtual Sports gaming products are installed in approximately 35 gaming jurisdictions worldwide, including the United
Kingdom, Italy, Greece, Morocco and the United States, our customers being many of the largest operators of lottery, gaming, and betting
operations worldwide. Additionally, our Interactive segment provides a wide range of premium iGaming content to large operators primarily
located in the United Kingdom, Italy, Greece and North America, as well as several other countries across Europe through over 170 websites.
Highly
Diversified Business Underpinned by Longstanding Customer Relationships
We
operate in several business segments and geographic locations that provide us a diversified revenue and cash flow stream that has proven
to be resilient under various economic environments. While our Gaming segment has represented the largest proportion of our revenue
in each of the last three years, our Virtual Sports and Interactive segments represent substantial growth opportunities as demonstrated
by recent trends, including during the COVID-19 global pandemic, which are expected to continue to diversify our business. Additionally,
we continue to expand in high growth markets, such as North America, which are expected to drive further geographic diversification across
business segments. We have over 600 customers, including major lottery, sports betting and gaming operators (both interactive and location-based)
within regulated sectors worldwide. Many of our customer relationships in the UK and European sectors are long-standing and in excess
of 10 years. We expect that
our diverse customer base will afford us opportunities to sell incremental products to certain of these customers in the future.
Substantial
Recurring Revenue Supported by Long-Term Participation-Based Contracts
We
believe our robust recurring revenue business model will drive our performance and free cash flow generation. For the year ended December
31, 2021, our recurring revenue, which included revenue generated from participation-based contracts and licensing arrangements, represented
86% of total revenue (87% excluding VAT-related revenue), as compared to approximately 67% of total revenue (84% excluding VAT-related
revenue) for the year ended December 31, 2020. Our content and products, which are provided primarily pursuant to long-term contracts,
are essential to generating revenue for our customers and satisfying the demand of our end users. Our long-term contracts typically have
an initial duration of three to five years depending on the business segment and the customer and, over the last three years, we have
successfully renewed all expiring contracts with key customers in our Gaming, Virtual Sports and Interactive segments, and have successfully
renewed all expiring contracts with key customers in our Leisure segment since the NTG Acquisition.
6
Proprietary
Technology and Track-Record of Strong Content Development
We
are dedicated to being at the forefront of our industry in terms of technology and innovation. We combine complementary expertise in
technology and operations, positioning us as a provider of superior technical solutions. As of December 31, 2021, we held approximately
15 patents and approximately 200 trademarks worldwide. We focus our product development efforts on emerging technology trends, utilizing
a combination of customer research, design experience and engineering excellence. We are committed to developing innovative products
for our customers and are focused on improving player entertainment and customer profitability.
We
believe convergence trends in the gaming industry emphasize the importance of proprietary content, including licensed content. Such content
is needed to successfully promote a compelling game offering across multiple platforms and to develop distinctive products for operator-clients.
Our proprietary content drives engagement across gaming platforms. Our full suite of high-quality gaming products, services and multichannel
distribution capabilities, extensive traditional content library, sizeable installed gaming machine base and deep relationships with
operator-customers help make us an attractive partner for potential licensors of branded content.
Our
Interactive business has expanded rapidly, with revenue growing at an approximate compound annual growth rate of 103% on a functional
currency at constant rate basis between 2019 and 2021. We believe this growth has been driven, in part, by our content library of over
100 slot games, many of which have not been extensively distributed previously to interactive operators. Many of our recent
game launches, including Maximus Gold Cash TM , Rainbow Cashpots TM , and Super Hot Fruits TM (a consistent
top performer in the Greek market), have been omni-channel, offering a premium player experience across multiple platforms.
Inspired’s
award-winning Virtual Sports products offer a wide range of betting markets and what we consider to be superior graphics. Our Virtual
Sports revenue has been growing fast and has achieved high Adjusted EBITDA margins, while providing an attractive recurring-revenue base.
Additionally, this business has benefitted from recent trends, including during the COVID-19 global pandemic, toward online gaming.
Positioned
To Benefit From Key Market Trends
With
our proprietary digital gaming platform and content comprising an end-to-end product offering and our multi-channel capabilities and
robust relationships across the client spectrum, we believe we are well-positioned to benefit from emerging gaming sector trends, including
growth stimulated by liberalization of government gaming regulations, the emergence of multi-channel offerings and the increasing importance
of proprietary content.
Our
multi-channel offerings are well-positioned to benefit from the increased prevalence of smart phones and tablets and the legalization
of online gaming in certain parts of the United States, Canada and other jurisdictions. Such jurisdictions have provided new growth opportunities
for gaming and lottery operators through the introduction of new channels and portals for delivering games to customers. This supplements
the existing broad-based online gambling market across Europe. Our multi-channel solutions and customer relationship management capabilities
position us to take advantage of new opportunities to extend our gaming solutions across different channels for our customers to reach
new players, expand the player demographic base and access players wherever they are whenever they want to play. Our technology extends
play for existing players and has the capability to reach new player segments. This and other technology help position us for future
online real-money gaming opportunities by offering play-for-fun online gaming options in jurisdictions where online real-money gaming
may be legalized in the future.
Government
initiatives, such as the legalization of casino operations in new jurisdictions, increases in the number of casinos allowed to operate
in a given jurisdiction and the legalization of new products, have helped stimulate growth in the gaming market. In the United States,
legislative change has led to an increase in the legalization of sports betting. As of December 31, 2021, 21 U.S. states and the District
of Columbia have legalized sports betting.
7
Experienced
Management Team
Our
seasoned management team is led by our Executive Chairman, Lorne Weil, who is known as a gaming industry innovator and whose past leadership
includes growing a diversified global gaming technology company both organically and through extensive acquisitions and joint ventures
further bolstering the business. Other members of the Company’s Office of the Executive Chairman (the “OEC”) are our
President and Chief Operating Officer, Brooks H. Pierce; our Executive Vice President and Chief Strategy Officer, Daniel B. Silvers;
our Executive Vice President and Chief Financial Officer, Stewart F.B. Baker, who is currently on a temporary medical leave of absence;
our Interim Principal Financial and Accounting Officer, Andrew C. Stone; and our Executive Vice President and General Counsel, Carys
Damon. The OEC executes the day-to-day management of the Company. Our management team has broad and deep experience in the gaming industry,
working with lotteries, casino operators, betting platforms, and online operators. The members of the OEC have, on average, decades of
experience in the gaming industry, including relationships with customers around the world, helping them build and sustain revenue growth.
In addition, the members of the OEC have centered their careers on identifying, acquiring and integrating, through the implementation
of value creation initiatives, complementary businesses.
Our
Strategy
We
seek to deliver innovative and differentiated products that provide value to our customers and exciting experiences to their players
in multiple jurisdictions throughout the world while achieving long-term growth in revenues, profit and cash flow. We place great emphasis
on developing creative solutions, in terms of game content and play that deliver and sustain superior performance through operators across
interactive and location-based channels. Our technology often allows us to update our games and operating software remotely, keeping
pace with evolving requirements in game play, security, technology and regulations. We seek to achieve these goals as we:
Extend
our positions in each of the sectors in which we operate by developing new content and products which can often be utilized across multiple
distribution channels.
We
continually invest in new content and product development in each of the business segments in which we operate. We believe these investments
can benefit our existing and prospective customers by making new content and products available to them and bringing exciting entertainment
experiences to their players. Our approach, which seeks to distribute our content across a wide range of channels, protocols and regulatory
standards, allows us to distribute our content across multiple sectors in which we operate on a cost-efficient basis. We have continued
to focus on channels where we believe there is considerable growth available – especially interactive. We believe our technological
approach allows us to quickly adapt to changes in player preferences.
Continue
to invest in content and technology in order to grow our existing customers’ revenues and penetrate new customers in our existing
markets.
Over
the last three years, a substantial portion of our annual revenue has been recurring and based on long-term contracts with customers,
where our revenues typically grow in line with the growth of our customers’ gaming revenues from our content and products. We seek
to work closely with our customers to assist in the optimization of their operations so they can achieve growth in their revenues generated
by our content and products, which we believe is to our benefit. Accordingly, we continually invest in new content and technology offerings
that we believe will enable our customers to keep their offerings fresh and allow them to offer their players new forms of entertainment.
As our content demonstrates successful commercial results, we seek to place it with additional customers who recognize its performance.
We believe content development is a key aspect of our strategy and we intend to continue this strategic priority for each of the businesses
in which we operate.
Add
new customers by expanding into underpenetrated markets.
We
believe our historical growth has been driven by our entry into new geographies, and supplemented by increasing our share in
existing markets. We expect to continue to focus on North American markets in the Gaming, Virtual Sports and Interactive segments
for such expansion. We believe North America is a major gaming market in which we currently have limited participation, but where
our products are well positioned, or can be positioned, for future success. For example, in 2020 and 2021, we placed 313 and 374
VLT terminals, respectively, in North America. We also believe there are likely to be growth opportunities in Latin America which
will be available to us in the future.
Pursue
targeted mergers and acquisitions to expand our product portfolio and distribution footprint.
In
addition to growing our business organically, we have pursued, and continue to pursue, merger and acquisition opportunities that we believe
will help strengthen and scale our operations and take further advantage of our competitive position. Our management team shares a combination
of operating, investing, financial and transactional experience that we believe will serve the Company well as it seeks to identify opportunities
for value-adding acquisitions and negotiate and close on beneficial acquisition transactions. For example, in October 2019, we completed
the NTG Acquisition which we believe added increased scale to our business while supplementing key technologies and content within our
portfolio. In December 2021 we completed the acquisition of Sportech Lotteries, LLC (currently Inspired Entertainment Lotteries LLC),
which is our first lottery-focused acquisition, further diversifying our business model on a product, customer, and geographic
level.
Our
ability to execute the strategy above will be affected by the ongoing COVID-19 global pandemic, which may have further, unexpected effects
on the business. We are currently focused on managing our cash flow and liquidity, as well as the segments of our business that remain
operational to maximize near term revenues from those segments.
8
Industry
Overview
We
operate within the global gaming and lottery industry. Global gaming and lottery growth has been resilient in the face of economic cycles
over the last decade. According to the H2 Database, the global gaming and
lottery industry has grown at a 10.5% compounded annual growth rate from 2010 to 2020, which has been driven by
increased consumer spend and the introduction of new regulated sectors but declined dramatically in 2020 due to land-based venues
being closed due to COVID-19 mandated shutdowns and restrictions.
During
this period, the digital online and mobile gaming and lottery sectors have grown at a faster pace than the industry as a whole. According
to the H2 Database, these industry sectors have grown at a 12.6% compound annual growth rate from 2010 to 2020, driven
by rapid growth in the deployment of digital games and technologies, including many of our products, into land-based venues in the primary
sectors in which we operate, where regulators have supported the transition to digital, online and retail channels.
Subject
to the impact of the COVID-19 global pandemic, we believe the global gaming and lottery industry will return to a growth trajectory,
with more robust growth in the digital gaming and lottery sectors, as further described below. We believe the industry is content
driven and, much like music, videogames and motion pictures, will continue to be transformed by the propagation of digitally-networked
technologies.
As
a gaming and lottery business-to-business supplier focused on digital products and technologies, we believe we are well-positioned to
benefit from these trends.
Influencers
of Digital Adoption
We
believe the digital segment of the global gaming and lottery industry will continue to grow, including as a result of the following factors:
Governments:
Opening of new gaming territories . Many national and state governments operating in developed economies in Europe and the United
States are suffering from structural funding deficits. The regulation and liberalization of gaming and lottery is frequently relied upon
to raise new sources of revenue for these governments. In most cases, we believe such liberalization does not favor buildouts of large
new destination resort casinos, but rather focuses on smaller distributed gaming (“EDGE”) venues with lottery, gaming and
sports betting, combined with online or mobile gaming.
Digital
Multi-Channel Offerings: Replacement of legacy analog machines with larger volume of smart digital devices, both interactive and location
based . In many established sectors, as existing gaming sectors mature, governments and regulatory authorities have implemented
regulations to upgrade the established terminal base to digital operation.
Smartphones
and Mobile Devices: Rapid adoption of gaming and lottery applications on growing volume . In certain sectors, mobile play on sports
betting and gaming now exceeds such play on personal computers. According to the H2 Database, mobile gaming revenues in such sectors
exhibited a 27.0% compound annual growth rate between 2010 and 2020. Mobile gaming and lottery is now expanding
in other sectors, and mobile play has recently been approved in other sectors for gaming or lottery.
In
addition to the foregoing, we believe there are significant benefits for our customers in adopting digitally networked gaming and lottery
technologies. We believe our digitally-enabled products allow operators to remotely manage their operations with minimal disruption to
their businesses. The system centralization enabled by digital operations offers flexibility to rotate or change games, tailor game availability
to time-of-day, target specific player demographics and take advantage of seasonal and themed marketing opportunities. New games often
can be phased in without the interim revenue declines often associated with replacing games on traditional slot machines. In addition,
digital operations permit more games per terminal, enabling operators to test new games and new suppliers, seek to appeal to a broader
base of players with minimal cost or risk, commission games from third-party party suppliers on an open game interface and reduce procurement
risk. Moreover, digital operations can significantly reduce the need for on-site repairs, improve terminal up-time and should extend
terminal life cycles as well as the time period over which capital costs can be depreciated.
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Regulatory
Framework
We
conduct business in a number of different jurisdictions, of which Great Britain, Italy and Greece have historically contributed the most
significant recurring revenues. The gaming regulator responsible for our activities in Great Britain is the Gambling Commission of Great
Britain (the “UK Gambling Commission” or the “Gambling Commission”). In Italy, the operation of gaming machines
and remote gaming is regulated by L’Agenzia delle dogane e dei Monopoli (“ADM”). In Greece, the operation of gaming
machines and remote gaming is regulated by the Hellenic Gaming Commission. In addition, we are licensed or certified (as applicable)
in a number of other jurisdictions by regulators such as the Malta Gaming Authority, Licensing Authority of Gibraltar, the Alderney Gambling
Control Commission, the Belgian Commission, Autorité Des Marchés Financiers (Quebec) and state regulators in various jurisdictions
in North America.
Great
Britain
In
the British sector, we supply and distribute Category B3 gaming machines (with maximum betting stakes for players of £2) and ETG
machines to third parties who are licensed to operate such machines in bricks-and-mortar premises. In addition, we operate
a number of Adult Entertainment Centers. We also supply virtual racing software to local retail venues and to online operators who are
licensed to target the British sector. We also supply our Interactive product to remote operators who are licensed to target the British
sector. The provision of our products and services in relation to the British sector is authorized by a series of licenses issued by
the UK Gambling Commission, namely remote and non-remote Gaming Machine Technical (Full) operating licenses, a remote casino operating
license, a remote and non-remote gambling software license and a remote general betting standard (virtual events) license gaming machine
general adult gaming center license and a gaming machine general family entertainment center license.
British
Betting and Gaming Laws and Regulations. The Gambling Act 2005 (the “GA05”) is the principal legislation in Great
Britain governing gambling (other than in relation to the National Lottery, which is governed by separate legislation). The GA05 applies
to both land-based gambling (referred to as “non-remote” gambling) and online and mobile gambling (referred to as “remote”
gambling).
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The
GA05 provides that it is an offense to make a gaming machine available for use without an appropriate operating license. There are a
number of different categories of licensable gaming machines (the GA05 provides for category A to D machines, although no category A
machines are currently in operation); each category is subject to different levels of maximum stakes and prize limits. In addition, there
are limits on the numbers and types of gaming machines that can be operated from licensed premises: for example, a licensed betting office
is permitted to house up to four category B2 to D machines, while a large casino may house up to 150 category B to D machines (subject
to satisfying certain ratios of machines to gaming tables).
Gaming
machine suppliers are required to hold an operating license in order to manufacture, supply, install, adapt, maintain or repair a gaming
machine or part of a gaming machine. Gaming machine suppliers must also comply with the Gaming Machine Technical Standards published
by the Gambling Commission in relation to each category of machine, and such machines must meet the appropriate testing requirements.
In
relation to remote gambling, the GA05 (as amended by the Gambling (Licensing and Advertising) Act 2014 provides that it is an offense
to “provide facilities” for remote gambling either (a) using “remote gambling equipment” situated in Great Britain,
or (b) which are used by players situated in Great Britain, in each case without a remote gambling operating license. It is also an offense
to manufacture, supply, install or adapt gambling software in Great Britain without an appropriate gambling software license.
A
remote gambling operating license holder providing facilities for remote gambling to British players is required to use gambling software
manufactured and supplied by the holder of a gambling software license (and failure to do so is an offence). Where gambling software
is used or supplied for use in relation to the British sector, it must satisfy the Remote Gambling and Software Technical Standards published
by the Gambling Commission.
The holder of a British gambling
operating license is subject to a variety of ongoing regulatory requirements, including, but not limited to, the following:
●
Shareholder
disclosure: An entity holding a gambling license must notify the Gambling Commission of the identity of any shareholder holding 3%
or more of the equity or voting rights in the entity (whether held or controlled either directly or indirectly).
●
Change
of corporate control: Whenever a new person becomes a “controller” (as defined in section 422 of the Financial Services
and Markets Act 2000) of a company limited by shares that holds a gambling operating license, the licensed entity must apply to the
Gambling Commission for permission to continue to rely on its operating license in light of the new controller. A new controller
includes any person who holds or controls (directly or indirectly, including ultimate beneficial owners who hold their interest through
a chain of ownership) 10% or more of the equity or voting rights in the licensed entity (or who is otherwise able to exercise “significant
influence” over it). The Gambling Commission must be supplied with specified information regarding the new controller (which,
in the case of an individual, includes detailed personal disclosure) and this information will be reviewed by the Gambling Commission
to assess the suitability of the new controller to be associated with a licensed entity. If the Gambling Commission concludes that
it would not have issued the operating license to the licensed entity had the new controller been a controller when the application
for the operating license was made, the Gambling Commission is required to revoke the operating license. It is possible to apply
for approval in advance from the Gambling Commission prior to becoming a new controller of a licensed entity.
●
Compliance
with the License Conditions and Codes of Practice (LCCP): The LCCP is a suite of license conditions and code provisions which attach
to operating licenses issued by the Gambling Commission. The provision of gambling facilities in breach of a license condition is
an offense under the GA05. Certain specified “Social Responsibility” code provisions are accorded the same weight as
license conditions in this regard (whereas breach of an “ordinary” code provision is not an offense in itself, but may
be evidence of unsuitability to continue to hold a gambling license). The LCCP imposes numerous operational requirements on licensees,
including compliance with the Gambling Commission’s Remote Gambling and Software Technical Standards, segregation of customer
funds, the implementation of a variety of social responsibility tools (such as self-exclusion), anti-money laundering measures, age
verification of customers and a host of consumer protection measures. The Gambling Commission regularly reviews and revises the LCCP.
●
Regulatory
returns and reporting of key events: The LCCP requires licensees to submit quarterly returns to the Gambling Commission detailing
prescribed operational data. Licensees are also required to notify the Gambling Commission as soon as practicable and in any event
within 5 working days of becoming aware of the occurrence of certain specified “key events” which, in summary, are events
which could have a significant impact on the nature or structure of the licensee’s business. Licensees are also required to
notify suspicion of offenses and suspicious gambling activity.
●
Personal
licenses: Key management personnel are required to maintain personal licenses authorizing them to discharge certain responsibilities
on behalf of the operator. These personal licenses are subject to renewal every five years. Personal licenses are subject to compliance
with certain license conditions.
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Italy
We operate two different gaming
businesses in Italy. We provide platform and games for video lottery terminals (“VLTs”), we also supply Virtual Sports
products, including online platforms and games, to betting shops and online platforms. Our businesses are operated through the Italian
branches of certain of our UK subsidiaries. These branches hold police licenses and are enrolled in the Register of Gestori, as further
described below. We supply our platform and games and Virtual Sports products only to operators licensed under Italian gaming laws and
regulations.
Our
VLT and Virtual Sports platforms must be connected over the internet to servers operated by the ADM. Information regarding gaming sessions
and the amounts wagered and won is provided in real time through the ADM servers, in order to enable the ADM to monitor the operation
of machines and games and to verify the amount of taxes due.
Italian
Betting and Gaming Laws and Regulations. Operators of betting premises offering VLTs (including the entities managing the networks
connecting such VLTs to ADM servers), and operators of betting premises or online platforms offering Virtual Sports products, must hold
an Italian gaming license. No gaming license is required in order to supply VLTs or Virtual Sports products to such operators. Such VLT
platforms, machines and games, and Virtual Sports platforms and games, must be certified and approved by SOGEI, an entity authorized
to conduct such certifications, and approved by the Italian Ministry of Finance. Such certifications and approvals must be obtained by
such operators, rather than the suppliers of such VLT platforms, machines and games, and Virtual Sports platforms and games.
Suppliers
of gaming machines, including VLTs, must hold a police license (as prescribed by article 86, paragraph 3, of the Italian United Text
of Public Security Law (TULPS) provided by the Royal Decree 18 June 1931, No. 773) and be enrolled in a registry prescribed by article
1, paragraph 82 of Law No. 220/2010 (known as the “Register of Gestori”). If a supplier of gaming machines is not enrolled
in the Register of Gestori, any agreement it enters into regarding the supply of gaming machines is null and void. In addition, if the
enrollment is not renewed, existing agreements regarding the supply of gaming machines become null and void. Enrollment in the Register
of Gestori is subject to, among other things, a review of the suitability of the applicant business entity and its directors. In the
event of a change of control of the entity enrolled in the Register of Gestori (but not of such entity’s direct or indirect parent
entities), the details of such change must be notified to the ADM and suitability must be reconfirmed.
Suppliers
of Virtual Sports products are not required to hold a police license, be enrolled in the Register of Gestori or otherwise be licensed
or registered.
Greece
In
Greece, we supply VLTs, including the terminal machines themselves, the related online platforms and the games available on the machines,
to brick-and-mortar gaming locations operated by OPAP, the country’s sole licensed operator of gaming machines. We supply such
VLTs under a certification provided by the Hellenic Gaming Commission (the “HGC”). We also supply Virtual Sports products
within retail venues operated by OPAP and via self-service betting terminals within OPAP venues and supply interactive games and Virtual
Sports to online operators in Greece including Stoiximan, OPAP and Novibet.
Greek
Betting and Gaming Laws and Regulations : I. According to Article 44 par. 2 of Law 4002/2011, as well as according to HGC’s
Decisions No 225/2/25.10.2016, 79314/05.08.2020 and 79305/05.08.2020, all suppliers of gaming machines in Greece must be certified by
the HGC in order to legally supply, sell, lease, offer or distribute any VLT or virtual game or any other game of chance (i.e. games
including wagers or bets and the result of which games depends, even partly, on the influence of luck). Moreover, a Suitability Licence
is required for suppliers, who are further are divided into a) Manufacturers (Art. 11 of the HGC’s Decision No 79314/05.08.2020)
and b) Importers/Distributors (Art. 12 of the HGC’s Decision No 79314/05.08.2020). Accordingly, manufacturers need to obtain a
Suitability Licence Type B, while importers/distributors need to obtain a Suitability Licence Type E2.
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II.
As regards online gaming, Articles 45 -52 of Law 4002/2011, which was recently amended by Law 4639/2019 (Government Gazette A/167/30.10.2019),
introduces several new provisions such as the two exclusive types of online licenses for online gaming operators: a) Online Betting Licence;
and b) a license for Other Online Games (it covers online casino games and online poker games and variants thereof). Furthermore, Article
14 of the HGC’s Decision No 79835/05.08.2020 states that all suppliers have to submit an application to the HGC, accompanied by
the required compliance certificates, for the following elements: i. the Gaming Platform (Betting Platform); ii. the Random Number Generator
(RNG) per type/group of Games that the Manufacturer offer to each Licence Holder; and iii. each individual game or multigame. Lastly,
Suitability Licences for suppliers are also divided into two types: a) Manufacturers Suitability Licence and b) Importers/Distributors
Suitability Licence (according to articles 9 and 10 of the HGC’s Decision No 79305/05.08.2020). Accordingly, manufacturers need
to obtain a Suitability Licence Type A1 or A2 (depending on whether the manufacturer provides management services to the operator or
not), while importers/distributors need to obtain a Suitability Licence Type E1.
Gaming
Regulation and Changes in Ownership
In
all of the jurisdictions in which we are subject to gaming regulations, regulators require us to keep them informed as to our ownership
structure and composition and, to varying extents and in various circumstances, require us to disclose certain information regarding
the persons who directly or indirectly hold our shares. Depending on the regulator, we may need to provide such information not only
when we first seek licenses or certifications, but also when material changes (measured at different levels) occur in the ownership of
our shares. As a result, material changes in our shareholdings may be subject to special procedures in order to ensure the continuation
of our gaming licenses and certifications.
Content
Development
We
continually invest in new product development in each of our Virtual Sports, Interactive, Leisure and Gaming business segments. Inspired
has a full stack game development structure, combining its proprietary technology frameworks together with some of the industry’s
best math, art, creative and production personnel spread across 3 game studios (Inspired, Astra and Bell Fruit). We release over 100
games each year onto our own priority gaming system, Interactive RGS and to our G2S clients around the world in markets such as North
America, UK, Greece, Spain, Belgium, Italy, Sweden and more. Whilst many of our game launches are omni-channel, we have a focus on building
the right game for the right market and take pride in tweaking and modifying the math and themes for the target player. In Virtual Sports
we combine graphical assets and software that controls those assets to schedule events and generate results via a random number generator,
as well as supplying on demand versions of our content. In 2020, we launched the Virtual Plug and Play (VPP) product range. Using
our award winning Virtuals assets, with our Interactive RGS and the addition of a Virtuals Bet Management System, VPP gives our operators
a Virtuals Sportsbook in a box, with ease of integrations and operation. We account for our development costs as software development
costs and these are typically amortized over a two-year period.
Suppliers
Our
principal supply arrangements concern the supply of our terminal components, content provision and outsourced labor. We work closely
with our key suppliers to ensure a high level of quality of goods and services is obtained and have worked with many of these suppliers
for many years. We have achieved significant cost savings through centralization of purchases.
Customers
Our
customer base includes regulated operators of lotteries, licensed sports bookmakers, gaming and bingo halls, casinos, pubs, adult gaming
centers, holiday parks and regulated online operators. We typically implement design and content variations to customize their terminals
and player experiences. Our license agreements with customers for the provision of machines, content and Virtual Sports products include
provisions to protect our intellectual property rights in our games and other content.
Customer
Contracts – Gaming
Our
contracts in the Gaming segment involve supplying gaming terminals and licensing gaming software and games for the terminals. We supply
the terminals on an exclusive or non-exclusive basis for all terminals of a customer or for specific locations. Under these contracts,
we have general obligations to deliver, install, upgrade and service the terminals and software. The contracts may be terminated early
in various circumstances such as if we fail to meet performance targets in servicing the machines.
Under
some contracts, we receive an upfront fee for the provision of the terminals but more typically generate revenue as a percentage of income
generated on terminals. With our participation-driven business model, approximately 97% of service revenue (excluding VAT related income)
for our Gaming segment is recurring in nature and derived under long-term contracts that are typically between three and five years (although
may be shorter for contract extensions). Over the last three years, we have renewed a significant majority of contracts that were expiring.
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Customer
Contracts – Virtual Sports
Our
contracts in the Virtual Sports segment typically involve the supply of licenses to operators to make available, either via online or
retail channels, virtual sporting events such as darts, cricket, or basketball, and to enable end-users to place bets on these events.
These are typically one-time non-exclusive licenses specific to the virtual sporting event. We may agree to customize and brand the virtual
sporting events for the operator or to provide language variations of the event. The contracts may be terminated early in various circumstances,
including, for example, if the operator fails to pay an invoice within 60 days of receipt.
Our
Virtual Sports products are typically offered to operators on a participation basis, whereby we receive a portion of the gaming revenues
generated, plus an upfront software license fee. With our participation-driven business model, our Virtual Sports segment produces approximately
94% of total revenue on a recurring basis under long-term contracts that average four years when entered into and we have historically
had a 99% renewal rate over the last three years for contracts that expired.
Customer
Contracts – Interactive
Our
contracts in the Interactive segment vary but generally involve the provision of a limited, non-exclusive, non-transferable, revocable
license to operators to display certain slot and casino content on which online bets are placed or to make our games available for play
by end-users of an operator’s online gaming business operations. The contracts may be terminated early in various circumstances,
including material breach or inability to operate due to a change in regulatory status.
Our
Interactive products are typically offered to operators on a participation basis, whereby we receive a percentage of total amount of
stakes wagered or a percentage of net gaming revenue. With our participation-driven business model, approximately 99% of revenue for
our Interactive segment is recurring in nature and derived under long-term contracts that averaged three years from when we entered into
these contracts. Over the last three years, we have renewed approximately 100% of these contracts for those customers that have continued
to trade.
Customer
Contracts – Leisure
Our
contracts in the Leisure segment vary but generally involve (i) agreement whereby the operator or proprietor of certain leisure resorts
contributes premises and we provide, on an exclusive basis, gaming and amusement terminals as well as gaming software and games for the
machines provided, (ii) contracts to supply gaming terminals as well as gaming software and games for the terminals provided to leisure
operators on a non-exclusive basis, and (iii) rental agreements, which we enter into with certain motorway services providers, whereby
we rent unit space in motorway service areas and populate this space with our gaming terminals.
Depending
on the contract type, we have general obligations to deliver, install, upgrade and service the terminals and software provided, to acquire
licensing for the various prizes and toys, which may be used in the terminals, to keep the premises open for minimum operating hours
and not to use the premises for certain business. These contracts may be terminated early in various circumstances, including for material
breach or insolvency events.
Under
our leisure contracts, we typically generate revenue on a participation-basis by participating, typically as a function of gross revenue
from each terminal, in a percentage of volumes generated by these terminals. With our participation-driven or fixed weekly fee business
model, approximately 100% of service revenue for our Leisure segment is recurring in nature and derived under long-term contracts that
are usually between three and five years. Since the NTG Acquisition, within the Leisure segment we have successfully renewed or extended
all major contracts that have expired.
Operations
and Employees
Our
operations include game production, platform and hardware design, production, testing, and distribution; the maintenance, management,
and extension of our centralized network for product distribution and product monitoring; the delivery and, in certain circumstances,
maintenance of SBG terminals; gaming machine engineering, assembly, repair and storage; parts supply; change and release management;
remote operational services; problem management; business development; market account management; and general administration and management,
including Finance, Legal, People (Human Resources), Investor Relations, Marketing and Communications, Quality, Compliance and Information
Security.
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As
of December 31, 2021, we had approximately 1,600 employees, approximately 1,500 of which were full-time. Of those employees,
over 600 were dedicated to delivering our digital gaming platforms, content and manufacturing. Approximately 85 of our employees
were assigned to the ongoing operation of our network, through which we supply and maintain our products. Approximately 600 of
our employees were involved in UK field operations. Our management, sales and administration teams accounted for approximately 200
employees.
Intellectual
Property
Our
intellectual property consists principally of the propriety software we develop to operate our network and in the design and distribution
of our games. We depend upon agreements relating to trade secrets and proprietary know-how to protect our rights in this intellectual
property. We require all our employees, contractors and other collaborators to enter into agreements that prohibit the disclosure of
our confidential information to other parties. In addition, it is our policy to require our employees, contractors and other collaborators
who have access to proprietary and trade secret material to enter into agreements that require them to assign any and all intellectual
property rights to us that arise as a result of their work on our behalf. We also require our employees to review and acknowledge our
intellectual property policies regarding how we handle intellectual property. These agreements, acknowledgements and policies may not
provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or
disclosure in violation of these agreements, and may not be sufficient to secure for us the value in such developments that they are
designed to secure.
We
also hold certain patents, trademarks, design rights and other intellectual property rights in respect of our products, systems, web
domains, and other intellectual property. We also rely on certain products and technologies that we license from third parties. Proprietary
licenses typically limit our use of intellectual property to specific uses and for specific time periods.
The
terms of our intellectual property registrations vary based on the type of registration and the date and jurisdiction of filing or grant.
European and U.K trademark registration lasts for 10 years but can be renewed indefinitely. European and U.K design registration lasts
for five years but it can be renewed four times (giving a maximum total of 25 years of protection). European and U.K patents can only
be renewed for up to 20 years. U.S. design patents expires 15 years from the date of grant, and the term of utility patents generally
expires 20 years from the date of filing of the first non-provisional patent application in a family of patents. The actual protection
afforded by a patent depends upon the type of patent, the scope of its coverage and the availability of legal remedies in the applicable
country.
Competition
We
operate in a highly competitive industry, and in highly competitive business segments. We face competition from a number of worldwide
businesses, many of which have substantially greater financial resources and operating scale than we do. Such competition could adversely
affect our ability to win new contracts and sales and renew existing contracts. We operate in a period of intense price-based competition
in some key sectors, which could affect the profitability of the contracts and sales we do win. In certain sectors, our businesses also
face competition from suppliers, operators or licensees who offer products for internet gaming in illegal or unregulated sectors, but
are still able or permitted to supply products and compete with us in regulated sectors. These competitors often have substantially greater
financial resources and operating scale than we do. Some larger competitors hold long term contracts which control access points for
some of our products and this may mean we must contract with those competitors rather than directly with the customer to provide our
products. Our principal competitors include, among others, certain businesses that have vertically integrated gaming machine and
retail betting operations and businesses that operate in both regulated and unregulated sectors and thereby effectively subsidize their
regulated operations with unregulated operations.
Corporate
Information
We
maintain a website at www.inseinc.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
any amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act are available free of charge through
the Investors link on our website as soon as reasonably practical after they are electronically filed with or furnished to the SEC. Also
available on our website are our Code of Ethics, as well as the charters of the audit, compensation and nominating and corporate governance
committees of the Board of Directors. Information on our website is not incorporated into this report.
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