What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-16 compared with 2022-03-31 · 371 added, 399 removed, 557 unchanged (58% of the section changed)

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Statements at the start of this Annual Report on Form 10-K for the year ended December 31, 2022.

Operating Restrictions During 2021

in all of the major jurisdictions in which our land-based customers operate have now allowed the reopening of land-based venues, in certain

circumstances subject to restrictions.

April 12, 2021 and May 16, 2021, licensed betting offices in England and Wales were permitted to reopen with certain restrictions,

including a limitation on operating only two of four gaming machines per venue, limited dwell time of 15 minutes, a maximum of two

visits per day per patron and an 8:00pm curfew - these restrictions were removed on May 17, 2021.

Gaming machines in pubs, holiday parks,

motorway services, Scottish betting offices and adult gaming centers across the United Kingdom were permitted to reopen on May 17, 2021,

with social distancing restrictions in place.

On July 19, 2021, all social distancing restrictions were removed in England.

9, 2021, all remaining restrictions in the remainder of the United Kingdom were removed.

In November 2021, the United Kingdom

put in place further measures (that remained in place for the balance of 2021), but none of these measures resulted in the closure of

any premises in which our land-based customers operate.

Jurisdictions

August 20, 2021, Italy put in place restrictions such that only fully vaccinated people could enter our customers’ venues.

13, 2021, Greece put similar restrictions in place.

These restrictions continue to be in force in both Italy and Greece.

remains uncertain as to whether and when further restrictions or closures could be implemented in each jurisdiction and how long they

may last to the extent they were implemented.

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.

results of operations can fluctuate due to seasonal trends and other factors.

Sales of our gaming machines can vary quarter on quarter

due to both supply and demand factors.

Player activity for our holiday parks is generally higher in the second and third quarters of

the year, particularly during the summer months and slower during the first and fourth quarters of the year.

Historical seasonality has

been impacted by COVID-19 business disruptions and could continue to be impacted in future periods.

the twelve-month period ended December 31, 2021, all land-based operations were either subject to lockdown or had social distancing restriction

These social distancing measures continued throughout Greece and Italy until the second quarter of 2022, however, were no longer

in place in the United Kingdom from July 2021, and therefore year on year comparisons may not be meaningful due to the COVID-19 impacts.

generate revenue in four principal ways:

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Geographically,

a majority of our revenue is derived from, and majority of our non-current assets are attributable to our UK operations.

The remainder

of our revenue is derived from, and non-current assets attributable to, Greece and the rest of the world (including North America).

the twelve months ended December 31, 2021, we derived approximately 71% of our revenue from the UK, 9% from Greece and the remaining

20% across the rest of the world.

During the twelve months ended December 31, 2020, we derived approximately 76%, 9% and 15% of our revenue

from those regions, respectively.

the majority of our revenue is derived from, and the majority of our non-current assets are attributable to, our UK operations.

remainder of our revenue is derived from, and non-current assets attributable to, Greece and the rest of the world (including North

the twelve months ended December 31, 2022, we derived approximately 73% of our revenue from the UK (including customers headquartered

in the UK but whose revenue is generated globally), 8% from Greece, and the remaining 19% across the rest of the world.

During the twelve

months ended December 31, 2021, we derived approximately 71%, 9% and 20% of our revenue from those regions, respectively.

of December 31, 2022, our non-current assets (excluding goodwill) were attributable as follows:

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currency (USD).

During the twelve-month periods ended December 31, 2021 and December 31, 2020, the average GBP:USD rates were 1.37 and

1.29, respectively.

During the periods ended December 31, 2022 and December 31, 2021, the average GBP:USD rates were for the twelve-month

period 1.23 and 1.37, respectively.

following discussion and analysis of our results of operations has been organized in the following manner:

discussion and analysis of the Company’s results of operations for the twelve-month period ended December 31, 2021, compared

to the same period in 2020;

discussion and analysis of the results of operations for each of the Company’s segments (Gaming, Virtual Sports, Interactive

and Leisure) for the twelve-month period ended December 31, 2021, compared to the same period in 2020, including KPI analysis.

a discussion and analysis

of the Company’s results of operations for the twelve-month period ended December 31, 2022, compared to the same period in

a discussion and analysis

of the results of operations for each of the Company’s segments (Gaming, Virtual Sports, Interactive and Leisure) for the twelve-month

periods ended December 31, 2022, compared to the same period in 2021, including KPI analysis.

the discussion and analysis below, certain data may vary from the amounts presented in our consolidated financial statements due to rounding.

Year-on-year comparisons may not be meaningful due to COVID-19 impacts in both the current and prior periods, as noted above.

Year-on-year comparisons may not be meaningful due to COVID-19 impacts in prior period, as noted above.

all reported variances, refer to the overall company and segment tables shown below.

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(In millions)

December 31, 2021

December 31, 2020

Variance Attributable to Currency Movement

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Change in fair value of warrant liability

Profit on disposal of trade & assets

Other finance income (expense)

Loss from equity method investee

Total other income (expense), net

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Reported Revenue by Segment

the twelve months ended December 31, 2021, revenue on a functional currency (at constant rate) basis decreased by $2.9 million, or 1.4%.

revenue decreased by $33.4 million, due to $38.6 million of VAT-related revenue during 2020, excluding this, Gaming revenue would have

grown by $5.2m.

Virtual Sports, Interactive and Leisure grew by $1.3 million, $8.1 million, and $21.0 million, respectively.

VAT-related revenue for

the twelve-months ended December 31, 2022 was $1.0 million, and for the twelve-months ended December 31, 2021 was $3.1 million.

revenue” are payments from UK customers related to our contractual revenue share of their value-added tax rebate.

the twelve months ended December 31, 2022, revenue on a functional currency (at constant rate) basis increased by $109.8 million, or

the twelve-month period, Leisure and Gaming service revenue grew by $38.4 million and $30.4 million, respectively, predominately due

to COVID-19 related closures and restrictions in the first six months of the prior year.

Virtual Sports and Interactive grew by $25.7

million and $3.0 million, respectively, with $22.6 million of the Virtuals Sports increase from Online and $3.1 million from Retail.

of Sales, excluding depreciation and amortization

of sales, excluding depreciation and amortization, for the twelve months ended December 31, 2022, increased by $30.2 million, or 60%.

Of this increase, $2.1 million was attributable to cost of Service and $1.1 million was attributable to cost of Product.

The increase was driven by Cost of Service of $21.0 million due to COVID-19 related closures in the prior period, and a $9.2 million

increase in Cost of Product.

general and administrative expenses

general and administrative (“SG&A”) expenses for the twelve months ended December 31, 2022 increased by $32.0 million,

The increase was driven primarily by the return of furloughed staff for the majority of the period of $5.9 million, lower labor

capitalization of $1.4 million, and $1.2 million of additional cost following a settlement with the Italian Tax Authorities in respect

of an audit of the Italian Branch of Inspired Gaming (International) Limited for the period 2015-2017 in respect of the historic VAT

treatment of supplies.

This was partly offset by lower facility and marketing costs of $2.2 million.

the twelve months ended December 31, 2021, the Company recorded an expense of $13.0 million with respect to outstanding awards.

included $5.3 million related to awards made under the 2018 Plan, $6.6 million (including $1.4 million of upfront recognition) respectively

related to awards made under the 2021 Plan and $1.1 million related to the vesting of awards from the 2018 Plan.

The charge for stock-based

compensation for the twelve months ended December 31, 2020, was $4.8 million.

The expense included $4.5 million related to awards made

under the 2018 Plan, $0.2 million, related to costs from awards made under a 2016 long term incentive plan and $0.1 million related to

the vesting of awards in December 2020.

increase was driven primarily by the increase in staff cost of $29.2 million, due to the return of furloughed staff and return to full

pay for the current period as well as wage inflation particularly increases in the ‘UK’s national living wage’ of

6.6% (The National Living Wage is an obligatory minimum wage payable to workers in the United Kingdom).

the twelve months ended December 31, 2022, the Company recorded expenses of $10.8 million, compared to expenses of $13.0 million, for

the twelve months ended December 31, 2021.

All expenses related to outstanding awards, but the twelve months ended December 31, 2021,

included $1.4 million of shares that fully vested on the date of grant.

and integration related transaction expenses

and integration related transaction expenses decreased by $5.7 million, to $1.6 million.

All expenses were integration costs in relation

to the NTG acquisition.

the twelve months ended December 31, 2022, the Company recorded an expense of $0.5 million, compared to an expense of $1.6 million, for

the twelve months ended December 31, 2021.

in both years related to integration costs for the Company’s acquisition of both Gaming Technology Group of Novomatic

UK Ltd., and acquisition costs of Sportech Lotteries, LLC as well as costs relating to potential acquisitions.

and amortization

and amortization decreased for the twelve-month period by $8.6 million, driven primarily by a decrease in Gaming due to certain assets

being fully depreciated.

and amortization decreased for the twelve-month period by $5.2 million.

This was mostly driven by Gaming and Leisure with reductions

of $4.0 million and $1.0 million.

The decrease in Gaming was due to a decrease in software amortization as software becomes fully amortized

and machine depreciation as machines in Greece become fully depreciated.

operating income/(loss)

the twelve-month period, net operating loss was $0.6 million, a decrease of $5.7 million.

This was attributable primarily

to the decrease in Gaming revenue driven by the recognition of VAT-related income in 2020.

This was partially offset by increases in

revenue in each of our Interactive, Virtuals and Leisure segments, as well as the decrease in acquisition and integration related transaction

expenses, facility and marketing costs and depreciation and amortization.

expense, net increased by $11.2 million in the twelve-month period ended December 31, 2021.

This increase was due primarily to a $14.4

million write-off of previously capitalized debt fees following the refinancing in May 2021.

Interest on term indebtedness increased

by $1.8 million, but this was offset by currency movement of $3.2 million, reduction of revolver interest charges of $0.8 million and

lower amortization of capitalized debt fees of $0.9 million following the refinancing.

the twelve-month period, net operating income was $48.9 million, an increase of $54.9 million.

These increases were attributable primarily

to the increases in revenue driven by the COVID-19 closures and restrictions in 2021, as well as growth in online revenue and the decrease

in depreciation, partly offset by an increase in Cost of sales and SG&A expenses.

expense, net decreased by $15.7 million in the twelve-month period ended December 31, 2022, which was due to the refinancing in the previous

year with savings due to lower debt interest of $0.6 million, lower debt fee amortization of $0.9 million and the $14.1 million write-off

of debt fees relating to the previous debt.

in fair value of warrant liability

in fair value of warrant liability for the twelve-months ended December 31, 2021, resulted in a $0.9 million gain.

The gain related to

changes in liability accounting pursuant to the statement made by the Office of Chief Accountant of the SEC, released on April 12, 2021,

informing market participants that warrants issued by special purpose acquisition companies may require classification as a liability

of the entity measured at fair value, with changes in fair value each period reported in earnings.

The credit reflects the decrease in

the value of the warrants, driven by a decrease in the Company’s share price and a decrease in the time to warrant expiry, respectively.

The warrants expired on December 23, 2021.

the expiration of the warrants on December 23, 2021, the liability and the requirement to restate to fair value ceased to exist.

the twelve months ended December 31, 2021, the change in fair value of the warrant liability resulted in a gain of $0.9 million.

on disposal of business

the twelve-months ended December 31, 2022, gain on disposal of business was $0.9 million due to the sale of part of our Italian Gaming

operations (see Gaming key events for more information).

finance income

finance income for the twelve-months ended December 31, 2021, was $5.7 million.

This compares to a $4.7 million expense in the twelve-months

ended December 31, 2020, giving a year-on-year movement of $10.4 million.

Of this increase, $10.3 million related to the retranslation

of the principal balance of our senior debt facilities in place at that time.

finance income for the twelve months ended December 31, 2022, was a $1.1 million gain.

This compares to a $5.7 million gain for the twelve

months ended December 31, 2021.

The year-on-year movements relate solely to the retranslation of the principal balance of our senior

debt facilities in place in the previous year.

effective tax rate for the twelve months ended December 31, 2022 was (12.9%), compared to 4.2% for the twelve months ended December

We recorded a valuation allowance against all of our deferred tax assets

as of both December 31, 2022, and December 31, 2021.

We intend to continue maintaining a full valuation allowance on our deferred tax

assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

However, given our current

earnings and anticipated future earnings, we believe that there is a reasonable possibility that within the next 12 months, sufficient

positive evidence may become available to allow us to reach a conclusion that a significant portion of the valuation allowance will no

longer be needed.

Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to

income tax expense for the period the release is recorded.

However, the exact timing and amount of the valuation allowance release are

subject to change on the basis of the level of profitability that we are able to actually achieve.

Income/ (loss)

the twelve-month period, we had a net loss of $36.7 million, a decrease of $0.3 million, primarily due to the decrease

in net operating income ($5.7 million) and the increase in interest expense net ($11.2 million), partially offset by the decreases

in other finance expense of $10.4 million, change in fair value of warrant liability of $3.9 million and income tax expense of $1.9 million.

During the twelve-month period, net income was $22.3

million, an increase of $60.9 million year-over-year, primarily due to an increase in net operating income $54.9 million, a decrease in

interest expense, net $15.7 million, a decrease in other finance income ($4.5 million) and increase in income tax expense of ($5.3 million).

Results ( for the twelve months ended December 31, 2022, compared to the twelve months ended December 31, 2021)

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Total Gaming - Average installed base (# of terminals) (3)

Participation - Average installed base (# of terminals)

Participation

- Average installed base (# of terminals) (3)

Fixed Rental - Average installed base (# of terminals)

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Average selling price per terminal

all SBG terminals in which the company takes a participation revenue share across all territories

all days of the year, including the days during which the Gaming terminals were not operating due to COVID-19 closures.

Includes all SBG terminals

in which the Company takes a participation revenue share across all territories.

Includes all days of the

year, including the days during which the Gaming terminals were not operating due to COVID-19 closures.

Includes circa 2,500 of

lottery terminals (zero in the prior year) where the share is on handle instead of net win.

the table above:

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Gaming Recurring Revenue as a % of Total Gaming Revenue (excluding VAT-related revenue)

not reflect VAT-related revenue.

Gaming Revenue for the twelve-month period ended December 31, 2021, includes the £2.3 million for VAT-related revenue, which

is not reflected in Gaming Recurring Revenue for that period.

Excluding VAT-related revenue, Gaming Recurring Revenue was 70.9% of

Total Gaming Revenue for such period.

Does not reflect VAT-related

Total Gaming Revenue for

the twelve-month period ended December 31, 2022 and 2021, includes £0.8 million and £2.3 million, respectively of VAT-related

revenue, which is not reflected in Gaming Recurring Revenue for that period.

Excluding VAT-related revenue, Gaming Recurring Revenue

was 67% and 70%, respectively of Total Gaming Revenue for such period.

Note – For the twelve-months

ending December 31, 2022, there has been some recharacterization between Gaming Participation Revenue and Other Fixed fee revenue

to ensure consistency with similar items across the Group.

No changes to prior year.

the table above:

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(In millions)

Total Functional Currency %

Service Revenue:

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be slightly different from the average rate during the period depending on timing of transactions.

Gaming Customer Gross Win per unit per day (in our functional currency, GBP) for the period increased by £3.94, or 8.4%.

was due primarily to strong UK performance in the three-month period ending June 30, 2021, following the reopening of land-based venues

(as more fully described in “ COVID-19 Operating Restrictions During 2021 ” above).

Revenues from Greece also grew,

primarily driven by our release of new content in the market.

the period, our land-based customers’ venues in the UK LBO estate exhibited strong year-over-year growth which accounted for the

majority of the overall Gross Win per unit per day increase.

When venues were operational, revenue performance generally returned to

prior year levels in the Greek and Italian markets.

During the twelve-month period, land-based venues of our customers across the business

were in operation for approximately 65 percent of the time in each of 2020 and 2021.

overall participation rate for our installed base decreased from 6.5 percent in 2020 to 6.4 percent in 2021.

This was due primarily to

the COVID-19 restrictions in place in UK venues in 2020 compared to those in place during 2021, as UK share terms typically are lower

than the total blended Gaming average.

the period ended December 31, 2020, Inspired received VAT-related revenue of $42.2 million from two major UK customers.

During the period

ended December 31, 2021, Inspired received VAT-related revenue of $2.9 million from one major UK customer.

Receipts in each of 2020 and

2021 were recorded as revenue in our results.

2021, we sold 424 VLTs to a major UK customer resulting in revenue of $2.5 million.

also upgraded our UK Gaming estate with the installation of 418 “Flex” and 573 “Prismatic” terminals through

a combination of outright sales and lease agreements.

furthered its relationship with a major customer in the Dutch market with the sale and delivery of an additional 415 terminals during

also secured a three-year contract extension with a major UK LBO customer for the service of self-service betting terminals (SSBTs),

which are placed on a rental basis.

Inspired recognized hardware sales for an additional 150 SSBTs during the period, generating revenue

of $0.6 million.

recognized a 944 VLT hardware sale to a major Italian customer in 2021, generating revenue of $1.1 million.

This completed a 1,624 VLT

hardware sale.

As part of this transaction, Inspired expects to transition to a content supplier only model during 2022 resulting in

meaningful operating expense savings.

In conjunction with this transition, Inspired transferred a portion of its operation, including

customer contracts and “in country” staff to a major Italian customer at the end of 2021.

Inspired expects to continue to

provide platform and content services to the customer.

the North America market, Inspired sold an aggregate of 274 Valor™ terminals to a number of customers in Illinois which increased

cumulative North American unit sales to 703 since the December 2019 launch.

Land-based venues in Illinois experienced Covid-related shutdowns

during January 2021, which negatively impacted sales throughout the year.

As of February 2021, each of the eleven regions in Illinois

were no longer subject to COVID-related shutdowns.

the period, Inspired made its first sales to Western Canada Lottery Corporation (WCLC), our second jurisdiction in North America.

recorded the sale of 100 Valor™ terminals to WCLC during March 2021, generating revenue of $1.5 million.

December 31, 2021 Inspired completed the acquisition of a lottery business based in the Dominican Republic.

The business operates more

than 2,500 terminals in various locations.

In conjunction with this acquisition, Inspired secured a ten year extension to the agreement

to supply the lottery terminals which now runs until March 9, 2035.

Gaming Customer Gross Win per unit per day (in our functional currency, GBP) for the twelve-months ended December 31, 2022, increased

by £40.4, or 80%, to £91.0.

Much of the increase is driven by retail venues being closed during the first quarter of 2021

and part of the second quarter as a result of COVID-19 restrictions.

Another factor was our first year recognizing the newly

acquired Lottery business, which includes just under 2,500 lottery terminals (zero in the prior year) where the share is on handle instead

of net win and achieves Gross Win per unit per day figures above the average of the remaining Gaming sector.

overall participation rate for our installed base decreased from 6.4% for the twelve months ended December 31, 2021, to 5.7% in 2022.

The decrease was due mainly to the new Lottery business, which delivers high gross win values at lower participation terms than the average

of the remaining Gaming sector.

The Lottery business operates close to 2,500 terminals in various locations in the Dominican Republic

and has an agreement for the supply of these terminals until March 9, 2035.

The twelve months of trading delivered $5.1 million

of participation revenue.

rolled out new content across the UK LBO estate during the months of April and May 2022, which resulted in Gaming Customer Gross Win

per unit per day increasing by 4.8% from the second half of 2021 to the second half of 2022 (This comparison is used rather than full

year to help separate the impact of Covid closure in the first half of 2021).

the twelve-months ended December 31, 2022, Inspired recognized contractual performance bonuses of $2.0 million within UK

The bonus payments were triggered by strong year-on-year growth in Gaming Customer Gross Win per shop.

the end of the second quarter of 2022, Inspired secured a five-year contract extension for service and content fees with

one of its largest UK LBO customers.

Over 400 “Vantage” terminals will go on trial during the first quarter of 2023 with

the full roll out plan expected to commence in the fourth quarter of 2023, expecting to be complete by the end of first quarter of 2024.

the fourth quarter of 2022, Inspired’s two other major UK LBO customers signed up for new five-year and four-year contracts

respectively.

Both customers will refresh their estate with the new “Vantage” terminal on their own capital expenditure,

all installations are expected to be complete by the end of 2023.

the twelve-month period, Inspired upgraded its Non-LBO UK gaming estate with the installation of 460 “Flex” and 700 “Prismatic”

terminals through a combination of outright sales and lease agreements.

In the Dutch gaming market, Inspired continued its

strong relationship with a major customer, delivering outright sales of over 360 digital terminals, which included 100 in the third quarter

and 160 in the fourth quarter.

the UK Casino market, Inspired installed 183 “Sabre Hydra” terminals into venues which completed the full machine order of

over 200 machines with a major customer.

the North America market, Inspired sold 186 “Valor” terminals across a number of customers in Illinois.

The total sales since

launch in December 2019 are now over 880 terminals.

delivered its second machine order to Western Canada Lottery Corporation (WCLC), our second jurisdiction in North America.

Inspired completed

the outright sale of 820 “Valor Clamshell” terminals in the fourth quarter 2022 which represents the highest single machine

As part of the agreement, Inspired will take back the original 100 “Valor” terminals in the second quarter of 2023,

these terminals will either redeployed in North America or converted for another market.

2022, Inspired delivered the final 308 “Valor” terminals of a total 500-terminal award to OPAP (Greece) which include an

upfront license fee, this takes Inspired’s contracted volumes to 9,440.

Inspired rolled out new content during the third quarter,

which has resulted in double-digit growth in Gaming Customer Gross Win per unit per day when compared to the second quarter.

the Italian market, Inspired has transitioned to a content and platform supplier only model beginning January 1, 2022, driving significant

operating expense savings.

Inspired sold a large portion of its business to a major machine operator, including customer contracts and

“in country” staff.

Results of Operations

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Net operating Income (Loss)

Profit on disposal of trade & assets

Net Income (Loss)

Exchange Rate - $ to £

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changes in foreign currency exchange rates.

the twelve-month period, Gaming revenue was impacted by COVID-19 closures and restrictions which were imposed upon certain of our customers,

with land-based venues across the business being operational for approximately 65% of the time for each of the current and prior year

Our UK LBO customers operated at an average of 69% of the time across 2020 and 68% of the time in 2021 with our customers in

other UK business lines operating at an average of 62% of the time across both periods.

Our Italian and Greek operated at an average

of 54% of the time and 57% of the time in 2021 and 2020, respectively.

the twelve-month period, Gaming revenue decreased by $33.4 million, or 30.3%.

This was driven primarily by a $38.6 million decrease in

VAT-related revenue compared to the prior period.

Excluding the VAT-related revenue, Gaming revenue during the twelve-month period increased

by $5.2 million.

the twelve-month period, Gaming Service revenue (excluding VAT-related revenue) increased by $2.1 million.

This was driven by an increase

in the UK market (including LBOs and UK other) of $2.7 million primarily driven by the timing of COVID-19 closures, with closures and

restrictions coming during the first and fourth quarter of the year in 2021 versus the second and fourth quarter in 2020.

This was partially

offset by declines in Greece of $0.4 million and Rest of World of $0.2 million.

revenue increased in the twelve-month period by $3.0 million.

This increase was primarily driven by Product sales of $1.9 million of

Valor terminal sales in North America, $1.0 million in the UK markets, $0.7 million sales to Italy, partially offset by lower spare sales

in Belgium of $0.4 million.

the twelve-month period, Gaming revenue increased by $43.1 million, or 53%, this was driven by a $30.4 million increase in Service revenue

and $12.7 million increase in Product revenue.

increase in Gaming Service revenue was driven by $20.4 million from the UK market, $5.2 million from the Greek market and $0.9 million

from the Italian market, as all venues were open for the entire period compared to the prior period when the majority of the UK estate,

all Greece retail venues and all Italy retail venues were shut for some of the period and had restrictions for the remaining.

of the increase was due to the addition of the new Lotteries market and $0.4 million from the rest of the world.

This was offset by lower

VAT-related revenue of $2.1 million.

revenue increase was primarily driven by higher Product sales of $9.3 million in North America, $3.3 million of UK sales and $2.0 million

of higher spare sales, partly offset by lower sales of $2.1 million in Italy.

Operating Income

Income decreased during the twelve-month period by $27.1 million.

decrease in Operating Income in the twelve-month period was primarily due to the decrease of $37.5 million in VAT-related income compared

to the prior period and an increase of $1.8 million in SG&A as staff returned from furlough or to full salary for a higher proportion

This was partially offset by the decrease in Cost of Sales of $2.5 million and a $6.6 million decrease in depreciation

and amortization driven by a decrease in depreciation in the UK LBO and Greece markets.

Excluding the VAT-related Income, Operating Income

would have increased by $10.4 million in the period.

income increased for the twelve-month period by $23.4 million.

This increase was primarily due to the increase in revenues of $43.1 million

and decrease in depreciation of $4.0 million, primarily due to the decrease in software amortization as software became fully amortized

and due to a decrease in machine depreciation, as machines in Greece become fully depreciated.

This was partially offset by an increase

of Cost of sales of $18.1 million and increase of $5.6 million in SG&A, as staff returned from furlough or to full salary.

the twelve-month period, Net income increased by $24.3 million, from an income of $1.8 million to an income of $24.0 million.

due to the increase in Operating income and a $0.9 million profit from the disposal of trade and assets from the sale of part of the

Italian VLT operations (see Gaming key events for more information).

generate revenue from our Virtual Sports segment through the licensing of our products.

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Revenue (£m)” represents total revenue for the Virtual Sports segment, including recurring and upfront service revenue.

revenue is also divided between “Total Revenue (£m) – Retail,” which consists of revenue earned through

players wagering at Virtual Sports venues, “Total Revenue (£m) – Online Virtuals,” which consists of revenue

earned through players wagering on Virtual Sports online.

revenue is also divided between “Total Revenue (£m) – Retail,” which consists of revenue earned through players

wagering at Virtual Sports venues, “Total Revenue (£m) – Online Virtuals,” which consists of revenue earned through

players wagering on Virtual Sports online.

Sports, Recurring Revenue

forth below is a breakdown of our Virtual Sports recurring revenue, which consists of Retail Virtuals and Online Virtuals recurring

revenue as well as long-term license amortization.

See “Virtual Sports Segment Revenue” below for a discussion of Virtual

Sports Service revenue between the periods under review.

For the Twelve-Month

forth below is a breakdown of our Virtual Sports recurring revenue, which consists of Retail Virtuals and Online Virtuals recurring revenue

as well as long-term license amortization.

See “Virtual Sports Segment Revenue” below for a discussion of Virtual Sports

Service revenue between the periods under review.

For the Twelve-Month Period ended

(In £ millions)

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Sports, key events

the twelve months ended December 31, 2021, we launched our Virtual Sports suite of products with BetMGM in New Jersey and OPAP and Novibet

in Greece via our new proprietary Virtuals Plug & Play (VPP) platform.

Greece, US Basketball was deployed into the OPAP retail estate of approximately 3,500 venues.

Poland, we launched soccer and a mixed sports channel on 250 self serving betting terminals (SSBTs) with Fortuna, which complements our

over the counter offer that was previously available.

We also launched our Virtual Sports products on their Croatian retail estate

consisting of approximately 200 venues and expect this to extend to a further 1,200 SSBTs during 2022.

Ireland, we deployed our new Horses and Greyhounds products in the approximately 750 venue Paddy Power UK and Irish retail estates.

Italy, multiple Italian clients, including Snaitech, launched with our new products Penalty Shootout, Matchday Ultra and Marbles.

also made various upgrades to existing products.

We also deployed a suite of new content with Eurobet, part of Entain, across its retail

and online channels which include approximately 790 retail venues.

new 5-year contract for a global distribution of Virtual Sports was signed with Entain covering both retail and online channels

across multiple jurisdictions.

largest online customer, Bet365, launched four channels of our brand-new V-Play Soccer 3 product and we renewed our contract with Bet365

to include the provision of additional products including Baseball, U.S Horses and Women’s Soccer.

signed new contracts with Mozzarbet (Serbia), Betplay (Colombia), Novibet (Greece), Betshop (Greece), iBet and Fonbet to deliver Virtuals

via our new VPP (Virtual Plug and Play) platform, and with Scientific Games for distribution of Virtual Sports via its Open Arena platform.

also signed a new four-year contract with the Major League Baseball Players Alumni Association (MLBPAA) to allow Inspired to produce

a suite of betting and gaming products utilizing the brand and image of MLBPAA members.

the last twelve-month period, Inspired’s Virtual products were shortlisted for the following awards:

Gaming Awards London 2021, in the Retail Supplier of the Year category

Sports Supplier and Virtual Sports Innovation at the 2021 SBC Awards

B2B 2021 in the Lottery Supplier category

Sports Supplier and Casino Content Supplier at the 2022 EGR Nordics Awards.

the period, we launched Virtual Horse racing with the DC Lottery into their lottery locations.

contracts were signed with Scientific Games for Virtual Sports content to be sold to Netherlands Lottery (NLO), Goldbet covering the

provision of Virtual Sports into both their retail and online channels in Italy and a contract for Class 4 VLT games in Ladbrokes Belgium

signed a long-term extension to our contract with Betfred covering the provision of Virtual Sports into their retail LBO

estate in the UK.

In addition, we signed contract term extensions with Bet Victor, Sisal (Italy), Niké, spol.

s r.o (Slovakia)

and additional territories were added to our contract with Kaizen Gaming.

new Virtuals Plug and Play contract was signed with Morocco Lottery and launched, plus an extension to the retail contract.

launched Virtuals Women’s Soccer to coincide with UEFA Women’s Euro 2022.

We also launched Matchday multi-stream with one

of our biggest online customers and Matchday Ultra 2 and Soccer Ultra 2 with SNAI (Italy) retail and online, and optimized OPAP retail

schedule increasing the frequency of events and added product enhancements.

also signed a long-term extension to our contract with 49’s .

Sports, Results of Operations

18 unchanged sentences

the twelve-month period, revenue increased by $25.7 million, or 71%.

This increase was driven by a $4.2 million increase in Online Virtuals,

primarily driven by the growth of one of our major online customers, which was partially offset by a decline in recurring Retail

Virtuals of $2.0 million - driven by the implementation of COVID restrictions in the Italian and Greek markets, allowing only fully vaccinated

people to enter our venues, slower UK recovery after venues reopened, regulatory changes in China and Belgium which resulted in no revenue

for 2021 and a decline of $0.9 million from historical license fee amortization related to contracts which expired.

This increase was driven by $22.6 million increase in

Online Virtuals, primarily driven by the growth from our existing online customers along with expanding jurisdictions, as well as increases

in Retail Virtuals of $3.1 million, due to retail venues being open for the whole of the period compared to the prior period.

Sports operating income

Income increased by $0.3 million during the twelve-month period.

increase in the period was primarily due to the increase in revenue of $1.3 million, the decrease in Cost of Sales of $1.1 million and

the decrease in Depreciation and Amortization of $0.5 million.

This was partly offset by the increase in SG&A expenses of $2.3 million,

driven by the $1.2 million expense from the settlement with the Italian Tax Authorities, an increase in staff costs as staff returned

from furlough and to full pay and an increase in technology costs driven by the growth of Online Virtuals.

income increased by $25.3 million in the twelve-month period.

This increase was primarily due to the increase in revenue of $25.7 million

and a decrease in depreciation and amortization of $0.5 million, partly offset by an increase of $0.8 million of cost of sales.

generate revenue from our Interactive segment through the licensing of our products.

Typically, we receive fees in exchange for the licensing

of our products, typically on a long-term contract basis, on a participation basis.

Our participation contracts are typically structured

to pay us a percentage of net win (defined as net revenue to our operator customers, after deducting player winnings, free bets or plays

and other promotional costs and any relevant regulatory levies) from Interactive content placed on our customers’ websites.

we recognize revenue from these arrangements on a daily basis over the term of the contract.

of our products, on a long-term contract basis, on a participation basis.

Our participation contracts are usually structured to pay us

a percentage of net win (defined as net revenue to our operator customers, after deducting player winnings, free bets or plays and other

promotional costs and any relevant regulatory levies) from Interactive content placed on our customers’ websites.

Typically, we

recognize revenue from these arrangements on a daily basis over the term of the contract.

growth for our Interactive segment is principally driven by the number of customers we have, the number of live games, the net win performance

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Recurring Revenue

forth below is a breakdown of our Interactive recurring revenue which consists principally of Interactive participation revenue.

“Interactive Segment Revenue” below for a discussion of Interactive service revenue between the periods under review.

For the Twelve-Month

(In £ millions)

Interactive Recurring Revenue

Total Interactive Revenue

Total Recurring Revenue - Interactive

Interactive Recurring Revenue as a Percentage of Total Interactive Revenue

undertook 44 new brand launches during 2021, including with BetMGM in New Jersey and Michigan, Golden Nugget in Michigan, Gamesys, DraftKings

in Michigan, Rush Street Interactive in New Jersey and four brands under The Stars Group.

We also launched with Luckia, 888 and Leo Vegas

as our first operators in Spain.

the twelve-month period, we were shortlisted for 15 iGaming awards including:

Awards for “Casino / Slots Developer of the Year”

Intelligence Awards, “Best iGaming Supplier” and “Best Game of the Year”

Gaming Awards for “Digital Industry Supplier of the Year”

Operator Awards for “Game of the Year”

Slot Awards for Top Performing Online Slot

International

Gaming Awards for “Best Game of the Year” and “Best Slot Provider of the Year”

Gaming Awards Las Vegas, for “Digital Industry Supplier of the Year”

Europe Gaming Awards for “Online Casino Supplier of the Year” and “Online Slot Games”

North America Awards for “Casino Content Supplier”

Nordic Awards for “Casino Content Supplier”

Game Developer Awards for “Game Retro Style”

in Gaming Awards for “Leader of the Year” and “Innovator”

Most Influential Women in 2021, which Claire Osborne, our VP of Interactive, won

deployed 34 new games in 2021 across the estate including three seasonal titles, four operator-branded games and our own new branded

games, including “Space Invaders” and “Big Fishing Fortune”.

Interactive revenue in both years was recurring.

the period ended December 31, 2022, we undertook 49 new brand launches, 24 during the first half of 2022 and 25 during the second half

We expanded territories with Bet365, BetMGM and Gamesys in Ontario, along with DraftKings in New Jersey, Connecticut and Pennsylvania

and Rush Street Interactive in Michigan and Pennsylvania.

We also expanded into Pennsylvania with BetMGM.

deployed 34 new games in the year, 20 new games in the first half of the year, including Big Egyptian Fortune TM and Big Wheel Bonus TM and

14 new games in the second half, including Cops N Robbers Big Money TM and Santa Linking TM .

launched our first iLottery title with Pharaon Reaction TM in the first half of 2022 and followed up with a second title in

the second half of 2022.

Results of Operations

For the Twelve-Month

For the Twelve-Month Period ended

(In millions)

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of any changes in foreign currency exchange rates.

the twelve-month period, revenue increased by $8.1 million, primarily driven by recurring revenue growth due to the consistent launch

of new content across the estate, growth in the customer base in new, emerging and core markets and increased promotional activity through

twelve-month period, revenue increased by $3.0 million, primarily driven by recurring revenue growth due to the consistent launch of

new content across the estate, growth in the customer base in new, emerging and core markets and increased promotional activity through

exclusive deals with tier-one customers.

operating income

Income increased in the twelve-month period by $3.7 million.

increase was primarily due to the increase in revenue (detailed above), partially offset by an increase in cost of sales ($1.6 million)

driven by an increase in third party platform provider costs (in line with the revenue increase for the period) as well as an increase

in SG&A expenses ($1.8 million) driven by the investment in the segment to help drive the increasing revenues.

typically generate revenue from our Leisure segment through the rental of our gaming and amusement machines.

income for the twelve-month period increased by $0.5 million.

This increase was driven by the increase in revenue, partially offset by

a $1.9 million increase in SG&A expenses driven by the investment in the segment to help drive revenues and for staff returning from

furlough and to full pay.

typically generate revenue from our Leisure segment through the supply of our gaming and amusement machines.

We receive rental fees for

machines, typically on a long-term contract basis, on both a participation and fixed fee basis, with our newer digital pub machines typically

contracted on a fixed fee basis.

Our participation contracts are typically structured to pay us a percentage of net win (defined as net

revenue to our operator customers, after deducting player winnings, free bets or plays and any relevant regulatory levies) from gaming

terminals placed in our customers’ facilities.

Typically, we recognize revenue from these arrangements on a daily basis over the

term of the contract.

growth for our Leisure segment is principally driven by the number of customers we have, the number of gaming machines in operation,

the net win performance of the machines and the net win percentage that we receive pursuant to our contracts with our customers.

machines, typically on a long-term contract basis, on both a participation and fixed fee basis.

Our participation contracts are usually

structured to pay us a percentage of net win (defined as net revenue to our operator customers, after deducting player winnings, free

bets or plays, any relevant regulatory levies and minimum fixed incomes where applicable) from machines placed in our customers’

We generally recognize revenue from these arrangements on a daily basis over the term of the contract.

growth for our Leisure segment is principally driven by the number of customers we have, the number of machines in operation, the net

win performance of the machines and the net win percentage that we receive pursuant to our contracts with our customers.

Key Performance Indicators

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Inspired Other Revenue per Machine per week

Total Leisure Parks Revenue (Gaming and Non Gaming) (£’m)

Total Holiday Parks Revenue (Gaming and Non Gaming) (£’m)

Service Area machines

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of period installed base Gaming” and “Average installed base Gaming” represent the number of gaming machines installed

(excluding Leisure park machines) that are Category B and Category C only, from which there is participation or rental revenue at the

(excluding Holiday Park machines) that are Category B and Category C only, from which there is participation or rental revenue at the

end of the period or as an average over the period.

of period installed base Other” and “Average installed base Other” represent the number of all other category machines

installed (excluding Leisure park machines) from which there is participation or rental revenue at the end of the period or as an average

installed (excluding Holiday Park machines) from which there is participation or rental revenue at the end of the period or as an average

over the period.

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Leisure Recurring Revenue as a Percentage of Total Leisure Revenue

the twelve-month period ending December 31, 2021, all major components of the Leisure segment (Pubs, Holiday Parks, Motorway Service

Areas and Bingo Halls) remained closed due to the COVID-19 closures in the UK until May 17 th , 2021.

Venues subsequently reopened

with social distancing and other restrictions imposed due to COVID-19.

All significant COVID-19 restrictions were removed on July 19,

the removal of restrictions, further measures continued to result in frequent amendments to overseas travel policies in the UK.

The additional costs and COVID testing requirements added to the uncertainty of overseas travel, resulting in a strong end to the season

for our Leisure Parks business.

A significant number of locations remained open into November due to increased demand for out-of-season

holiday breaks.

MSA sector also continued to trade strongly due to increased travel within the UK and increasing volume of road transport.

the twelve-month period ended December 31, 2022 the holiday parks business delivered record sales and we successfully contracted another

Butlins site, which started earning income in January 2023 making Inspired the sole supplier of amusement

and gaming machines for Butlins for the next seven years, and we secured a new five-year deal with Haven.

the Pubs sector we successfully renewed our contract with Greene King for a further three years and increased our share of the estate

from 36% to 42%.

We signed a three-year extension with Mitchells and Butler and were reappointed as a supplier to Marstons for a further

We also divested our prize vend assets in the estate to allow focus on core gaming products with increased margins, which

is the reason for the decline in Other installed base year on year.

the year we have deployed several new titles across the pubs estate, including ‘Cops n Robbers Bank Buster’, Space Invaders,

‘Centurion’ ‘Gold Cash Freespins’ and “Party Time Pub Addition’ demonstrating our commitment to leveraging

Inspired’s successful game portfolio for the pub sector.

Results of Operations

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any changes in foreign currency exchange rates.

the twelve-month period, revenue increased by $21.0 million, or 48.3%, as our business benefitted from fewer COVID closures and social

distancing restrictions during the period than in the prior year.

revenue increased by $21.0 million, to $65.7 million.

This was driven primarily by leisure park reopenings and the removal of COVID-19

restrictions.

Product revenue remained in line with the prior period.

Operating Loss

Loss for the twelve-month period improved by $15.0 million, to a loss of $1.0 million.

This was primarily due to the increase in revenue

as venues reopened and COVID-19 restrictions were removed, as well as a reduction in depreciation and amortization of $1.9 million.

was partially offset by increases in cost of sales, of $5.2 million, and SG&A expenses, of $2.3 million, due to staff returning from

furlough and to full pay.

the twelve-month period, revenue increased by $38.0 million, or 55%, respectively, as our business benefitted from no COVID-19 closures

and fewer social distancing restrictions and growth in Service revenue.

revenue increased by $38.4 million, driven by all markets being open for the whole of the period, particularly Pubs ($14.1 million),

Holiday parks ($12.3 million), Motorway service areas ($8.1 million) and Bingo Halls ($2.3 million).

Operating Income/ (Loss)

income for the twelve-month period improved by $12.3 million, from a loss of $1.0 million to income of $10.0 million.

This was primarily

due to the increase in revenue as venues reopened and COVID-19 restrictions were removed, as well as a reduction in depreciation and

amortization of $1.0 million.

This was partially offset by increases in Cost of sales ($10.8 million) and SG&A expenses ($15.9 million),

due to staff returning from furlough and to full pay and in the later months from the increase in the UK national living wage.

Financial Measures

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to standard U.S.

financial measures.

There are no specific rules or regulations for defining and using non-GAAP financial measures, and as a result the

measures we use may not be comparable to measures used by other companies, even if they have similar labels.

The presentation of non-GAAP

financial information should not be considered in isolation from, or as a substitute for, or superior to, financial information prepared

and presented in accordance with U.S.

You should consider our non-GAAP financial measures in conjunction with our U.S.

GAAP financial

GAAP financial measures.

There are no specific rules or regulations for defining and using non-GAAP financial measures,

and as a result the measures we use may not be comparable to measures used by other companies, even if they have similar labels.

presentation of non-GAAP financial information should not be considered in isolation from, or as a substitute for, or superior to, financial

information prepared and presented in accordance with U.S.

You should consider our non-GAAP financial measures in conjunction with

GAAP financial measures.

define our non-GAAP financial measures as follows:

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Reconciliations

from net loss, as shown in our Consolidated Statements of Operations and Comprehensive Loss, to Adjusted EBITDA are shown below.

from net loss, as shown in our Consolidated Statements of Operations and Comprehensive Income (Loss), to Adjusted EBITDA are shown

Reconciliation

to Adjusted EBITDA by segment for the Twelve Months ended December 31, 2022

For the Twelve-Month Period ended

(In millions)

For the Twelve-Month Period ended December 31, 2021

Virtual Sports

4 unchanged sentences

Acquisition and integration related transaction expenses (2)

Refinancing of Company Debt (4)

Italian tax related costs relating to prior years (5)

Acquisition and integration related transaction expenses (2)

Litigation Settlement (3)

Stock-based compensation expense (4)

Stock-based compensation expense

Depreciation and amortization (4)

Depreciation and amortization

Interest expense net (4)

Change in fair value of warrant liability

Interest expense net

Profit on disposal of trade & assets (5)

Profit on disposal of trade & assets

Other finance expenses / (income) (4)

Other finance expenses / (income)

Income tax (4)

Adjusted EBITDA

2 unchanged sentences

Certain unallocated corporate function costs have not been allocated to the Company’s reportable operating segments because these

costs are not allocable and to do so would not be practical, these are shown in the Corporate category.

costs are not allocable and to do so would not be practical;

these are shown in the Corporate category.

Reconciliation

to Adjusted EBITDA by segment for the Twelve Months ended December 31, 2021

For the Twelve-Month Period ended Dec 31,2021

(In millions)

For the Twelve-Month Period ended

December 31, 2020

Virtual Sports

Net Income/ (loss)

2 unchanged sentences

Items outside the normal course of business:

Costs of group restructure (2)

Acquisition and integration related transaction expenses (2)

Impairment on interest in equity method investee(6)

Refinancing of Company Debt (7)

Italian tax related costs relating to prior years (8)

Stock-based compensation expense (4)

Stock-based compensation expense

Depreciation and amortization (4)

Depreciation and amortization

Interest expense net (4)

Interest expense net

Change in fair value of warrant liability (4)

Change in fair value of warrant liability

Other finance expenses / (income) (4)

Other finance expenses / (income)

Income tax (4)

Adjusted EBITDA

2 unchanged sentences

Certain unallocated corporate function costs have not been allocated to the Company’s reportable operating segments because these

costs are not allocable and to do so would not be practical, these are shown in the Corporate category.

costs are not allocable and to do so would not be practical;

these are shown in the Corporate category.

to Adjusted EBITDA reconciliation tables above:

5 unchanged sentences

These costs are included within Corporate Functions.

of group restructure” include redundancy costs, Payments In Lieu of Notice costs, any associated employer taxes and costs associated

with onerous property leases.

To qualify as being an adjusting item, costs must be part of a large restructuring project, which will

net save ongoing future costs.

These costs were primarily incurred in connection with the property consolidation.

and integration related transaction expenses, Stock-based compensation expense, Depreciation and amortization, Total other expense,

net and Income tax are as described above in the Results of Operations line item discussions.

Total expense, net includes interest

income, interest expense, change in fair value of earnout liability, change in fair value of derivative liability and other finance

May 2021, the Company refinanced its debt.

These are the one-off fees as a result of the refinance.

tax related costs relating to prior years invoicing” relate to a settlement with the Italian Tax Authorities in respect of

an audit of the Italian Branch of Inspired Gaming (International) Limited for the period 2015-2017 in respect of the historic VAT

treatment of supplies.

April 2020, the Company disposed of its 40% non-controlling equity interest in Innov8 Gaming Limited which resulted in the investment

of $0.7 million being written off.

and integration related transaction expenses, are as described above in the Results of Operations line item discussions.

For 2022 this includes a write-off of inventory items related to the integration of Gaming Technology Group of Novomatic UK Ltd.

Settlement” refers to full and final settlement of a contractual dispute relating to a Development Services and Management

compensation expense, Depreciation and amortization, Total other expense, net and Income tax are as described above in the Results

of Operations line item discussions.

Total expense, net includes interest income, interest expense, change in fair value of earnout

liability, change in fair value of derivative liability and other finance income.

on disposal of trade & assets” — In January 2022, the Company sold its Italian VLT business, including all terminals

and other assets, staff costs and facilities and contracts to a non-connected party, recognizing a profit on this disposal.

rate in the table is calculated by dividing the USD Adjusted EBITDA by the GBP Adjusted EBITDA, therefore this could be slightly

different from the average rate during the period depending on timing of transactions.

May 2021, the Company refinanced its debt.

These are outside of the write off of old debt fees recognized in the interest line.

tax related costs relating to prior years invoicing” relate to a settlement with the Italian Tax Authorities in respect of

an audit for the period 2015-2017 in respect of the historic VAT treatment of supplies.

and Capital Resources

Months ended December 31, 2022, compared to Twelve Months ended December 31, 2021

12 Months ended

Flow Summary - A Two Year Comparative

Twelve Months ended

(in millions)

Net profit/(loss)

Amortization of debt fees

Change in fair value of derivative and warrant liabilities and stock-based compensation expense

Impairment expense

Foreign currency translation on senior bank debt and cross currency swaps

Depreciation and amortization (incl RoU assets)

Other net cash (utilized)/generated by operating activities

Other net cash utilized by operating activities

Net cash provided by operating activities

Net cash used in investing activities

Net cash generated/(used) by financing activities

Net cash used/(generated) by financing activities

Effect of exchange rates on cash

Net increase in cash and cash equivalents

Net decrease in cash and cash equivalents

cash provided by operating activities

the twelve months ended December 31, 2022, net cash inflow provided by operating activities was $34.7 million, compared to a $6.2 million

inflow for the twelve months ended December 31, 2020, representing a $46.7 million decrease in cash generation.

This decrease was driven

primarily by interest timing differences resulting in interest payments of $30.8 million, compared to $13.3 million in the prior period,

and that the prior period included $41.9 million of VAT-related income, compared to $3.2 million in 2021.

of debt fees increased by $13.8 million, to $17.2 million, due to the write-off of capitalized debt fees totaling $14.4 million in May

2021 in conjunction with the Company’s refinancing.

in fair value of derivative and warrant liabilities and stock-based compensation expense increased by $4.7 million, from $8.9 million

inflow for the twelve months ended December 31, 2021, representing a $28.5 million increase in cash generation.

This increase was driven

primarily by trading levels through increases in our online businesses and the worldwide trading restrictions in the previous year resulting

from the COVID-19 pandemic.

of debt fees decreased by $15.4 million, to $1.8 million, due to the reduction in the level of capitalized debt fees after May 2021 following

the Company’s refinancing of its debt and the $14.4 million write off of the remaining debt fees from the previous financing arrangement.

in the fair value of derivative and warrant liabilities and stock-based compensation expense decreased by $2.1 million, from $13.6 million

to $11.5 million.

Of the increase, $8.2 million related to stock-based compensation expense and $0.6 million related to the movement

in cross-currency swaps.

Movements in the fair valuation of warrant liabilities decreased by $4.1 million.

currency translation on senior bank debt and cross currency swaps resulted in a loss of $4.6 million for the twelve months ended December

31, 2021, as a result of the movement in exchange rates during the period, compared to a $5.6 million gain for the twelve months ended

December 31, 2020.

and amortization decreased by $5.6 million, to $50.3 million, with reductions of $3.6 million in machine depreciation, $1.5 million in

amortization of intangible assets and $0.3 million in both non-machine deprecation and right of use asset amortization.

net cash utilized by operating activities decreased by $44.4 million, to a $33.6 million outflow following the impact of the COVID-19

Movements due to different timing of interest payments following the May 2021 refinancing have resulted in a $16.2 million

higher outflow in the twelve-months ended December 31, 2021.

A higher VAT accrual level at the start of 2021 resulted in a $11.0 million

net adverse movement in the twelve-months ended December 31, 2021.

Further adverse movements were also seen on income accrual levels

($8.4 million), long term receivables ($2.6 million), prepaid expenses and other current assets ($3.1 million), deferred revenue ($2.9

million) and payroll and corporation taxes ($3.6 million).

COVID-19 trading levels have resulted in adverse movements on trade receivables

($2.1 million) but these were offset by favorable movements on trade payables ($5.5 million).

A lower stock-based compensation expense ($2.2 million) and a lower gain relating to terminated cross currency swaps

($0.8 million) was partly offset by movements in the fair value of warrant liabilities in the prior year ($0.9 million).

the refinancing in May 2021, there has been no foreign currency translation on senior bank debt and cross currency swaps.

In the twelve

months ended December 31, 2021, the foreign currency translation on senior bank debt and cross currency swaps resulted in a loss of $4.6

million as a result of the movement in exchange rates during the period.

and amortization decreased by $10.3 million, to $40.0 million, with reductions of $4.4 million in machine depreciation, $5.0 million

in amortization of intangible assets and $1.0 million in amortization of right of use assets.

net cash utilized by operating activities increased by $7.3 million, to a $40.9 million outflow.

The relative movements between the

twelve months ended December 31, 2022 and the twelve months ended December 31, 2021 resulted in a $17.6 million outflow through

increased inventory holding as Inspired made the strategic decision to secure components and protect sales in a challenging global

supply chain market and a $7.0 million increase in receivables due to timing of sales.

These were offset by relative

favorable movements between the twelve months ended December 31, 2022 and the twelve months ended December 31, 2021 for prepayments

and accrued income of $10.2 million due to lower trading levels at the start of the previous year, interest accruals of $5.0 million

following the debt refinancing in May 2021 and trade payables and accruals of $1.9 million.

cash used in investing activities

cash used in investing activities increased by $8.0 million, to $37.9 million in the twelve-months ended December 31, 2021.

driven primarily by the $12.5 million acquisition of Sportech Lotteries LLC which was partially offset by lower spend on plant, property

and equipment ($3.8 million decrease compared to 2020) and capitalized software ($0.7 million decrease compared to 2020).

cash generated by financing activities

the twelve-months ended December 31, 2021, net cash generated by financing activities was $31.2 million, compared to a $8.2 million outflow

in the twelve-months ended December 31, 2020.

The inflow in the twelve-months ended December 31, 2021, related primarily to the proceeds

generated from warrant exercise ($30.5 million), the net movement from the May 2021 refinancing and finance lease spend of $0.6 million.

During the twelve-months ended December 31, 2020, changes in the level of revolver drawn provided a $4.2 million outflow as well as $3.1

million of debt fees incurred and $0.9 million of finance lease spend.

cash utilized in investing activities increased by $2.5 million, to $40.4 million in the twelve months ended December 31, 2022.

was driven by higher spend on plant, property and equipment (an $9.6 million increase compared to 2021) and capitalized software (a $4.8

million increase compared to 2021) due to spending in the previous year being low as a result of the pandemic.

These were largely offset

by the $12.5 million acquisition of Sportech Lotteries, LLC on December 31, 2021 for which the twelve months ended December 31, 2022

included the final payment of $0.6 million.

cash (used)/generated by financing activities

the twelve months ended December 31, 2022, net cash utilized by financing activities was $11.0 million, $10.4 million of which related

to the Company’s repurchase of its common shares under the Share Repurchase Program and $0.6 million of which related to finance

During the twelve months ended December 31, 2021, financing activities generated $31.2 million of cash following the receipt

of $30.5 million proceeds from the warrant exercise and a net $1.3 million from the refinancing in May 2021 after payment of associated

fees less a spend of $0.6 million on finance leases.

Needs and Sources

5 unchanged sentences

31, 2021, with a further $27.0 million of revolver facilities undrawn.

We had a working capital outflow of $33.6 million for the twelve-months

ended December 31, 2021, compared to an $10.9 million inflow for the twelve-months ended December 31, 2020.

We had a working capital outflow of $40.9 million for the twelve

months ended December 31, 2022, compared to a $33.6 million outflow for the twelve months ended December 31, 2021.

level of our working capital surplus or deficit varies with the level of machine production we are undertaking and our capitalization

as well as the seasonality evident in some of the businesses purchased as part of the NTG Acquisition.

In periods with minimal machine

volumes and capital spend, our working capital is typically more stable.

In periods where significant numbers of machines are being produced,

the levels of inventory and creditors are typically higher and there is a natural timing difference between converting the stock into

sellable or capitalized plant and settling payments to suppliers.

These factors, along with movements in trading activity levels which

have been seen during 2020 and 2021 following the COVID-19 closures, can result in significant working capital volatility.

of low activity, our working capital volatility is reduced.

Working capital is reviewed and managed with the aim of ensuring that current

liabilities are covered by the level of cash held and the expected level of short-term receipts.

as well as the seasonality evident in some of the businesses.

In periods with minimal machine volumes and capital spend, our working

capital is typically more stable.

In periods where significant numbers of machines are being produced, the levels of inventory and creditors

are typically higher and there is a natural timing difference between converting the stock into sellable or capitalized plant and settling

payments to suppliers.

These factors, along with movements in trading activity levels which were seen during 2021 following

the COVID-19 closures, can result in significant working capital volatility.

In periods of low activity, our working capital volatility

Working capital is reviewed and managed with the aim of ensuring that current liabilities are covered by the level of cash

held and the expected level of short-term receipts.

of our business operations require cash to be held within the machines.

1 unchanged sentence

cash and cash equivalents were held as operational floats within the machines.

At December 31, 2021, $2.7 million of

our $47.8 million of cash and cash equivalents were held as operational floats within the machines

currently believes that the Company’s cash balances on hand, cash flows expected to be generated from operations, and the ability

1 unchanged sentence

Term and Other Debt

Note 13 Long Term and Other Debt of the Financial Statements for detail of the debts held during 2020 and 2021.

(In millions)

December 31, 2022

December 31, 2021

Original principal senior debt

Cash interest accrued

Finance lease creditors

our debt facilities in place as of December 31, 2022, we are not subject to covenant testing on the Senior Secured Notes.

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2022 showed covenant compliance.

our debt facilities in place as of December 31, 2020, we were subject to covenant testing on the Senior Secured Notes.

The covenant testing

was set at the level of Inspired Entertainment Inc., the ultimate holding company, and consisted of a test on Leverage (Consolidated

Total Net Debt/Consolidated Pro Forma EBITDA) and a test on the level of capital expenditure.

These were measured under U.S.

was tested at quarterly intervals commencing for the period ending June 30, 2020, and capital expenditure was tested annually commencing

on December 31, 2019.

to reaching our first leverage covenant test on June 30, 2020, the covenants were reset as a direct result of the impact of COVID-19

on the global economy and subsequent loss of trading as a result of government lockdowns in many key trading countries around the world.

Formal agreement of the revised covenants was achieved on June 25, 2020.

were no breaches of the debt covenants in the periods ended December 31, 2022 or December 31, 2021.

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the assets of the Company and certain of the Company’s subsidiaries.

Board of Directors has authorized that the Company may use up to $25.0 million to repurchase Inspired shares of common stock, subject

to repurchases being effected on or before May 10, 2025.

Management has discretion as to whether to repurchase shares of the Company

and as of December 31, 2022, an aggregate of $10.5 million of our shares of common stock had been repurchased.

of December 31, 2022, our contractual obligations were as follows:

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Operating lease payments

Interest on non-utilisation fees

Interest on non-utilization fees

Sheet Arrangements

1 unchanged sentence

Securities and Exchange Commission.

Accounting Policies

preparation of our unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted

Accounting Policies and Accounting Estimates

preparation of our audited consolidated financial statements in conformity with accounting principles generally accepted

in the United States (“U.S.

19 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis