Inspired Entertainment (INSE) Q3 2026 earnings review
Inspired Entertainment margins hit a record, but Brazil cuts profit
Inspired Entertainment, a supplier of betting-shop machines and online casino games, lifted profit margins to a record high, but a regulatory shutdown in Brazil forced a cut to its annual plan. Sales from continuing businesses rose 4%, while dropping its British holiday parks lifted the EBITDA margin excluding one-offs to 46%. Because Brazil suspended online betting, chief executive Brooks Pierce cut the 2026 EBITDA forecast to $109–112 million, which by our math leaves fourth-quarter profit down 2% from a year ago.
| Sales from continuing businesses | +4% +9% before higher UK online gaming taxes |
|---|---|
| EBITDA margin, excluding one-offs | 46% 37% a year ago |
| Online gaming (Interactive) sales | $15.5M +3% from a year ago; −1% from last quarter |
| 2026 EBITDA outlook, excluding one-offs | Cut $4.5M new range: $109–112M (prior $112–118M) |
⚖️ Verdict: 🔴 Bearish
The story got worse because a new regulatory blow in Brazil pushed the company's 2027 growth targets back by a full year and triggered a second cut to its 2026 cash conversion goal. In addition, Interactive online gaming revenue slipped slightly from the second quarter even with the April British online tax hike already in the comparison. The brighter news: Britain set next April's physical machine tax increase at 20% to 25%, costing $2–3 million rather than the much larger hike investors feared.
The question now is whether online gaming growth will bounce back once the British tax hike passes its one-year mark next April, or if demand is slowing on its own. If the tax is the only drag, fourth-quarter online sales should climb on holiday games and US share gains; if player growth is fading, sequential revenue will stay sluggish. Fourth-quarter Interactive revenue and a first-quarter Brazilian regulatory ruling will tell.
🐂 Bull Case
Selling Holiday Parks Lifted Profit Margins to 46%
Inspired Entertainment supplies slot machines, virtual sports and online casino games to betting operators. Chief executive Brooks Pierce is "building a higher-margin, more digital business" after selling its British holiday parks in November 2025 and overhauling how it runs pub gaming machines. Those changes cut the workforce by a third and removed about 30% of reported sales, so total revenue fell 29% from a year ago to $61.4 million.
- Sales from continuing businesses: up 4% from a year ago, or 9% before higher British online taxes
- Cost of providing services: 12.1% of revenue, down 13.5 percentage points from 25.5% a year ago by our math
- Overhead and selling costs: 40.2% of revenue, up 3.5 percentage points on the smaller sales base
- EBITDA margin excluding one-offs: 45.9%, up 8.5 percentage points from a year ago
Because the holiday parks carried heavy staffing and property costs, dropping them lifted operating profit 6% to $10.3 million even on lower revenue. In Retail Solutions, which supplies gaming machines to betting shops and pubs, sales per machine rose across its three largest British betting-shop customers after operators closed weaker locations. In Greece, where the group is replacing older terminals with its new slant cabinet, machine performance hit multi-year highs with almost one-third of its Greek machines still to be upgraded.
What to watch: first-quarter 2027 revenue and operating profit. That is the first full quarter after the November 2025 holiday-park sale drops out of the year-ago comparison, so it will show whether margins keep rising without the benefit of the divestiture.
US Online Gaming and New Lottery Deals Expand
Outside Britain and Brazil, the supplier is signing major North American operators and taking share in online casino games. Gross gaming revenue — the money players lose on its games before operator splits — rose more than 30% from a year ago in the United States and over 50% so far this year in Italy, Pierce said. Rush Street Interactive named the group its second-largest game supplier in October, and its new Bee Reel Games studio sent its first title for regulatory testing.
In Virtual Sports, which streams computer-generated horse, car and soccer matches for round-the-clock betting, the group launched on the Massachusetts Lottery's online platform in the fourth quarter. It also went live with five virtual sports on FanDuel, the largest US online sportsbook, and took its first machine order for the expanding Chicago video-terminal market. What to watch: first-quarter 2027 Virtual Sports revenue, once the FanDuel rollout finishes its six-week testing phase. A return to growth would show North American deals can replace lost South American sales.
UK Machine Tax Hike Is Smaller Than Feared
After Britain nearly doubled its tax on online casino games in April 2026, investors worried the autumn budget would hit physical betting-shop machines just as hard. Instead, the British government raised the Machine Games Duty from 20% to 25% starting in April 2027, rather than the 20-percentage-point jump Pierce noted had been discussed in the press. "The increase in machine games duty from 20% to 25%, effective April 2027, is disappointing but manageable," Pierce said.
Because the company shares machine revenue with betting-shop operators after taxes, the higher rate still trims its take. Pierce stated that "based on our estimates, we believe that it's going to be an impact to us of between $2 million and $3 million starting in April" of 2027, which management plans to offset through game design and contract adjustments. What to watch: Retail Solutions EBITDA excluding one-offs in the second quarter of 2027, when the 25% duty takes effect. Holding segment profit near $18 million would confirm that new games and higher per-machine play absorbed the tax.
🐻 Bear Case
Brazil's Online Betting Shutdown Cuts the 2026 Plan
Inspired spent the past year adding operators in Brazil to revive Virtual Sports, its computer-generated sports betting segment. Instead, Brazil suspended regulated online betting, which cut third-quarter results and forced management to lower its full-year profit plan. "Brazil’s unexpected shutdown of regulated online betting and gaming affects a business representing approximately 5% of our total revenue," Pierce said. Virtual Sports sales fell 9% from a year ago to $8.5 million, and its EBITDA excluding one-offs dropped 14% to $5.7 million.
- Estimated Brazil loss: about $3 million of revenue per quarter, or $1 million of monthly profit before cost cuts
- 2026 EBITDA outlook excluding one-offs: cut to $109–112 million from $112–118 million
- 2027 EBITDA outlook: pushed out by a year from the prior $130 million middle target
Because Virtual Sports carries a 67% profit margin, losing Brazil hits the bottom line directly. Executive chairman Lorne Weil said the shutdown "shifts the growth curve one year to the right" because the company must replace that lost profit before growing again. "We expect 2027 will be up only modestly from 2026 because, again, we're assuming that Brazil will stay shut down," Weil told analysts.
What to watch: a Brazilian regulatory ruling on whether sports and virtual betting can resume without online casinos, which Pierce expects by the first quarter of 2027. If the ban holds, fourth-quarter Virtual Sports revenue will show the full quarterly drop before cost cuts take effect.
Online Gaming Growth Slowed to 3% After UK Tax Hike
Interactive, the segment that supplies online slot games to betting websites, is the engine of the group's digital shift. Management emphasized that Interactive EBITDA excluding one-offs would have risen 20% from a year ago without April's British online gaming tax hike from 21% to 40%, and noted that October was its highest month on record. However, actual reported Interactive revenue grew only 3% from a year ago to $15.5 million, and segment profit fell 5% to $10.2 million.
More tellingly, Interactive revenue shrank 1.3% from the second quarter's $15.7 million by our math, even though both quarters carried the exact same 40% British tax rate. Last quarter, management disclosed that British online gross gaming revenue jumped 40% from a year ago; this quarter, it gave no figure for British player growth and blamed an August dip on the World Cup. Because sequential growth stalled with the tax already in the base, fast growth in the US and Italy is barely offsetting slower British net revenue.
What to watch: fourth-quarter Interactive revenue against last year's $17.8 million seasonal peak. If fourth-quarter sales do not step up noticeably from $15.5 million after the record October Halloween lineup, online growth is slowing for reasons beyond the British tax step.
Interest Costs Eat Almost All Operating Profit
Inspired carries $340 million of total debt and finance leases, and interest payments consume nearly everything the business earns. In the third quarter, net interest expense of $9.6 million took 93% of its $10.3 million operating profit by our math, leaving a net loss of $0.1 million. While senior secured net debt fell to 2.8 times trailing EBITDA and management hopes to refinance after prepayment penalties expire in June 2027, cash generation fell short of plan again.
Because of the Brazil shutdown, management cut its 2026 target for the share of EBITDA that turns into free cash flow to "slightly below the Company’s 20% target" — the second cut this year from its original 20%–25% plan. Weil told analysts the group will buy back stock as fast as it ever has, but the cash flow statement shows it spent $5.2 million on buybacks in the first nine months, unchanged from June, meaning zero shares were bought in the third quarter. What to watch: fourth-quarter share repurchases and debt paydown.
Risks this quarter didn't answer
Two standing governance and customer risks received no update in the third-quarter earnings release or on the conference call.
- Customer concentration: two customers accounted for 21% of first-half revenue after the holiday-park sale shrank the revenue base; the quarterly filing's footnotes will show whether concentration rose further and whether shop closures continued.
- Finance leadership turnover: former finance chief James Richardson left in May 2026 after 16 months and was replaced internally by Craig Wilson; Wilson did not speak on the call, leaving internal-control questions following the 2023–2024 accounting restatement unanswered until the annual report.
💲 Other KPIs
Deferred revenue — upfront license and game-development fees customers have paid before the service is delivered — fell for a third straight quarter. By our math, the combined current and long-term balance dropped by $1.7 million from the second quarter and is down 4.8% from a year ago, as older contracts amortize faster than new upfront payments arrive.
Inventory climbed 38.4% from $18.5 million at the end of 2025 and rose from $17.7 million in the second quarter, tying up $7.4 million of cash over the first nine months. The gaming supplier is building terminals ahead of fourth-quarter and 2027 deliveries for Genting Casino, the Dominican Republic lottery and Greek replacements.
Cash spent on property, equipment, software and customer contracts fell 40.8% from $42.2 million in the first nine months of 2025, dropping to 13.9% of revenue by our math. Selling the capital-heavy holiday parks cut physical equipment purchases from $24.6 million to $6.2 million, while software development rose to $9.1 million.
The weighted average share count fell 1.4% from 29.1 million a year ago and declined from 29.3 million in the second quarter. That reduction reflects the 707,225 shares the group bought back during the first half of 2026 under its $25 million repurchase authorization.
🔮 Guidance
Cut. The middle of the full-year plan moved down $4.5 million to $110.5 million, about 1% below 2025, after holding at $115 million for three quarters. By our math, that leaves $30.1–33.1 million for the fourth quarter (up 12% from the third quarter at the middle, down 2% from a year ago). Management also pushed its $130 million target for 2027 out to 2028 because of the Brazil ban.
Cut. Management expects full-year cash conversion to finish just under 20% of EBITDA excluding one-offs, down from 22% over the first nine months ($17.6 million of free cash flow). It is the second reduction to this year's cash goal, which started at 20%–25% before being trimmed to 20%+ last quarter, as lost fourth-quarter profit in Brazil weighs on year-end cash.
❓ Key Questions
How fast did UK online gaming grow in Q3?
Last quarter management disclosed that British online gross gaming revenue jumped 40% from a year ago, proving player demand offset the tax hike. This quarter it gave no British growth rate while total Interactive revenue fell slightly from the second quarter.
Why did buybacks stop in the third quarter?
Executive chairman Lorne Weil said the group's overwhelming emphasis is on share repurchases, yet nine-month buybacks stayed at $5.2 million, meaning zero shares were bought in the third quarter despite positive free cash flow.
How much can cost cuts reduce the Brazil hit?
Management said the Brazil online betting shutdown costs about $1 million of profit per month and that it will cut local expenses if the ban sticks, but did not say how much of that monthly loss can be removed.
When will the Greek machine upgrades start delivering?
Almost one-third of Inspired's Greek gaming machines still await upgrading to the new slant cabinet, and management previously expected to begin delivering an order of over 2,000 replacement units in the fourth quarter.