Inspired’s Comparable Growth Faces a Changing UK Tax Test

Inspired’s reported group revenue fell 29% to US$61.4 million for the three months ended 30 September. Its comparable growth measure excludes the divested UK holiday parks operation and adjusts for changes to the pubs business model.

That approximately 4% figure is a group comparison. It should not be presented as a standalone measure of UK revenue growth.

Both periods cover the three months ended 30 September. Adjusted EBITDA is the company’s non-GAAP earnings measure.

The comparisons matter. Adjusted EBITDA increased sequentially from the second quarter but remained approximately 13% below the previous year’s third quarter. A higher margin therefore coexisted with a smaller absolute earnings figure.

Inspired reported an adjusted EBITDA margin of 46%, describing it as a quarterly record excluding periods containing a UK VAT rebate. That qualification belongs alongside the record claim.

Our view is that the comparable growth provides useful evidence of resilience within the retained business. The reported figures remain necessary for understanding the size and earnings of the group shareholders actually own.

Inspired’s current structure follows a sequence of expansion and subsequent reshaping.

In October 2019, it acquired Novomatic UK’s Gaming Technology Group, adding businesses associated with machines and services across British leisure and gaming venues. That transaction strengthened its position in the physical estate through which customers encounter its products.

On 7 November 2025, Inspired completed the sale of its UK holiday parks business and associated leisure assets to GENDA for approximately £18.6 million in cash.

The disposal explains part of the reduction in reported revenue a year later. It also means that a comparison between the two groups must account for activities that contributed in 2025 and had departed by the 2026 quarter.

The continuing company still combines Retail Solutions, Virtual Sports and Interactive. Retail remains its largest revenue segment. The shift towards digital activity is therefore taking place within a mixed business whose customers include physical venues as well as online operators.

That mix gives Inspired several routes to growth. It also requires separate judgements about machine investment, venue trading and the performance of online content.

The distinction between supplier and operator becomes clearer in Inspired’s quarterly filing.

The filing describes Retail Solutions participation income calculated from customer gross win after gaming taxes, using the contractual share. Its typical Interactive arrangements also use a participation model, with deductions including winnings, promotional costs and relevant regulatory levies.

Higher tax can consequently reduce the amount available to share. The fact that a supplier sells technology or games does not remove its exposure to the economics of the gambling activity beneath them.

There are opportunities to offset that pressure. Better-performing content, additional customers and stronger activity can increase the revenue pool or the supplier’s contribution to it. The commercial result depends on both the contractual basis and what happens to demand.

Chief executive Brooks Pierce said UK volume growth had helped offset the higher gaming tax in Interactive. The segment’s reported 3% revenue increase covers its wider business, including other countries.

This is evidence of mitigation. Its durability depends on the supplier continuing to produce content that operators and customers want, while maintaining viable commercial terms.

Fixed rental and service arrangements create other exposures. An agreed fee can provide some near-term predictability, while the customer’s ability to keep venues open, refresh equipment and renew contracts still matters.

Our report on Betfred’s withdrawal from a proposed Classics sponsorship renewal examined how pressure on an operator’s wider costs can influence spending elsewhere. Suppliers need to consider that customer response alongside the immediate effect of tax deductions.

The government plans to bring more machines into the 25% Machine Games Duty category from 1 April 2027. The published proposal covers machines with a maximum stake above £1 or a maximum prize above £100, changing the thresholds for the existing higher-rate category.

It is a targeted change, rather than a new 25% rate applied indiscriminately to every gaming machine. It is also separate from Remote Gaming Duty, whose 40% rate already applies in the current tax year.

A second announced reform concerns liability. From 1 April 2028, the government intends suppliers to account for Machine Games Duty on supplier-owned machines operated under profit-sharing arrangements.

Premises operators would retain liability where they own the machine outright, or use a fixed rental or lease arrangement and control the takings. The consultation on implementation runs until 20 January 2027.

For suppliers with arrangements inside the proposed scope, that would change their legal responsibilities. It could also affect record keeping, settlement processes and the timing of cash movements.

Moving responsibility for an existing duty does not, by itself, establish an additional tax charge of the same size. The commercial effect will depend on the final rules and the contracts between suppliers and premises operators.

This is why the distinction between direct liability and economic exposure deserves attention. Inspired already describes participation income calculated after gaming taxes. A future change in who accounts for the duty needs to be assessed against that existing arrangement.

The clearest limit to the quarter’s reassuring narrative came from Brazil.

Management reduced its full-year adjusted EBITDA outlook to US$109 million to US$112 million, from US$112 million to US$118 million, primarily reflecting the suspension of regulated online betting and gaming. It put the affected Brazilian business at approximately 5% of total revenue.

A business spread across several markets can withstand a local interruption more readily than one dependent on that market alone. It still loses the contribution from activity that can no longer take place, and replacement revenue takes time to develop.

Management acknowledged limited opportunities to offset the lost contribution in the near term. That is an important qualification to the broader opportunities in its pipeline.

Our earlier examination of Brazil’s betting ban and licence uncertainty considered the implications for operators that had invested under the regulatory framework. Inspired illustrates how the consequences can also reach businesses supplying those operators.

The supplier’s risk is connected to access to the market. Successful games and useful technology still need customers able to offer them legally.

The results received a relatively favourable reading from Macquarie, which described them as better than feared, according to Gambling Insider’s coverage. That is an assessment against expectations, rather than a reversal of the guidance cut.

For the business itself, cash generation offers a more durable test.

The first nine months produced US$45.7 million of operating cash flow. After US$25 million of net investment outflows and US$3.1 million of finance lease repayments, approximately US$17.6 million remained under the company’s free cash flow definition. Inspired reported year-to-date conversion of approximately 22% of adjusted EBITDA.

That conversion relates to the first nine months of 2026.

Management now expects full-year conversion slightly below its 20% target following the loss of Brazil’s fourth-quarter contribution. The achieved year-to-date figure and the revised annual expectation describe different periods.

Our view is that the mix shift should be judged partly by how much cash remains after the expenditure needed to sustain it. Developing games, maintaining software and supporting an installed machine base continue to require investment.

The adjusted margin is useful evidence about operating performance. The cash left after those commitments shows more directly what is available for debt reduction, further investment or returns to shareholders.

Inspired’s comparable growth is a credible sign that a supplier can adapt to tax pressure through product performance and its business mix. The results also show how closely that adaptation remains connected to customers, contracts and market access.

We would judge the next stage through continued performance in the retained business, cash generation after investment and a clear explanation of exposure to the forthcoming machine-duty changes.

The company has made its portfolio more selective. It now needs to demonstrate that the remaining activities can sustain their contribution as customer economics and legal responsibilities evolve. That is the more consequential test behind an encouraging comparable growth figure.