UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2020~~March 31, 2021

☐[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period _______________

Commission File Number: 001-36689

INSPIRED ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)

Delaware		47-1025534
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

250 West 57^th Street, Suite 415
New York, NY		10107
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (646) 565-3861

(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒[X] No ☐[ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒[X] No ☐[ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐[ ]		Accelerated filer ☐[ ]
Non-accelerated filer ☒[X]		Smaller reporting company ☒[X]
		Emerging growth company ☐[ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐[ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐[ ] No ☒[X]

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, par value $0.0001 per share		INSE		The NASDAQ Stock Market LLC

As of ~~November 10, 2020,~~May 12, 2021, there were ~~23,029,492~~23,218,323 shares of the Company’s common stock issued and outstanding.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

	Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Statements of Operations and Comprehensive Loss	2

	Condensed Consolidated Statement of Stockholders’ Deficit	3

	Condensed Consolidated Statements of Cash Flows	45

	Notes to Condensed Consolidated Financial Statements	56

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	5542

ITEM 4.	CONTROLS AND PROCEDURES	5643

PART II.	OTHER INFORMATION	5743

ITEM 1.	LEGAL PROCEEDINGS	5743

ITEM 1A.	RISK FACTORS	5743

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	5743

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	5743

ITEM 4.	MINE SAFETY DISCLOSURES	5743

ITEM 5.	OTHER INFORMATION	5743

ITEM 6.	EXHIBITS	5844

SIGNATURES		5945

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
	(Unaudited)						(Unaudited)
Assets
Cash	$	43.9		$	29.1		$	41.2		$	47.1
Accounts receivable, net		28.9			24.2			21.0			27.5
Inventory, net		16.9			18.8			17.1			17.6
Prepaid expenses and other current assets		21.3			23.2			13.3			16.8
Total current assets		111.0			95.3			92.6			109.0

Property and equipment, net		65.8			79.3			61.8			65.5
Software development costs, net		40.9			46.9			39.7			42.4
Other acquired intangible assets subject to amortization, net		7.5			9.9			7.5			7.7
Goodwill		79.3			80.9			84.7			83.7
Right of use asset		12.2			9.4			12.0			12.5
Investment		—			0.6
Other assets		3.6			5.1			2.7			3.3
Total assets	$	320.3		$	327.4		$	301.0		$	324.1

Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable	$	25.6		$	22.2		$	21.1		$	17.9
Accrued expenses		35.0			31.2			32.1			31.4
Corporate tax and other current taxes payable		11.4			6.6			5.8			14.4
Deferred revenue, current		11.0			10.1			9.3			11.5
Operating lease liabilities		3.2			3.6			3.6			3.6
Other current liabilities		1.0			1.9			2.4			2.5
Current portion of long-term debt		12.9			2.6
Warrant liability								16.0			13.0
Current portion of finance lease liabilities		0.6			0.1			0.9			0.6
Total current liabilities		100.7			78.3			91.2			94.9

Long-term debt		281.6			270.5			295.9			297.5
Long term finance lease liabilities		0.3			—
Finance lease liabilities, net of current portion								1.1			0.2
Deferred revenue, net of current portion		12.7			17.7			9.2			11.4
Derivative liability		2.0			—			1.1			1.7
Operating lease liabilities		9.0			5.2			8.6			9.2
Other long-term liabilities		9.0			5.2			6.3			10.9
Total liabilities		415.3			376.9			413.4			425.8

Commitments and contingencies

Stockholders’ deficit
Preferred stock; $0.0001 par value; 1,000,000 shares authorized		—			—			—			—
Series A Junior Participating Preferred stock; $0.0001 par value; 1,000,000 shares authorized; 49,000 shares designated; no shares issued and outstanding at September 30, 2020 and December 31, 2019		—			—
Common stock; $0.0001 par value; 49,000,000 shares authorized; 22,405,376 shares and 22,230,768 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		—			—
Common stock; $0.0001 par value; 49,000,000 shares authorized; 22,594,207 shares and 22,430,475 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively								—			—
Additional paid in capital		349.7			346.6			326.0			324.6
Accumulated other comprehensive income		38.1			45.1			35.7			31.1
Accumulated deficit		(482.8	)		(441.2	)		(474.1	)		(457.4	)
Total stockholders’ deficit		(95.0	)		(49.5	)		(112.4	)		(101.7	)
Total liabilities and stockholders’ deficit	$	320.3		$	327.4		$	301.0		$	324.1

The accompanying notes are an integral part of these condensed consolidated financial statements.

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(in millions, except share and per share data)

(Unaudited)

Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019
Revenue:
Service $ 56.4 $ 23.8 $ 114.8 $ 80.2
Hardware 3.7 2.8 13.2 6.8
Total revenue 60.1 26.6 128.0 87.0

Cost of sales, excluding depreciation and amortization:
Cost of service (11.2 ) (4.7 ) (20.9 ) (15.4 )
Cost of hardware (2.5 ) (2.3 ) (9.8 ) (4.9 )
Selling, general and administrative expenses (21.9 ) (11.5 ) (61.6 ) (39.0 )
Stock-based compensation expense (1.1 ) (2.2 ) (3.1 ) (6.6 )
Acquisition and integration related transaction expenses (1.2 ) (3.3 ) (5.6 ) (4.9 )
Depreciation and amortization (14.0 ) (8.3 ) (39.9 ) (27.1 )
Net operating income (loss) 8.2 (5.7 ) (12.9 ) (10.9 )

Other (expense) income
Interest income 0.1 — 0.5 0.1
Interest expense (8.3 ) (4.4 ) (22.5 ) (12.9 )
Change in fair value of earnout liability — — — (2.3 )
Change in fair value of derivative liability — 2.9 — 2.8
Loss from equity method investee — — (0.5 ) —
Other finance income (expense) 0.3 (1.2 ) (5.9 ) (0.9 )

Total other expense, net (7.9 ) (2.7 ) (28.4 ) (13.2 )

Income (loss) before income taxes 0.3 (8.4 ) (41.3 ) (24.1 )
Income tax expense — (0.1 ) (0.3 ) (0.1 )
Net income (loss) 0.3 (8.5 ) (41.6 ) (24.2 )

Other comprehensive loss:
Foreign currency translation (loss) gain (4.2 ) 0.5 (0.7 ) 0.7
Change in fair value of hedging instrument (0.4 ) 3.1 (2.7 ) 3.4
Reclassification of loss (gain) on hedging instrument to comprehensive income 0.3 (3.4 ) 1.0 (4.5 )
Actuarial losses on pension plan (0.3 ) (3.1 ) (4.6 ) (4.2 )
Other comprehensive loss (4.6 ) (2.9 ) (7.0 ) (4.6 )

Comprehensive loss $ (4.3 ) $ (11.4 ) $ (48.6 ) $ (28.8 )

Net income (loss) per common share – basic and diluted $ 0.01 $ (0.38 ) $ (1.86 ) $ (1.11 )

Weighted average number of shares outstanding during the period – basic 22,405,376 22,193,955 22,396,652 21,790,075
Weighted average number of shares outstanding during the period – diluted 23,344,402 22,193,955 22,396,652 21,790,075

	Three Months Ended March 31,
	2021			2020
Revenue:
Service	$	17.1		$	42.8
Product sales		5.7			9.5
Total revenue		22.8			52.3

Cost of sales, excluding depreciation and amortization:
Cost of service		(2.1	)		(8.5	)
Cost of product sales		(3.2	)		(6.2	)
Selling, general and administrative expenses		(15.2	)		(29.0	)
Acquisition and integration related transaction expenses		(1.4	)		(3.2	)
Depreciation and amortization		(13.1	)		(12.6	)
Net operating loss		(12.2	)		(7.2	)

Other expense
Interest income		—			0.3
Interest expense		(8.6	)		(6.1	)
Change in fair value of warrant liability		(3.0	)		7.6
Loss from equity method investee		—			(0.5	)
Other finance income (expense)		6.4			(3.7	)

Total other expense, net		(5.2	)		(2.4	)

Loss before income taxes		(17.4	)		(9.6	)
Income tax benefit (expense)		0.7			(0.2	)
Net loss		(16.7	)		(9.8	)

Other comprehensive income/(loss):
Foreign currency translation (loss) gain		(1.1	)		3.1
Change in fair value of hedging instrument		0.6			(1.5	)
Reclassification of gain on hedging instrument to comprehensive income		0.5			0.4
Actuarial gains on pension plan		4.6			4.4
Other comprehensive income/(loss)		4.6			6.4

Comprehensive loss	$	(12.1	)	$	(3.4	)

Net loss per common share – basic and diluted	$	(0.74	)	$	(0.44	)

Weighted average number of shares outstanding during the period – basic and diluted		22,584,609			22,384,268
Supplemental disclosure of stock-based compensation expense
Stock-based compensation included in:
Selling, general and administrative expenses	$	(1.4	)	$	(1.0	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

~~FOR THE PERIOD JANUARY 1, 2020 TO SEPTEMBER 30, 2020~~THREE MONTHS ENDED MARCH 31, 2021

(in millions, except share data)

(Unaudited)

	Common stock				Additional paid in		Accumulated other comprehensive			Accumulated			Total stockholders’			Common stock				Additional paid in		Accumulated other comprehensive			Accumulated			Total stockholders’
	Shares		Amount		capital		income			deficit			deficit			Shares		Amount		capital		income			deficit			deficit

Balance as of January 1, 2020		22,230,768	$	—	$	346.6	$	45.1		$	(441.2	)	$	(49.5	)
Balance as of December 31, 2020																	22,430,475		—		324.6		31.1			(457.4	)		(101.7	)
Foreign currency translation adjustments		—		—		—		3.1			—			3.1			—		—		—		(1.1	)		—			(1.1	)
Actuarial gains on pension plan		—		—		—		4.4			—			4.4			—		—		—		4.6			—			4.6
Change in fair value of hedging instrument		—		—		—		(1.5	)		—			(1.5	)		—		—		—		0.6			—			0.6
Reclassification of loss on hedging instrument to comprehensive income		—		—		—		0.4			—			0.4			—		—		—		0.5			—			0.5
Shares issued in net settlement of RSUs		166,959		—		—		—			—			—			163,732		—		—		—			—			—
Stock-based compensation expense		—		—		1.0		—			—			1.0			—		—		1.4		—			—			1.4
Net loss		—		—		—		—			(17.4	)		(17.4	)		—		—		—		—			(16.7	)		(16.7	)
Balance as of March 31, 2020		22,397,727	$	—	$	347.6	$	51.5		$	(458.6	)	$	(59.5	)
Foreign currency translation adjustments		—		—		—		0.4			—			0.4
Actuarial loss on pension plan		—		—		—		(8.7	)		—			(8.7	)
Change in fair value of hedging instrument		—		—		—		(0.8	)		—			(0.8	)
Reclassification of loss on hedging instrument to comprehensive income		—		—		—		0.3			—			0.3
Stock-based compensation expense – ESPP		7,649		—		—		—			—			—
Stock-based compensation expense		—		—		1.0		—			—			1.0
Net loss		—		—		—		—			(24.5	)		(24.5	)
Balance as of June 30, 2020		22,405,376	$	—	$	348.6	$	42.7		$	(483.1	)	$	(91.8	)
Foreign currency translation adjustments		—		—		—		(4.2	)		—			(4.2	)
Actuarial loss on pension plan		—		—		—		(0.3	)		—			(0.3	)
Change in fair value of hedging instrument		—		—		—		(0.4	)		—			(0.4	)
Reclassification of loss on hedging instrument to comprehensive income		—		—		—		0.3			—			0.3
Stock-based compensation expense		—		—		1.1		—			—			1.1
Net income		—		—		—		—			0.3			0.3
Balance as of September 30, 2020		22,405,376	$	—	$	349.7	$	38.1		$	(482.8	)	$	(95.0	)
Balance as of March 31, 2021																	22,594,207	$	—	$	326.0	$	35.7		$	(474.1	)	$	(112.4	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

~~FOR THE PERIOD JANUARY 1, 2019 TO SEPTEMBER 30, 2019~~THREE MONTHS ENDED MARCH 31, 2020

(in millions, except share data)

(Unaudited)

	Common stock				Additional paid in		Accumulated other comprehensive			Accumulated			Total stockholders’			Common stock				Additional paid in		Accumulated other comprehensive			Accumulated			Total stockholders’
	Shares		Amount		capital		income			deficit			deficit			Shares		Amount		capital		income			deficit			deficit

Balance as of January 1, 2019		20,870,397	$	—	$	329.9	$	55.9		$	(404.2	)	$	(18.4	)
Balance as of December 31, 2019																	22,230,768		—		320.6		45.1			(425.0	)		(59.3	)
Foreign currency translation adjustments		—		—		—		(0.5	)		—			(0.5			—		—		—		3.1			—			3.1
Actuarial gains on pension plan		—		—		—		0.9			—			0.9			—		—		—		4.4			—			4.4
Change in fair value of hedging instrument		—		—		—		(2.1	)		—			(2.1	)		—		—		—		(1.5	)		—			(1.5	)
Reclassification of loss on hedging instrument to comprehensive income		—		—		—		1.5			—			1.5			—		—		—		0.4			—			0.4
Shares issued in earnout		1,323,558		—		8.6		—			—			8.6	)
Shares issued in net settlement of RSUs																	166,959		—		—		—			—			—
Stock-based compensation expense		—		—		1.7		—			—			1.7			—		—		1.0		—			—			1.0
Net loss		—		—		—		—			(5.0	)		(5.0	)		—		—		—		—			(9.8	)		(9.8	)
Balance as of March 31, 2019		22,193,955	$	—	$	340.2	$	55.7		$	(409.2	)	$	(13.3	)
Foreign currency translation adjustments		—		—		—		0.7			—			0.7
Actuarial losses on pension plan		—		—		—		(2.0	)		—			(2.0	)
Change in fair value of hedging instrument		—		—		—		2.4			—			2.4
Reclassification of gain on hedging instrument to comprehensive income		—		—		—		(2.6	)		—			(2.6	)
Conversion of awards previously classified as derivatives		—		—		0.8		—			—			0.8
Stock-based compensation expense		—		—		2.1		—			—			2.1
Net loss		—		—				—			(10.7	)		(10.7	)
Balance as of June 30, 2019		22,193,955	$	—	$	343.1	$	54.2		$	(419.9	)	$	(22.6	)
Foreign currency translation adjustments		—		—		—		0.5			—			0.5
Actuarial losses on pension plan		—		—		—		(3.1	)		—			(3.1	)
Change in fair value of hedging instrument		—		—		—		3.1			—			3.1
Reclassification of gain on hedging instrument to comprehensive income		—		—		—		(3.4	)		—			(3.4	)
Stock-based compensation expense		—		—		2.2		—			—			2.2
Net loss		—		—				—			(8.5	)		(8.5	)
Balance as of September 30, 2019		22,193,955	$	—	$	345.3	$	51.3		$	(428.4	)	$	(31.8	)
Balance as of March 31, 2020																	22,397,727	$	—	$	321.6	$	51.5		$	(434.8	)	$	(61.7	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

	Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2021			2020
Cash flows from operating activities:
Net loss	$	(41.6	)	$	(24.2	)	$	(16.7	)	$	(9.8	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		39.9			27.1			13.1			12.6
Amortization of right of use asset		2.7			—			0.6			0.9
Stock-based compensation expense		3.1			6.6			1.4			1.0
Change in fair value of derivative liability		—			(2.8	)
Change in fair value of earnout liability		—			2.3
Impairment of investment in equity method investee		0.7			—			—			0.7
Foreign currency translation on senior bank debt		6.6			4.8			(6.1	)		3.9
Foreign currency translation on cross currency swaps		—			(3.8	)
Change in fair value of warrant liability								3.0			(7.6	)
Reclassification of loss on hedging instrument to comprehensive income		0.7			—			0.2			0.4
Non-cash interest expense relating to senior debt		2.2			1.4			1.3			0.5
Changes in assets and liabilities:
Accounts receivable		(5.8	)		1.0			6.7			(10.0	)
Inventory		1.1			(0.3	)		0.7			1.3
Prepaid expenses and other assets		2.8			4.4			4.3			5.7
Corporate tax and other current taxes payable		5.2			(1.8	)		(8.6	)		0.1
Accounts payable		4.1			8.5			3.0			4.9
Deferred revenues and customer prepayment		(4.7	)		(4.3	)		(4.5	)		(0.5	)
Accrued expenses		16.3			3.3			0.4			7.5
Operating lease liabilities		(2.3	)		—			(0.7	)		(0.8	)
Other long-term liabilities		0.5			0.2			(0.1	)		0.3
Net cash provided by operating activities		31.5			22.4
Net cash (used in) provided by operating activities								(2.0	)		11.1

Cash flows from investing activities:
Purchases of property and equipment		(11.9	)		(4.9	)		(2.0	)		(8.4	)
Disposals of property and equipment		—			—			—			1.0
Purchases of capital software		(10.1	)		(11.6	)		(2.8	)		(3.6	)
Net cash used in investing activities		(22.0	)		(16.5	)		(4.8	)		(11.0	)

Cash flows from financing activities:
Proceeds from issuance of revolver		9.2			9.3			—			22.3
Debt fees incurred		(3.1	)		—
Repayments of finance leases		(0.7	)		(0.3	)		(0.2	)		(0.1	)
Net cash provided by financing activities		5.4			9.0
Net cash (used in) provided by financing activities								(0.2	)		22.2

Effect of exchange rate changes on cash		(0.1	)		(1.3	)		1.1			(2.9	)
Net increase in cash		14.8			13.6
Net (decrease) increase in cash								(5.9	)		19.4
Cash, beginning of period		29.1			16.0			47.1			29.1
Cash, end of period	$	43.9		$	29.6		$	41.2		$	48.5

Supplemental cash flow disclosures
Cash paid during the period for interest	$	0.6		$	12.5		$	6.8		$	0.1
Cash paid during the period for income taxes	$	0.1		$	—		$	—		$	—
Cash paid during the period for operating leases	$	2.4		$	—		$	0.3		$	1.0

Supplemental disclosure of non-cash investing and financing activities
Supplemental disclosure of noncash investing and financing activities
Property and equipment acquired through finance lease							$	1.3		$	—
Lease liabilities arising from obtaining right of use assets	$	(6.1	)	$	—		$	—		$	(0.9	)
Adjustment to goodwill arising from adjustment to fair value of assets acquired	$	(0.2	)	$	—		$	—		$	(0.3	)
Capitalized interest payments	$	10.6		$	—
Property and equipment acquired through finance lease	$	1.5		$	—
Assets arising from asset retirement obligations	$	0.8		$	—
Additional paid in capital reclassified from derivative liability	$	—		$	0.8

The accompanying notes are an integral part of these condensed consolidated financial statements.

1.	Nature of Operations, Management’s Plans and Summary of Significant Accounting Policies

Company Description and Nature of Operations

~~Inspired Entertainment, Inc. (the “Company,” “we,” “our,” and “us”) is~~We are a global ~~business-to-business~~ gaming technology company, supplying ~~Server Based Gaming (“SBG”)~~content, platform and ~~Virtual Sports (which includes Interactive) systems~~other products and services to online and land-based regulated lottery, betting and gaming operators worldwide through ~~an “omni-channel”~~a broad range of distribution ~~strategy.~~channels, predominantly on a business-to-business basis. We provide end-to-end digital gaming solutions (i) on our own proprietary and secure network, which accommodates a wide range of devices, including land-based gaming machine terminals, mobile devices ~~such as smartphones and tablets~~ and online computer applications and ~~social applications.~~(ii) through third party networks. Our content and other products can be found through the consumer-facing portals of our interactive customers and, through our land-based customers, in licensed betting offices, adult gaming centers, pubs, bingo halls, ~~and through our Acquired Businesses (defined herein), in UK pubs,~~ airports, motorway service areas and leisure parks.

Management Liquidity Plans

As of ~~September 30, 2020,~~March 31, 2021, the Company’s cash on hand was ~~$43.9~~$41.2 million, and the Company had working capital of ~~$10.3~~$1.4 million. The Company recorded net losses of ~~$41.6~~$16.4 million and ~~$24.2~~$10.2 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Net losses include ~~non-cash stock-based compensation of $3.1 million and $6.6 million for the nine months ended September 30, 2020 and 2019, respectively, and~~ excess depreciation and amortization over capital expenditure of ~~$17.9~~$8.3 million and ~~$10.6~~$0.6 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2021, and 2020, respectively, non-cash stock-based compensation of $1.4 million and ~~2019,~~$1.0 million for the three months ended March 31, 2021 and 2020, respectively, and non-cash changes in fair value of warrant liability of $3.0 million loss and $7.6 million income for the three months ended March 31, 2021 and 2020, respectively. Historically, the Company has generally had positive cash flows from operating activities and has relied on a combination of cash flows provided by operations and the incurrence of debt and/or the refinancing of existing debt to fund its obligations. Cash flows used in operations amounted to $2.0 million and $11.1 million provided by operations ~~amounted to $31.5 million and $22.4 million~~ for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively.~~respectively with the change year on year due to land based operations being subject to full lockdown restrictions for the three months ended March 31, 2021. Working capital of ~~$10.3~~$1.4 million includes a non-cash settled item of ~~$11.0~~$9.3 million of deferred ~~income.~~income, and an item not expected to be cash settled of $16.0 million comprising a warrant liability. Management currently believes that, ~~subject to~~absent any unanticipated ~~coronavirus (“COVID-19”)~~COVID-19 impact (see below), the Company’s cash balances on hand, cash flows expected to be generated from operations, ability to control and defer capital projects and amounts available from the Company’s external borrowings will be sufficient to fund the Company’s net cash requirements through ~~February~~May 2022.

Our business ~~is being, and will continue~~continues to be adversely affected by the ~~expanding~~continuing nature of the COVID-19 pandemic. ~~There~~Due to the fluidity with which the situation continues to develop, we are ~~continuing periods~~not able at this time to estimate the extent of ~~increases or spikes in~~ the ~~number~~impact of the COVID-19 ~~cases in areas in which we operate, which have seen the government re-impose restrictions~~pandemic on our financial results and operations ~~up to and including complete or partial closures of retail venues. Further, the~~in future periods. The long-term impacts of the pandemic on the global economy, trade relations, consumer behavior, our industry and our business operations remain ~~unknown.~~unknown, however the vaccination programme in the UK began on December 8, 2020, and as of the date of this report, whilst the majority of retail venues in Italy and Greece are closed, the UK is poised to re-open retail venues from May 17, 2021, and the vaccination programme in the UK remains on schedule.

As a result of the significant reductions in revenue and other changes to our business, at least in the short term (which also affects other companies in our industry), 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.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the years ended December 31, ~~2019~~2020 and ~~2018.~~2019. The financial information as of December 31, ~~2019~~2020 is derived from the audited consolidated financial statements presented in the Company’s Annual Report on Form 10-K filed with the SEC on March ~~30, 2020.~~29, 2021 (“the Original 10-K”), and as amended and filed on Form 10-K/A with the SEC on May 10, 2021 (“the 10-K/A”). The interim results for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2020~~2021 or for any future interim periods.

Restatement of Previously Reported Information

On May 7, 2021, after consultation with Marcum LLP, the Company’s independent registered public accounting firm, the Company’s management and the audit committee of the Company’s Board of Directors concluded that it was appropriate to restate the Company’s previously issued audited financial statements as of December 31, 2020, and December 31, 2019, and for the years ended December 31, 2020, and December 31, 2019, which were included in the Original 10-K.

The restatement related to the SEC’s public statement 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 effect of the restatement on previously reported information for the three months ended March 31, 2020 is as follows:

	As Previously Reported			Adjustments			As Restated
	(in millions, except per share data)
Consolidated Statements of Stockholders’ Deficit as of January 1, 2020
Additional paid in capital	$	346.6		$	(26.0	)	$	320.6
Accumulated deficit		(441.2	)		16.2			(425.0	)

Consolidated Statement of Operations and Comprehensive Loss for the three months ended March 31, 2020
Change in fair value of warrant liability	$	—		$	7.6		$	7.6
Net loss		(17.4	)		7.6			(9.8	)
Comprehensive loss		(11.0	)		7.6			(3.4	)

Net loss per common share – basic and diluted	$	(0.78	)	$	0.34		$	(0.44	)

Consolidated Statements of Stockholders’ Deficit as of March 31, 2020
Additional paid in capital	$	347.6		$	(26.0	)	$	321.6
Accumulated deficit		(458.6	)		23.8			(434.8	)

Recharacterization of Previously Reported Information

In prior years, and up to and including the interim period nine months ended September 30, 2020, the Company operated its business along three operating segments: Server Based Gaming, Virtual Sports (which included Interactive) and Acquired Businesses. During the period subsequent to September 30, 2020, the Company completed the process of changing its internal structure, which has been ongoing since the NTG Acquisition, and as a result changed the composition of its operating segments. The Company now operates its business along four operating segments, which are segregated on the basis of revenue stream: Gaming, Virtual Sports, Interactive and Leisure. The Company believes this method of segment reporting reflects both the way its business segments are now managed and the way the performance of each segment is now evaluated.

As part of the recharacterization exercise, certain items of Revenue, Cost of Sales and Selling, General and Administrative Expenses have been recharacterized to ensure consistency with similar items across the Group. The revenue recharacterizations are to ensure spares and similar items are reflected with other items of hardware (Product Sales). The resulting impact on previously reported information for the three months ended March 31, 2020 is as follows: Service Revenue, previously reported $43.2 million, now $42.8 million; Product Sales Revenue, previously reported $9.1 million, now $9.5 million; Cost of Service, previously reported $6.6 million, now $8.5 million; Cost of Product Sales, previously reported $7.0 million, now $6.2 million; Selling, General and Administrative Expenses (excluding Stock-based compensation), previously reported $29.1 million, now $28.0 million. The recharacterization has no impact on the previously reported Net Operating Loss, Net Loss or Net Comprehensive Loss for the three months ended March 31, 2020.

Inventory

Inventory consists of the following:

	September 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
	(in millions)				(in millions)
Component parts	$	12.6	$	12.7	$	11.5	$	12.1
Work in progress		2.0		2.1		1.8		1.7
Finished goods		2.3		4.0		3.8		3.8
Total inventories	$	16.9	$	18.8	$	17.1	$	17.6

Component parts include parts for gaming terminals. Included in ~~inventory~~component parts are reserves for excess and slow-moving inventory of ~~$1.9~~$1.8 million and ~~$0.9~~$1.5 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. Our finished goods inventory primarily consists of gaming terminals which are ready for sale.

3.	~~Accrued Expenses~~

~~Accrued expenses consist of the following:~~

September 30,
2020 December 31,
2019
(in millions)
Direct costs of sales $ 4.5 $ 5.5
Payroll and related costs 4.5 4.4
Accrued corporate cost expenses 1.0 1.6
Interest payable - cash 12.7 5.5
Asset retirement obligations 1.4 2.0
Acquisition consideration 1.7 2.5
Contract termination costs 0.4 0.1
Other creditors 8.8 9.6
$ 35.0 $ 31.2

4.	Contract Liabilities and Other Disclosures

The following table summarizes contract related balances:

Accounts
Receivable Unbilled
Accounts
Receivable Deferred
Income Customer
Prepayments
and Deposits
(in millions)
At September 30, 2020 $ 30.7 $ 12.9 $ (23.7 ) $ (0.5 )
At December 31, 2019 $ 24.5 $ 15.3 $ (27.8 ) $ (1.9 )
At December 31, 2018 $ 11.5 $ 11.0 $ (32.0 ) $ (3.6 )

	Accounts Receivable		Unbilled Accounts Receivable		Deferred Income			Customer Prepayments and Deposits
	(in millions)
At March 31, 2021	$	23.8	$	5.0	$	(18.5	)	$	(1.8	)
At December 31, 2020	$	30.4	$	8.2	$	(22.9	)	$	(1.6	)
At December 31, 2019	$	24.5	$	15.3	$	(27.8	)	$	(1.9	)

Revenue recognized that was included in the deferred income balance at the beginning of the period amounted to ~~$8.3~~$3.9 million and ~~$9.6~~$10.3 million for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and the year ended December 31, ~~2019,~~2020, respectively.

5.	~~Long Term and Other Debt~~

On September 27, 2019, the Company, together with certain direct and indirect wholly-owned subsidiaries, entered into a Senior Facilities Agreement (the “SFA”) with Lucid Agency Services Limited, as agent, Nomura International plc and Macquarie Corporate Holdings Pty Limited (UK Branch) as arrangers and/or bookrunners and each lender party thereto (the “Lenders”), pursuant to which the Lenders agreed to provide, subject to certain conditions, two tranches of senior secured term loans (the “Term Loans”), in an original principal amount of £140.0 million ($180.9 million) and €90.0 million ($105.5 million), respectively, and a secured revolving facility loan in an original principal amount of £20.0 million ($25.8 million).

On June 25, 2020, the Company, certain direct and indirect subsidiaries of the Company, Lucid Agency Services Limited, and Lucid Trustee Services Limited as security agent under the SFA and the Intercreditor Agreement (as defined in the SFA), entered into an Amendment and Restatement Agreement (the “ARA”) with respect to the SFA.

The ARA amends the SFA by, among other things, (i) capitalizing certain interest payments that fell due on April 1, 2020, (ii) resetting the leverage and capital expenditure financial covenants applicable under the SFA, removing certain rating requirements under the SFA, (iii) allowing the Company and its subsidiaries to incur additional indebtedness under the UK Coronavirus Large Business Interruption Loan Scheme under a stand-alone facility, which may rank ~~pari passu~~ or junior to the facilities under the SFA, in an amount not exceeding £10.0 million ($12.9 million), (iv) removing certain rating requirements under the SFA, (v) limiting the ability of the Company and its subsidiaries to incur additional indebtedness, including by reducing the amount of general indebtedness the Company and its subsidiaries are permitted to incur and removing the ability to incur senior secured, second lien and unsecured indebtedness in an amount not exceeding the aggregate of (A) an unlimited amount, as long as, pro forma for the utilization of such indebtedness, the consolidated total net leverage ratio does not exceed the lower of 3.4:1 and the then applicable ratio with respect to the consolidated total net leverage financial covenant summarized further below, plus (B) an amount equal to the greater of £16.0 million ($20.7 million) and 25% of the consolidated pro forma EBITDA of the Company and its subsidiaries for the relevant period (as defined in the SFA, but disregarding, for the purposes of calculating the usage of such cap, any financial indebtedness applied to refinancing other financial indebtedness, together with any related interest, fees, costs and expenses), (vi) increasing the margin applicable to the Facilities (as defined in the SFA) by 1% and adding an additional payment-in-kind margin of 0.75% payable on any principal amounts outstanding under Facility B (as defined in the SFA) after September 24, 2021 (the “Relevant Date”), (vii) adding an exit fee payable by the Company with respect to any repayment or prepayment of Facility B after the Relevant Date at the time of such repayment or prepayment in an amount equal to 0.75% of the principal amount of Facility B being repaid or prepaid, (viii) removing any ability to carry forward or carry back any unused allowance under the capital expenditure financial covenant in the SFA and (ix) granting certain additional information rights to the Lenders under the SFA, including the provision of a budget, and certain board observation rights until December 31, 2022. All other material terms of the SFA remain unchanged in all material respects.

In consideration for the amendments listed above, the Company agreed to pay the Lenders an amendment fee equal to 1% of the Total Commitments (as defined in the SFA) after giving effect to the capitalization of the interest payment described above. The amendment fee is payable to the Lenders pro rata to their commitments under the SFA.

The modification to the SFA is not considered to be substantial in accordance with Topic 470-50 and has therefore not been treated as a debt extinguishment. The amendment fees, amounting to $3.2 million, are associated with the modified debt instrument and will be amortized along with the existing unamortized debt issuance costs. Fees payable to third parties are expensed as incurred, resulting in $1.0 million charged to interest expense for the nine months ended September 30, 2020.

~~There were no breaches of the debt covenants in the periods ended September 30, 2020 and December 31, 2019.~~

~~Outstanding Debt and Finance Leases~~

~~The following reflects outstanding debt as of September 30, 2020:~~

Principal Unamortized
deferred
financing charge Book value,
September 30,
2020
(in millions)
Senior bank debt $ 310.6 $ (16.1 ) $ 294.5
Finance lease liabilities 0.9 — 0.9
Total long-term debt outstanding 311.5 (16.1 ) 295.4
Less: current portion of long-term debt (13.5 ) — (13.5 )
Long-term debt, excluding current portion $ 298.0 $ (16.1 ) $ 281.9

6.4.	Derivatives and Hedging Activities

On January 15, 2020, the Company entered into two interest rate swaps with UBS AG designed to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows on a portion of the current floating rate debt facilities. The swaps fix the variable interest rate of the current debt facilities and provide protection over potential interest rate increases by providing a fixed rate of interest payment in return. These interest rate swaps are for £95 million ($~~122.8~~131.1 million) at a fixed rate of 0.9255% based on the 6-month LIBOR rate and for €60 million ($~~70.3~~70.5 million) at a fixed rate of 0.102% based on the 6 month ~~EUROLIBOR~~EURIBOR rate and are effective until maturity on October 1, 2023.

Hedges of Multiple Risks

The Company’s objectives in using interest rate derivatives are to add stability to interest and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in ~~Accumulated Other Comprehensive Income~~accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional ~~$1.9~~$1.5 million will be reclassified as an increase to interest expense.

As of ~~September 30,~~March 31, 2021, and December 31, 2020, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

Interest Rate Derivative		Number of Instruments			Notional
Interest rate swaps			2			£95 million ($~~122.8~~131.1 million) at a fixed rate of 0.9255% based on the 6-month LIBOR rate and €60 million ($~~70.3~~70.5 million) at a fixed rate of 0.102% based on the 6 month ~~EUROLIBOR~~EURIBOR rate

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in the consolidated balance sheet as of ~~September 30,~~March 31, 2021.

	Balance Sheet Classification		Asset Derivatives Fair Value		Balance Sheet Classification	Liability Derivatives Fair Value
			(in millions)			(in millions)
Derivatives designated as hedging instruments:
Interest Rate Products		Fair Value of Hedging Instruments	$	—	Derivative Liability	$	(1.7	)
Total derivatives designated as hedging instruments			$	—		$	(1.7	)

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in the consolidated balance sheet as of December 31, 2020.

	Balance Sheet Classification	Asset Derivatives Fair Value		Balance Sheet Classification	Liability Derivatives Fair Value			Balance Sheet Classification		Asset Derivatives Fair Value		Balance Sheet Classification	Liability Derivatives Fair Value
			(in millions)			(in millions)				(in millions)			(in millions)
Derivatives designated as hedging instruments:
Interest Rate Products	Fair Value of Hedging Instruments	$	—	Other Current Liabilities and Long Term Derivative Liability	$	(2.5	)		Fair Value of Hedging Instruments	$	—	Other Current Liabilities and Long Term Derivative Liability	$	(2.6	)
Total derivatives designated as hedging instruments		$	—		$	(2.5	)			$	—		$	(2.6	)

The table below presents the effect of fair value and cash flow hedge accounting on accumulated other comprehensive income for the three months ended March 31, 2021.

	Amount of Gain/(Loss) Recognized in Other Comprehensive Income on Derivative			Location of Gain Reclassified from Accumulated Other Comprehensive Income into Income
	(in millions)			(in millions)
Interest Rate Products	$	0.6	Interest Expense	$	(0.5	)
Total	$	0.6		$	(0.5	)

The table below presents the effect of fair value and cash flow hedge accounting on ~~Accumulated Other Comprehensive Income~~accumulated other comprehensive income for the ~~nine~~three months ended ~~September 30,~~March 31, 2020.

	Amount of Gain/(Loss) Recognized in Other Comprehensive Income on Derivative				Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Income into Income			Amount of Gain Recognized in Other Comprehensive Income on Derivative				Location of Gain Reclassified from Accumulated Other Comprehensive Income into Income
	(in millions)				(in millions)			(in millions)				(in millions)
Interest Rate and Foreign Exchange Products	$	(2.7	)	Interest Expense	$	(1.0	)
Interest Rate Products								$	(1.5	)	Interest Expense	$	(0.4	)
Total	$	(2.7	)		$	(1.0	)	$	(1.5	)		$	(0.4	)

The table below presents the effect of the Company’s derivative financial instruments on the ~~Consolidated Statements~~consolidated statements of ~~Operations~~operations for the ~~nine~~three months ended ~~September 30,~~March 31, 2021.

	Interest Expense
	(in millions)
Total amounts of income and expense line items presented in the statement of operations and comprehensive loss in which the effects of fair value or cash flow hedges are recorded	$	8.6

Gain/(loss) on cash flow hedging relationships in Subtopic 815-20	$	(0.5	)

The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations for the three months ended March 31, 2020.

	Interest Expense			Interest Expense
		(in millions)		(in millions)
Total amounts of income and expense line items presented in the statement of operations and comprehensive loss in which the effects of fair value or cash flow hedges are recorded	$	19.0		$	6.1

Gain/(loss) on cash flow hedging relationships in Subtopic 815-20	$	(1.0	)	$	(0.4	)

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of ~~September 30,~~March 31, 2021 and December 31, 2020. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheet.

The ISDA Master Agreement between Gaming Acquisitions Limited, a wholly-owned subsidiary of the Company, and UBS AG is documented using the 2002 Form and the ISDA standard set-off provision in Section 6(f) of the ISDA Master Agreement apply to both parties and is only modified to include Affiliates of the Payee. There is no CSA and thus there is no collateral posting.

Offsetting of Derivative Assets

~~September 30, 2020~~

March 31, 2021

Gross Amounts Not Offset in the
Statement of Financial Position

Gross
Amounts of
of Recognized
Assets

Gross
Amounts
Offset in the
Statement of
Financial
Position

Net Amounts
of Assets
presented in
in the
Statement
of Financial
Position

Financial Instruments

~~Financial~~
~~Instruments~~Cash Collateral Received

Net Amount

(in millions)

Fair value of hedging instrument

—

Offsetting of Derivative Liabilities
March 31, 2021
							Gross Amounts Not Offset in the Statement of Financial Position
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Liabilities presented in the Statement of Financial Position		Financial Instruments		Cash Collateral Received		Net Amount
	(in millions)
Fair value of hedging instrument	$	1.7	$	—	$	1.7	$	—	$	—	$	—

Offsetting of Derivative Assets

December 31, 2020

~~Cash~~
~~Collateral~~
~~Received~~

~~Net~~Gross Amounts Not Offset in the
~~Amount~~Statement of Financial Position

Gross
Amounts of
Recognized
Assets

Gross
Amounts
Offset in the
Statement of
Financial
Position

Net Amounts

of Assets
presented in
the Statement
of Financial
Position

Financial Instruments

Cash Collateral Received

Net Amount

(in millions)

Fair value of hedging instrument

—

Offsetting of Derivative Liabilities
September 30, 2020
Gross Amounts Not Offset in the
Statement of Financial Position
Gross
Amounts
of Recognized
Liabilities Gross
Amounts
Offset in the
Statement of
Financial
Position Net Amounts
of Liabilities
presented
in the
Statement
of Financial
Position Financial
Instruments Cash
Collateral
Received Net
Amount
(in millions)
Fair value of hedging instrument $ 2.5 $ — $ 2.5 $ — $ — $ —

Offsetting of Derivative Liabilities
December 31, 2020
							Gross Amounts Not Offset in the Statement of Financial Position
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Liabilities presented in the Statement of Financial Position		Financial Instruments		Cash Collateral Received		Net Amount
	(in millions)
Fair value of hedging instrument	$	2.6	$	—	$	2.6	$	—	$	—	$	—

Credit-risk-related Contingent Features

The Company has entered into an industry standard ISDA Master Agreement, with a negotiated Scheduled thereto (the “ISDA Agreement”), with the counterparty to its derivative transactions and which ISDA Agreement sets forth various provisions which govern the trading relationship between the Company and its counterparty. Such provisions include certain events which, if triggered by either party, may give rise to an acceleration of the ISDA Agreement, thus triggering the exchange of a breakage payment between the parties.

The ISDA Agreement with the Company’s derivative counterparty contains a provision where the Company could be declared in default on its derivative obligations if, among others, its repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness. The ISDA Agreement can also be accelerated if Lucid Trustee Services Limited requests or requires that the lender terminates or closes-out any Transaction under the ISDA Agreement pursuant to Clause 4.10 of the Intercreditor Agreement between primarily the Company, Lucid Agency Services as Senior Agent and Lucid Trustee Services Limited as Security Agent; in the event of certain refinancing circumstances; and in the event of certain reductions in the principal with respect to amounts loaned under the Senior Facilities Agreement.

As of ~~September 30, 2020,~~March 31, 2021, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to the ISDA Agreements was ~~$2.5~~$1.7 million. As of ~~September 30, 2020,~~March 31, 2021, the Company has not posted any collateral related to the ISDA Agreement, as no collateral is required under the terms of such ISDA Agreement. If the Company had breached any of the provision under the ISDA Agreement which resulted in an acceleration of the ISDA Agreement at ~~September 30, 2020,~~March 31, 2021, it could have been required to settle its obligations under the ISDA Agreement at its termination value of ~~$3.0 million.~~ $2.5 million

7.5.	Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset and liability in an orderly transaction between market participants at the measurement date. We estimate the fair value of our assets and liabilities utilizing an established three-level hierarchy. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date as follows:

	Level 1:	Quoted prices in active markets for identical assets or liabilities.

	Level 2:	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include non-binding market consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions.

	Level 3:	Unobservable inputs that are supported by little or no market activity that are significant to the fair value of the asset or liability. Level 3 inputs also include non-binding market consensus prices or non-binding broker quotes that are unable to be corroborated with observable market data.

The fair value of our financial assets and liabilities is determined by reference to market data and other valuation techniques as appropriate. We believe the fair value of our financial instruments approximates their recorded values.

For each period, derivative financial instrument assets and liabilities measured at fair value on a recurring basis are included in the financial statements as per the table below.

			September 30,		December 31,			March 31,		December 31,
	Level		2020		2019		Level	2021		2020
			(in millions)					(in millions)
Derivative liability (see Note 6)		2	$	2.5	$	—
Public Warrants (included in warrant liability)							1	$	4.3	$	3.2
Long term receivable (included in other assets)		2	$	1.2	$	1.5	2	$	1.3	$	1.4
Private Placement Warrants (included in warrant liability)							2	$	11.7	$	9.8
Derivative liability (see Note 4)							2	$	1.7	$	2.6

Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the derivative liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s principal financial officer, who reports to the principal executive officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Principal Financial Officer and approved by the Principal Executive Officer.

At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

8.6.	Stock-Based Compensation

The Company’s stock-based compensation plans authorize awards of restricted stock units (“RSUs”), stock options and other equity-related awards. ~~In May 2019, in conjunction with the~~The Company’s ~~stockholders approving the~~ 2018 Omnibus Incentive Plan (the “2018 Plan”)~~, which authorizes a total of 2,550,000 shares~~ was approved by stockholders in May 2019 and is the successor to ~~be issued pursuant to awards thereunder, the balances available for awards under~~ the Company’s ~~predecessor plans (i.e., the~~ 2016 Long-Term Incentive Plan and the Second Long-Term Incentive ~~Plan)~~Plan (collectively, the “Prior Plans”). The balances available for awards under the Prior Plans were ~~terminated. Although~~terminated in connection with approval of the 2018 Plan; although outstanding awards under the Prior Plans remain governed by the terms of the Prior Plans, no new awards ~~will~~may be granted or become available for grant under the Prior Plans. See Note 17 “Subsequent Events” below regarding the Company’s adoption of the 2021 Omnibus Incentive Plan on April 12, 2021 which was approved by our stockholders on May 11, 2021.

As of ~~September 30, 2020,~~March 31, 2021, there were (i) ~~2,429,011~~1,777,611 shares subject to outstanding awards under the 2018 Plan, including 75,000 shares subject to performance-based target awards and 259,300 shares subject to awards that were previously subject to performance criteria that were determined to have been met for the applicable performance year which awards continue to remain subject to a time-based vesting schedule; and (ii) 2,411,319 shares subject to outstanding awards under the Prior Plans, including 1,092,633 shares subject to market-price vesting conditions ~~and (ii) 1,909,373 shares subject to outstanding awards under the 2018 Plan, including 100,000 shares subject to performance-based target awards and 241,077 shares subject to awards~~ that ~~were previously subject to performance criteria that were determined to be met in June 2020 (at~~have a ~~level equal to approximately 87%~~satisfaction deadline of ~~the target awards) which awards continue to remain subject to a time-based vesting schedule.~~December 23, 2021. As of ~~September 30, 2020,~~March 31, 2021, there were ~~367,311~~221,799 shares available for new awards under the 2018 Plan and no shares available for new awards under the Prior Plans. All awards consist of RSUs and Restricted Stock.

The Company also has an employee stock purchase plan (“ESPP”) that authorizes the issuance of up to an aggregate of 500,000 shares of common stock pursuant to purchases thereunder by employees. The ESPP, which was approved by stockholders in July 2017, is administered by the Compensation Committee which has discretion to designate the length of offering periods and other terms subject to the requirements of the ESPP. The Company held a twelve-month offering period under the ESPP that began on June 3, 2019 and ended on June 2, 2020. This offering period authorized employees to contribute up to 10% of their base compensation to purchase a maximum of 1,000 shares at a discounted purchase price that would be equal 85% of the lower of: (i) the closing price at the beginning of the offering period and (ii) the closing price at the end of the offering period. A total of 7,649 shares were purchased on the last day of the offering period, June 2, 2020, at a discounted price of $3.2215 per share. As of ~~September 30, 2020,~~March 31, 2021, a total of 467,751 shares remain available for purchase under the ESPP.

A summary of the Company’s RSU activity during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 is as follows:

	Number of Shares

Unvested Outstanding at January 1, ~~2020~~2021		~~1,571,964~~2,149,118
Granted		~~1,017,039~~59,466
Forfeited		(~~47,613~~13,954	)
Vested⁽¹⁾		(~~210,553~~11,418	)
Unvested Outstanding at ~~September 30, 2020~~March 31, 2021		~~2,330,837~~2,183,212

~~(1)~~

The RSUs that vested during the nine months ended September 30, 2020 are subject to deferred settlement terms such that the awards do not settle until the participant’s services terminate. The Company issued a total of 166,959 shares during the nine months ended September 30, 2020 in connection with the net settlement of RSUs that vested during the preceding year (on December 31, 2019).

The Company issued a total of 163,732 shares during the three months ended March 31, 2021 in connection with the net settlement of RSUs that vested on December 31, 2020.

Stock-based compensation is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. For performance awards that are contingent upon the Company achieving certain pre-determined financial performance targets, compensation expense is calculated based on the number of shares expected to vest after assessing the probability that the performance criteria will be met. Determining the probability of achieving a performance target requires estimates and judgment.

The Company recognized $1.4 million and $1.0 million of stock-based compensation expense ~~for Restricted Stock and RSUs amounting to $1.1 million and $2.2 million for~~during the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $3.1 million and $6.6 million for the nine months ended September 30, 2020 and 2019,~~ respectively. Total unrecognized compensation expense related to unvested stock awards and unvested RSUs at ~~September 30, 2020~~March 31, 2021 amounts to ~~$7.5~~$5.0 million and is expected to be recognized over a weighted average period of ~~1.4 years.~~1 year.

9.7.	Accumulated Other Comprehensive Loss (Income)

The accumulated balances for each classification of comprehensive loss (income) are presented below:

Foreign Currency Translation Adjustments Change in
Fair Value of Hedging Instrument Unrecognized Pension Benefit Costs Accumulated Other Comprehensive (Income)
(in millions)
Balance at January 1, 2020 $ (76.5 ) $ 1.4 $ 30.0 $ (45.1 )
Change during the period (3.1 ) 1.1 (4.4 ) (6.4 )
Balance at March 31, 2020 (79.6 ) 2.5 25.6 (51.5 )
Change during the period (0.4 ) 0.5 8.7 8.8
Balance at June 30, 2020 (80.0 ) 3.0 34.3 (42.7 )
Change during the period 4.2 0.1 0.3 4.6
Balance at September 30, 2020 $ (75.8 ) $ 3.1 $ 34.6 $ (38.1 )

	Foreign Currency Translation Adjustments			Change in Fair Value of Hedging Instrument			Unrecognized Pension Benefit Costs			Accumulated Other Comprehensive (Income)
	(in millions)
Balance at January 1, 2021		(71.1	)		2.8			37.2			(31.1	)
Change during the period		1.1			(1.1	)		(4.6	)		(4.6	)
Balance at March 31, 2021	$	(70.0	)	$	1.7		$	32.6		$	(35.7	)

Foreign Currency Translation Adjustments Change in
Fair Value of Hedging Instrument Unrecognized Pension Benefit Costs Accumulated Other Comprehensive (Income)
(in millions)
Balance at January 1, 2019 $ (78.9 ) $ (0.1 ) $ 23.1 $ (55.9 )
Change during the period 0.5 0.6 (0.9 ) 0.2
Balance at March 31, 2019 (78.4 ) 0.5 22.2 (55.7 )
Change during the period (0.7 ) 0.2 2.0 1.5
Balance at June 30, 2019 (79.1 ) 0.7 24.2 (54.2 )
Change during the period (0.5 ) 0.3 3.1 2.9
Balance at September 30, 2019 $ (79.6 ) $ 1.0 $ 27.3 $ (51.3 )

	Foreign Currency Translation Adjustments			Change in Fair Value of Hedging Instrument		Unrecognized Pension Benefit Costs			Accumulated Other Comprehensive (Income)
	(in millions)
Balance at January 1, 2020		(76.5	)		1.4		30.0			(45.1	)
Change during the period		(3.1	)		1.1		(4.4	)		(6.4	)
Balance at March 31, 2020	$	(79.6	)	$	2.5	$	25.6		$	(51.5	)

Included within accumulated other comprehensive income is an amount of ~~$0.8~~$0.4 million relating to the change in fair value of discontinued hedging instruments. This amount will be amortized as a charge to income over the life of the original instrument, to August 2021 in accordance with US GAAP. The remaining ~~$2.3~~$1.3 million relates to currently active hedging instruments.

~~10.~~8.

Net ~~Income/~~Loss per Share

Basic ~~income/~~loss per share (“EPS”) is computed by dividing net ~~income/~~loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period, including stock options, restricted stock, RSUs and warrants, using the treasury stock method, and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive.

The computation of diluted EPS excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019		Three Months Ended March 31,
									2021		2020
RSUs		—		3,066,697		3,714,268		3,066,697		3,564,814		2,954,493
Unvested Restricted Stock		624,116		624,116		624,116		624,116		624,116		624,116
Stock Warrants		9,539,565		9,539,565		9,539,565		9,539,565		9,539,565		9,539,565
		10,163,681		13,230,378		13,877,949		13,230,378		13,728,495		13,118,174

~~11.~~9.

Other Finance Income (Expense)

Other finance income (expense) consisted of the ~~following for the three and nine months ended September 30, 2020 and 2019:~~following:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
	(in millions)						(in millions)						(in millions)
Pension interest cost	$	(0.5	)	$	(0.6	)	$	(1.6	)	$	(2.0	)	$	(0.4	)	$	(0.6	)
Expected return on pension plan assets		0.8			0.9			2.3			2.7			0.7			0.8
Foreign currency translation on senior bank debt		—			(4.5	)		(6.6	)		(4.8	)		6.1			(3.9	)
Foreign currency remeasurement on hedging instrument		—			3.0			—			3.2
	$	0.3		$	(1.2	)	$	(5.9	)	$	(0.9	)	$	6.4		$	(3.7	)

~~12.~~10.

Income Taxes

The effective income tax rate for the three months ended ~~September 30,~~March 31, 2021 and 2020 was 4.0% and ~~2019 was 0.0% and 1.2%~~2.0%, respectively, resulting in a ~~$0.0 million and $0.1~~$0.7 million income tax ~~expense, respectively. The effective income tax rate for the nine months ended September 30, 2020~~benefit and ~~2019 was 0.7% and 0.4%, respectively, resulting in~~ a ~~$0.3 million and $0.1~~$0.2 million income tax expense, respectively. The Company’s effective income tax rate has fluctuated primarily as a result of the income mix between jurisdictions.

The income tax expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ differs from the amount that would be expected after applying the statutory U.S. federal income tax rate primarily due to pre-tax losses for which no tax benefit can be recorded, and foreign earnings being taxed at rates different than the US statutory rate.

~~13.~~11.

Related Parties

Macquarie Corporate Holdings Pty Limited (UK Branch) (“Macquarie UK”), is an affiliate of MIHI LLC, the beneficial owner of approximately ~~16.75%~~13% of our common stock. Macquarie UK is one of the lending parties with respect to our senior secured term loans and revolving credit facility under our senior facilities agreement dated September 27, 2019, as amended and restated on June 25, 2020 (the “SFA”) ~~(see Note 5)~~. The portion of the total loans of $310.6 million at March 31, 2021, and $313.3 million at December 31, 2020, under these facilities held by Macquarie UK at ~~September 30,~~March 31, 2021 and December 31, 2020 was ~~$29.2 million.~~$30.4 million and $30.7 million, respectively. Interest expense payable to Macquarie UK for the three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ amounted to $0.6 million and ~~$0.0 million, respectively, and for the nine months ended September 30, 2020 and 2019 amounted to $1.7 million and $0.0~~$0.5 million, respectively. In addition, ~~$1.1~~$0.5 million ~~of a total $12.7~~and $0.6 million of accrued interest payable was due to Macquarie UK at ~~September 30,~~March 31, 2021 and December 31, 2020, ~~and Macquarie UK received $0.3 million of the total $3.1 million of SFA amendment fees paid (see Note 5).~~respectively. MIHI LLC, also holds warrants to purchase 1,000,000 shares of our common stock and is ~~also~~ a party to a stockholders agreement with the Company and other stockholders, dated December 23, 2016, pursuant to which, subject to certain conditions, MIHI LLC, jointly with Hydra Industries Sponsor LLC, are permitted to designate two directors to be nominated for election as directors of the Company at any annual or special meeting of stockholders at which directors are to be elected, until such time as MIHI LLC and Hydra Industries Sponsor LLC in the aggregate hold less than 5% of the outstanding shares of the Company.

The Company held a 40% non-controlling equity interest in Innov8 Gaming Limited (“Innov8”) from October 2019 until April 2020 when the Company disposed of its interest. Revenue earned from Innov8 while a related party for the nine months ended September 30, 2020 and 2019 amounted to $0.6 million and $0.0 million, respectively and purchases from Innov8 while a related party for the nine months ended September 30, 2020 and 2019 amounted to $0.2 million and $0.0 million, respectively. The value of the investment was impaired by $0.7 million to $Nil in March 2020 prior to disposal.

~~14.~~12.

Leases

The Company is party to leases with third parties with respect to various gaming machines. Gaming machine leases typically include a lease (of the machine) and a non-lease (provision of software services) component.

The components of lease income were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2020		2019		2020		2019		2021		2020
	(in millions)				(in millions)				(in millions)
Interest receivable from sales type leases	$	0.1	$	—	$	0.1	$	—	$	—	$	—
Operating lease income		0.9		—		1.9		—		—		1.0
Variable income from sales type leases		0.3		—		0.5		—		—		0.2
	$	1.3	$	—	$	2.5	$	—
Total									$	—	$	1.2

~~15.~~13.

Commitments and Contingencies

Employment Agreements

We are party to employment agreements with our executive officers and other employees of the Company and our subsidiaries which contain, among other terms, provisions relating to severance and notice requirements.

Our employment agreement with our Executive Chairman dated October 9, 2020 provides that, subject to the terms and conditions thereunder, our Executive Chairman would receive special grants covering 750,000 RSUs (a mix of time-based RSUs, performance-based RSUs and stock-price based RSUs) during the year ending December 31, 2021, subject to the condition that our stockholders approve an increase in our equity incentive plan share authorization limit at the annual meeting of our stockholders to be held during 2021. Such RSUs were granted on May 11, 2021 upon the approval by our stockholders of a new equity incentive plan (see Note 17).

Legal Matters

From time to time, the Company may become involved in lawsuits and legal matters arising in the ordinary course of business. While the Company believes that, currently, it has no such matters that are material, there can be no assurance that existing or new matters arising in the ordinary course of business will not have a material adverse effect on the Company’s business, financial condition or results of operations.

~~16.~~

~~Pension Plan~~

14. Pension Plan

We operate a defined ~~contributions pension scheme~~contribution plan in the US, and both defined benefit and defined ~~contributions~~contribution pension schemes in the UK. The defined contribution scheme assets are held separately from those of the Company in independently administered funds.

Defined Benefit Pension Scheme

The defined benefit ~~section~~scheme has been closed to new entrants since April 1, 1999 and closed to future accruals for services rendered to the Company for the entire financial statement periods presented. On March 15, 2019, it was agreed that no further deficit reduction contributions ~~shall~~would be made to the scheme, except in the event that the scheme funding level does not progress as expected, in which case contingent contributions would be made subject to an agreed maximum amount. It

In January 2021, the funding level of the scheme was tested against the expected position at December 31, 2020 and it was determined that further contingent contributions of ~~$1.1~~$1.2 million and expense contributions of $0.4 million ~~would~~will be payable during the year ~~ended December 31, 2020, with agreement reached with the trustees of the scheme to defer $0.4 million of the contingent contributions into the year~~ ending December 31, ~~2021~~ 2021.

The funding level of the scheme will next be tested against the expected position at December 31, ~~2020~~2021 to determine whether further contingent contributions are payable during the year ending December 31, ~~2021.~~2022.

The total amount of employer contributions paid during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 amounted to ~~$0.6 million.~~$0.1 million relating to the three months ended March 31, 2021, and $0.4 million of contributions relating to the year ending December 31, 2020 agreed with the trustees of the scheme to be deferred into the year ending December 31, 2021.

The following table presents the components of our net periodic pension benefit cost:

	Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2021			2020
	(in millions)						(in millions)
Components of net periodic pension benefit cost:
Interest cost	$	1.6		$	2.0		$	0.4		$	0.6
Expected return on plan assets		(2.3	)		(2.7	)		(0.7	)		(0.8	)
Net periodic benefit	$	(0.7	)	$	(0.7	)
Net periodic (benefit) cost							$	(0.3	)	$	(0.2	)

The following table sets forth the estimate of the combined funded status of the pension plans and their reconciliation to the related amounts recognized in our consolidated financial statements at the respective measurement dates:

	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
	(in millions)						(in millions)
Change in benefit obligation:
Benefit obligation at beginning of period	$	110.4		$	94.1		$	127.8		$	110.4
Interest cost		1.6			2.7			0.4			2.2
Prior service cost		—			—
Actuarial loss		5.8			14.1
Actuarial (gain)/loss								(9.9	)		14.5
Benefits paid		(1.9	)		(4.2	)		(0.6	)		(4.1	)
Foreign currency translation adjustments		(1.9	)		3.7			1.5			4.8
Benefit obligation at end of period	$	114.0		$	110.4		$	119.2		$	127.8
Change in plan assets:
Fair value of plan assets at beginning of period	$	107.3		$	97.4		$	118.7		$	107.3
Actual gain on plan assets		2.9			10.3
Actual (loss)/gain on plan assets								(4.8	)		9.8
Employer contributions		0.6			0.2			0.1			1.6
Benefits paid		(1.9	)		(4.2	)		(0.6	)		(4.1	)
Foreign currency translation adjustments		(2.1	)		3.6			1.3			4.1
Fair value of assets at end of period	$	106.8		$	107.3		$	114.7		$	118.7
Amount recognized in the consolidated balance sheets:
Unfunded status (non-current)	$	(7.2	)	$	(3.1	)	$	(4.5	)	$	(9.1	)
Net amount recognized in other long-term liabilities	$	(7.2	)	$	(3.1	)
Net amount recognized							$	(4.5	)	$	(9.1	)

15. Segment Reporting and Geographic Information

~~17.~~

~~Segment Reporting and Geographic Information~~

The Company operates its business along ~~three~~four operating segments, which are segregated ~~based~~ on the basis of revenue stream: ~~Service Based~~ Gaming, Virtual Sports, ~~(which includes Interactive)~~Interactive and ~~Acquired Businesses.~~Leisure. The Company believes this method of segment reporting reflects both the way its business segments are managed and the way the performance of each segment is evaluated.

The following tables present revenue, cost of sales, excluding depreciation and amortization, selling, general and administrative expenses, depreciation and amortization, stock-based compensation expense and acquisition related transaction expenses, operating profit/(loss), total assets and total capital expenditures for the periods ended ~~September 30,~~March 31, 2021 and March 31, 2020, ~~and 2019,~~ respectively, by business segment. 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. Corporate function costs consist primarily of selling, general and administrative expenses, depreciation and amortization, capital expenditures, right of use assets, cash, prepaid expenses and property and equipment and software development costs relating to corporate/shared functions. All acquisition and integration related transaction expenses are allocated as corporate function costs. Amounts previously disclosed for the three months ended March 31, 2020 have been recharacterized in line with the current operating segments and categories.

~~As a result~~In addition, as part of ~~improved processes that~~the recharacterization exercise, certain items of Revenue, Cost of Sales and Selling, General and Administrative Expenses have ~~allowed us~~been recharacterized to ~~more accurately allocate assets between reporting segments, we have allocated our right~~ensure consistency with similar items across the Group. The revenue recharacterizations are to ensure spares and similar items are reflected with other items of ~~use asset between segments differently when compared to previous quarters.~~hardware (Product Sales). The resulting impact on previously reported information for the three months ended March 31, 2020 is as follows: Service Revenue, previously reported $43.2 million, now $42.8 million; Product Sales Revenue, previously reported $9.1 million, now $9.5 million; Cost of Service, previously reported $6.6 million, now $8.5 million; Cost of Product Sales, previously reported $7.0 million, now $6.2 million; Selling, General and Administrative Expenses (excluding Stock-based compensation), previously reported $29.1 million, now $28.0 million. The recharacterization has no impact on the previously reported Net Operating Loss, Net Loss or Net Comprehensive Loss for the three months ended March 31, 2020.

Segment Information

Three Months Ended ~~September 30, 2020~~March 31, 2021

	Server Based Gaming			Virtual Sports			Acquired Businesses			Intergroup Eliminations			Corporate Functions			Total			Gaming			Virtual Sports			Interactive			Leisure			Corporate Functions			Total
	(in millions)																		(in millions)
Revenue:
Service	$	23.7		$	10.9		$	22.4		$	(0.6	)	$	—		$	56.4		$	5.6		$	6.3		$	5.2		$	—		$	—		$	17.1
Hardware		1.8			—			1.9			—			—			3.7
Product sales																				5.2			—			—			0.5			—			5.7
Total revenue		25.5			10.9			24.3			(0.6	)		—			60.1			10.8			6.3			5.2			0.5			—			22.8
Cost of sales, excluding depreciation and amortization:
Cost of service		(5.0	)		(1.2	)		(5.6	)		0.6			—			(11.2	)		(0.6	)		(0.3	)		(0.8	)		(0.4	)		—			(2.1	)
Cost of hardware		(0.9	)		—			(1.6	)		—			—			(2.5	)
Cost of product sales																				(2.9	)		—			—			(0.3	)		—			(3.2	)
Selling, general and administrative expenses		(4.5	)		(1.4	)		(12.1	)		—			(3.9	)		(21.9	)		(4.1	)		(1.1	)		(1.0	)		(3.2	)		(4.4	)		(13.8	)
Stock-based compensation expense		(0.2	)		(0.2	)		—			—			(0.7	)		(1.1	)		(0.2	)		(0.1	)		(0.1	)		(0.1	)		(0.9	)		(1.4	)
Acquisition and integration related transaction expenses		—			—			—			—			(1.2	)		(1.2	)		—			—			—			—			(1.4	)		(1.4	)
Depreciation and amortization		(5.4	)		(1.5	)		(6.8	)		—			(0.3	)		(14.0	)		(6.6	)		(1.1	)		(0.7	)		(4.2	)		(0.5	)		(13.1	)
Segment operating income (loss)		9.5			6.6			(1.8	)		—			(6.1	)		8.2			(3.6	)		3.7			2.6			(7.7	)		(7.2	)		(12.2	)

Net operating income																$	8.2
Net operating loss																																		$	(12.2	)

Total assets at September 30, 2020	$	61.1		$	69.2		$	149.1		$	—		$	40.9		$	320.3
Total assets at March 31, 2021																			$	78.7		$	60.9		$	13.3		$	84.6		$	63.5		$	301.0

Total goodwill at September 30, 2020	$	—		$	45.4		$	33.9		$	—		$	—		$	79.3
Total capital expenditures for the three months ended September 30, 2020	$	1.2		$	1.8		$	2.4		$	—		$	1.0		$	6.4
Total goodwill at March 31, 2021																			$	1.5		$	48.5		$	0.4		$	34.3		$	—		$	84.7
Total capital expenditures for the three months ended March 31, 2021																			$	1.2		$	0.8		$	0.9		$	3.1		$	0.2		$	6.2

Three Months Ended ~~September 30, 2019~~March 31, 2020

	Server Based Gaming			Virtual Sports			Acquired Businesses		Intergroup Eliminations		Corporate Functions			Total			Gaming			Virtual Sports			Interactive			Leisure			Corporate Functions			Total
	(in millions)																(in millions)
Revenue:
Service	$	15.5		$	8.3		$	—	$	—	$	—		$	23.8		$	16.6		$	7.8		$	2.1		$	16.3		$	—		$	42.8
Hardware		2.8			—			—		—		—			2.8
Product sales																		8.3			—			—			1.2			—			9.5
Total revenue		18.3			8.3			—		—		—			26.6			24.9			7.8			2.1			17.5			—			52.3
Cost of sales, excluding depreciation and amortization:								—		—
Cost of service		(4.1	)		(0.6	)		—		—		—			(4.7	)		(4.3	)		(0.7	)		(0.2	)		(3.3	)		—			(8.5	)
Cost of hardware		(2.3	)		—			—		—		—			(2.3	)
Cost of product sales																		(5.4	)		—			—			(0.8	)		—			(6.2	)
Selling, general and administrative expenses		(5.7	)		(1.9	)		—		—		(3.9	)		(11.5	)		(8.9	)		(1.2	)		(1.2	)		(11.0	)		(5.7	)		(28.0	)
Stock-based compensation expense		(0.4	)		(0.3	)		—		—		(1.5	)		(2.2	)		(0.1	)		(0.1	)		—			—			(0.8	)		(1.0	)
Acquisition and integration related transaction expenses		—			—			—		—		(3.3	)		(3.3	)		—			—			—			—			(3.2	)		(3.2	)
Depreciation and amortization		(6.8	)		(1.3	)		—		—		(0.2	)		(8.3	)		(7.4	)		(0.8	)		(0.6	)		(3.4	)		(0.4	)		(12.6	)
Segment operating income (loss)		(1.0	)		4.2			—		—		(8.9	)		(5.7	)		(1.2	)		5.0			0.1			(1.0	)		(10.1	)		(7.2	)

Net operating loss														$	(5.7	)																$	(7.2	)

Total assets at December 31, 2019	$	80.8		$	66.8		$	156.7	$	—	$	23.1		$	327.4
Total assets at December 31, 2020																	$	93.9		$	64.4		$	8.5		$	87.0		$	70.3		$	324.1

Total goodwill at December 31, 2019	$	—		$	46.4		$	34.5	$	—	$	—		$	80.9
Total capital expenditures for the three months ended September 30, 2019	$	3.7		$	1.4		$	—	$	—	$	0.2		$	5.3
Total goodwill at December 31, 2020																	$	1.4		$	48.0		$	0.4		$	33.9		$	—		$	83.7
Total capital expenditures for the three months ended March 31, 2020																	$	2.7		$	1.0		$	0.6		$	5.2		$	2.3		$	11.8

~~Nine Months Ended September 30, 2020~~

Server
Based
Gaming

Virtual
Sports

Acquired
Businesses
Intergroup
Eliminations
Corporate
Functions
Total
(in millions)
Revenue:
Service $ 40.7 $ 29.7 $ 45.6 $ (1.2 ) $ — $ 114.8
Hardware 5.5 — 7.9 (0.2 ) — 13.2
Total revenue 46.2 29.7 53.5 (1.4 ) — 128.0
Cost of sales, excluding depreciation and amortization:
Cost of service (9.6 ) (3.3 ) (9.2 ) 1.2 — (20.9 )
Cost of hardware (3.0 ) — (6.8 ) — — (9.8 )
Selling, general and administrative expenses (11.5 ) (4.2 ) (32.6 ) — (13.3 ) (61.6 )
Stock-based compensation expense (0.5 ) (0.4 ) — — (2.2 ) (3.1 )
Acquisition and integration related transaction expenses — — — — (5.6 ) (5.6 )
Depreciation and amortization (17.6 ) (4.3 ) (17.2 ) — (0.8 ) (39.9 )
Segment operating income (loss) 4.0 17.5 (12.3 ) (0.2 ) (21.9 ) (12.9 )

Net operating loss $ (12.9 )

Total capital expenditures for the nine months ended September 30, 2020 $ 2.8 $ 5.4 $ 9.7 $ — $ 3.9 $ 21.8

~~Nine Months Ended September 30, 2019~~

Server
Based
Gaming

Virtual
Sports

Acquired
Businesses
Intergroup
Eliminations
Corporate
Functions
Total
(in millions)
Revenue:
Service $ 52.7 $ 27.5 $ — $ — $ — $ 80.2
Hardware 6.8 — — — — 6.8
Total revenue 59.5 27.5 — — — 87.0
Cost of sales, excluding depreciation and amortization:
Cost of service (12.9 ) (2.5 ) — — — (15.4 )
Cost of hardware (4.9 ) — — — — (4.9 )
Selling, general and administrative expenses (18.3 ) (6.2 ) — — (14.5 ) (39.0 )
Stock-based compensation expense (1.3 ) (1.0 ) — — (4.3 ) (6.6 )
Acquisition and integration related transaction expenses — — — — (4.9 ) (4.9 )
Depreciation and amortization (21.7 ) (4.2 ) — — (1.2 ) (27.1 )
Segment operating income (loss) 0.4 13.6 — — (24.9 ) (10.9 )

Net operating loss $ (10.9 )

Total capital expenditures for the nine months ended September 30, 2019 $ 8.7 $ 4.4 $ — $ — $ 0.9 $ 14.0

Geographic Information

Geographic information for revenue is set forth below:

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2020		2019		2020		2019		2021		2020
	(in millions)				(in millions)				(in millions)
Total revenue
UK	$	47.8	$	16.0	$	95.4	$	53.7	$	10.9	$	38.4
Greece		5.7		4.9		13.1		14.5		2.3		4.8
Canada										1.8		0.1
Italy		2.6		3.6		6.2		12.0		1.3		2.2
Rest of world		4.0		2.1		13.3		6.8		6.5		6.8
Total	$	60.1	$	26.6	$	128.0	$	87.0	$	22.8	$	52.3

Geographic information of our non-current assets excluding goodwill is set forth below:

	September 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
	(in millions)				(in millions)
UK	$	99.8	$	116.1	$	97.0	$	101.8
Greece		19.7		26.5		15.2		18.2
Italy		2.2		2.3		1.9		2.1
Rest of world		8.3		6.3		9.6		9.3
Total	$	130.0	$	151.2	$	123.7	$	131.4

Software development costs are included as attributable to the market in which they are utilized.

~~18.~~

~~Customer Concentration~~

16. Customer Concentration

During the three months ended ~~September 30, 2020, one customer~~March 31, 2021, there were two customers that represented at least 10% of the Company’s revenues, accounting for ~~21%~~16% and 14% of the Company’s revenues. ~~The customer was~~These customers were served by ~~both~~ the ~~Server Based~~ Gaming, ~~and~~ Virtual Sports ~~segments.~~and Interactive segments, and the Virtual Sports and Interactive segments, respectively. During the three months ended ~~September 30, 2019, two~~March 31, 2020, there were no customers ~~represented at least 10% of revenues, each accounting for 18% of the Company’s revenues. Both customers were served by the Server Based Gaming and Virtual Sports segments.~~

~~During the nine months ended September 30, 2020, two customers~~that represented at least 10% of the Company’s ~~revenues, accounting for 12% and 10% of the Company’s~~ revenues. During the nine months ended September 30, 2019, three customers represented at least 10% of revenues, accounting for 20%, 16% and 10% of the Company’s revenues. All these customers were served by both the Server Based Gaming and Virtual Sports segments.

At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, there were no customers that represented at least 10% of accounts receivable.

~~19.~~

~~Subsequent Events~~

17. Subsequent Events

The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements were issued. Other than as described below, the Company did not identify subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

On ~~November 10, 2020,~~April 12, 2021, the Company’s Board of Directors adopted the 2021 Omnibus Incentive Plan (the “2021 Plan”), subject to the approval of our stockholders, which was obtained at the Company’s annual meeting of stockholders held on May 11, 2021. The 2021 Plan authorizes a total of 2,900,000 shares to be issued pursuant to awards and will also replace the 2018 Plan such that shares available for grant under the 2018 Plan would instead be available for grant under the 2021 Plan. Upon approval of the 2021 Plan, the Company’s Executive Chairman received the sign-on equity awards discussed above pursuant to the terms of his employment agreement (see Note 13).

On May 13, 2021, the Company ~~agreed to contractual income of £24.6 million ($32.5 million) from~~issued a ~~customer in relation to our revenue share agreements and their previously paid VAT on fixed odds betting terminals, as result~~press release announcing that Inspired Entertainment (Financing) PLC, a wholly owned finance subsidiary of the ~~UK decision~~Company, priced a private offering of £235.0 million ($324.2 million) aggregate principal amount of its 7.875% senior secured notes due 2026 (the “2026 Senior Secured Notes”). The 2026 Senior Secured Notes will be guaranteed by the Company and certain of its English and U.S. subsidiaries. The offering is expected to close on or about May 20, 2021, subject to customary closing conditions.

The Company intends to use the proceeds from the offering of the 2026 Senior Secured Notes (i) to repay its existing £145.8 million ($201.1 million) senior secured term loan facility and €93.1 million ($109.4 million) senior secured term loan facility and accrued interest thereon, (ii) to pay fees, commissions and expenses incurred in ~~Commissioners~~connection with the refinancing, and (iii) for ~~HM Revenue and Customs –v- (1) The Rank Group Plc and (2) Done Brothers (Cash Betting) Ltd & Ord [2020] UKUT 0117 (TCC). This amount was received on November 11, 2020.~~general corporate purposes, including to close-out derivative contracts entered into in connection with the existing term loan facilities. As part of the refinancing, the Company will also be putting into place a new 4.5 year £20 million ($27.6 million) Super Priority Senior Secured Revolving Credit Facility.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual future results could differ materially from the historical results discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included herein and in our annual report on Form 10-K for the fiscal year ended December 31, ~~2019..~~ 2020.

~~COVID-19 Update~~

Investors and potential investors are advised to review this Form 10-Q in light of ongoing events. As with other businesses worldwide, we are experiencing severe disruption to our business as a result of the COVID-19 pandemic and the far-reaching actions of the governments of various countries where we do, and hope to do, business, as well as countries sourcing our supply chain.

Our business is being and will continue to be adversely affected by the continuing nature of the coronavirus (COVID-19) pandemic. Due to the speed and fluidity with which the situation continues to develop, we are not able at this time to estimate the extent of the impact of the COVID-19 pandemic on our financial results and operations in future periods. The “second wave” has seen various governments re-impose restrictions on our operations, including complete or partial closures of retail venues and the long-term impacts of the pandemic on the global economy, trade relations, consumer behavior, our industry and our business operations. As of the date of this report, the majority of retail venues in the UK, Italy, and Greece are closed.

During the previous closure of retail venues, we saw a significant increase in our online revenues from slots and virtual sports, though we can provide no assurance that such an increase will accompany current or future closures.

Our ability to execute our strategy is necessarily affected by the ongoing COVID-19 pandemic and its continuing effects on our business. We continue to be highly focused on managing our cash flow and liquidity, as well as focusing on managing the recent re-closures our businesses.

However, the dynamic nature of the pandemic and government restrictions, as well as evolving potential for future relevant, government sponsored business stimuli and creditor relief plans are neither quantifiable nor predictable as of this Report.

Forward-Looking Statements

We make forward-looking statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. For definitions of the term Forward-Looking Statements, see the definitions provided in the Cautionary Note Regarding Forward-Looking Statements at the start of the Quarterly Report on Form ~~10-Q. These forward-looking statements relate to expectations~~10-Q for ~~future financial performance, business strategies or expectations for our business, and~~ the ~~timing and ability for us to complete currently contemplated or future acquisitions. Specifically, forward-looking statements may include statements relating to:~~period ended March 31, 2021.

●

~~the future financial performance of the Company;~~

●

restrictions in our existing borrowings, including covenants set forth in our existing debt facilities (and the recent amendment thereto), or any other indebtedness we may incur in the future, could adversely affect our business, financial condition, or results of operations, and our ability to make distributions to stockholders and the value of our common stock;

●

~~the market for our products and services;~~

●

~~expansion plans and opportunities, including currently contemplated or future acquisitions or additional business combinations; and~~

●

other statements preceded by, followed by or that include words such as “anticipate”, “believe”, “can”, “continue”, “could”, “estimate”, “expect”, “forecast”, “intend”, “may”, “might”, “plan”, “possible”, “potential”, “predict”, “project”, “proposed”, “scheduled”, “seek”, “should”, “target”, “would” or similar expressions, among others.

These forward-looking statements are based on information available as of the date hereof, and current expectations, forecasts and assumptions that involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause our actual results or performance to differ include:

●

the effect and impact of the ongoing global coronavirus (COVID-19) pandemic on our business including whether there is continuing increases or spikes in the number of COVID-19 cases in areas in which we operate; the duration, degree and effectiveness of governmental, business or other actions in response to the pandemic, including but not limited to quarantine, shelter-in-place and social distancing measures; restrictions on or changes to our operations up to and including complete or partial closures of retail venues; the long-term impacts of the pandemic on the global economy, trade relations, consumer behavior, our industry and our business operations;

●

~~our ability to compete effectively in our industries;~~

●

~~the effect of evolving technology on our business;~~

●

~~our ability to renew long-term contracts and retain customers, and secure new contracts and customers;~~

●

~~our ability to maintain relationships with suppliers;~~

●

~~our ability to protect our intellectual property;~~

	●	~~our ability to protect our business against cybersecurity threats;~~

	●	~~government regulation of our industries;~~

●

~~our ability to successfully grow by acquisition as well as organically;~~

●

~~fluctuations due to seasonality;~~

●

~~our ability to attract and retain key members of our management team;~~

●

~~our need for working capital;~~

●

~~our ability to secure capital for growth and expansion;~~

●

~~changing consumer, technology and other trends in our industries;~~

●

~~our ability to successfully operate across multiple jurisdictions and markets around the world;~~

●

~~changes in local, regional and global economic and political conditions; and~~

●

~~other factors.~~

~~Overview~~COVID-19 Update

~~We are a global business-to-business gaming technology company, supplying Server Based Gaming (“SBG”) and Virtual Sports (which includes Interactive) systems~~Governments in certain of the jurisdictions in which our land-based customers operate have either (i) provided guidance as to regulated lottery, betting and gaming operators worldwide through an “omni-channel” distribution strategy. We provide end-to-end digital gaming solutions on our proprietary and secure network, which accommodates a wide rangethe potential timing for reopening land-based venues in such jurisdictions or (ii) reopened land-based venues with certain restrictions. As of ~~devices, including land-based gaming machine terminals, mobile devices such as smartphones and tablets and online computer and social applications. Our products can be found~~April 12, 2021, in the United Kingdom, licensed betting offices in England have reopened with certain restrictions including operating two of four gaming machines per venue, limited dwell time of 15 minutes, as well as a maximum of two visits per day per patron and an 8:00pm curfew. These restrictions are expected to remain in place until May 17, 2021. Gaming machines in pubs, holiday parks, motorway services, Scottish betting offices and adult gaming centers ~~bingo halls, and through our Acquired Businesses,~~across the United Kingdom are due to open on May 17, 2021 with social distancing restrictions in ~~UK pubs, airports, motorway service areas, and leisure parks.~~

~~Our key strategic priorities are to:~~

●

~~Extend our strong positions~~place. It is currently anticipated that any social distancing restrictions will remain in place in ~~each of Virtual Sports, Interactive and SBG by developing new omni-channel products;~~

●

~~Continue to invest in games and technology in order to grow our existing customers’ revenues;~~

●

~~Add new customers by expanding into underpenetrated markets and newly regulated jurisdictions; and~~

●

~~Pursue targeted mergers and acquisitions to expand our product portfolio and/or distribution footprint.~~

~~On October 1, 2019,~~ the Company completed the acquisition of the Gaming Technology Group (“NTG”) of Novomatic UK Ltd., a division of Novomatic Group, a leading international supplier of gaming equipment and solutions, and heretofore denoted as “Acquired Businesses.”United Kingdom until June 21, 2021. Furthermore, betting offices in Wales have reopened with certain social distancing restrictions in place.

~~Business Segments~~Segment Reporting Recharacterizations

We report our operations in three business segments, SBG, Virtual Sports (which includes Interactive, an operating segment which does not exceed the quantitative thresholds in Accounting Standards Committee (“ASC” 280-10-50-12), and Acquired Businesses (which is comprisedFor full information on this, see Part IV, Item 15 of the ~~aforementioned NTG business, acquired~~Annual Report on ~~October 1, 2019), representing our different products~~Form 10-K for the year ended December 31, 2020, ‘Exhibits, Financial Statement Schedules’ Note 26 ‘Segment Reporting and services. We evaluate our business performance, resource allocation and capital spending on an operating segment level, where possible. We use our operating results and identified assets of each of our operating segments in order to make prospective operating decisions. Although our revenue and cost of sales (excluding depreciation and amortization) are reported exclusively by segment, we do include unallocated items in our consolidated financial statements for certain expenses including depreciation and amortization as well as selling, general and administrative expenses. Unallocated balance sheet line items include items that are a shared resource and therefore not allocated between operating segments.

Our SBG business segment designs, develops, markets and distributes a broad portfolio of games through our digital network architecture. Our SBG customers include UK licensed betting offices (“LBOs”), casinos, gaming hall operators, bingo operators and regulated operators of lotteries, as well as government-affiliated operators.

Our Virtual Sports business segment designs, develops, markets and distributes ultra-high-definition games that create an always-on sports wagering experience. Our Virtual Sports customers include virtual sports retail and digital operators, including regulated betting operators, lotteries, casinos, online and social gaming operators and other gaming and lottery operators in the UK, continental Europe, Africa, Asia and North America. Our Interactive business segment (reported as part of Virtual Sports) comprises the offering of our SBG, Virtual Sports, and interactive-only content via our remote gaming servers.

Our Acquired Businesses designs, develops, markets and distributes a broad portfolio of games through our digital network architecture. In addition, it operates analog gaming and amusement machines for certain customers, including UK pubs, adult gaming centers, motorway service stations and holiday resorts.Geographic Information’.

Revenue

We generate revenue in ~~three~~four principal ways: i) on a participation basis, ii) on a fixed rental fee basis, ~~and~~iii) through product sales and iv) through software license fees. Participation revenue generally includes a right to receive a share of our customers’ gaming revenue, generated from (i) our Virtual Sports products placed with operators; (ii) our SBG terminals placed in gaming and lottery venues; (iii) our Interactive content placed with operators; (iv) licensing our game content and intellectual property to third parties; and (v) our games on third-party online gaming platforms that are interoperable with our game servers.typically as a share of net win but sometimes as a share of the handle or “coin in” which represents the total amount wagered.

Geographic Range

Geographically, ~~more than half~~a majority of our revenue is derived from, and ~~more than half~~majority of our non-current assets are ~~attributed~~attributable to our UK ~~operations, with the~~operations. The remainder of our revenue is derived from, and non-current assets ~~attributed~~attributable to, Greece, Canada, Italy ~~Greece~~ and the rest of the world.

For the three months ended ~~September 30, 2020,~~March 31, 2021, we earned approximately ~~79.6%~~48% of our revenue in the UK, ~~9.5%~~10% in Greece, ~~4.3%~~8% in Canada, 6% in Italy and the remaining ~~6.6%~~28% across the rest of the world. During the three months ended ~~September 30, 2019,~~March 31, 2020, we earned approximately ~~60.2%~~73%, ~~18.3%~~9%, ~~13.5%~~0%, 4% and ~~8.0%~~13% of our revenue in those regions, respectively.

~~For the nine months ended September 30, 2020, we earned~~As of March 31, 2021, our non-current assets (excluding goodwill) attribution approximately ~~74.5% of our revenue~~78% in the UK, ~~10.5%~~12% in Greece, ~~4.8%~~2% in Italy, and ~~the remaining 10.2%~~8% across the rest of the world. ~~During the nine months ended September 30, 2019, we earned approximately 61.7%, 16.7%, 13.8% and 7.8% of our revenue in those regions, respectively.~~

Foreign Exchange

Our results are affected by changes in foreign currency exchange rates as a result of the translation of foreign functional currencies into our reporting currency and the re-measurement of foreign currency transactions and balances. The impact of foreign currency exchange rate fluctuations represents the difference between current rates and prior-period rates applied to current activity. The largest geographic region in which we operate is the UK and the British pound (“GBP”) is considered to be our functional currency. Our reporting currency is the U.S. dollar (“USD”). Our results are translated from our functional currency of GBP into the reporting currency of USD using average rates for profit and loss transactions and applicable spot rates for period-end balances. The effect of translating our functional currency into our reporting currency, as well as translating the results of foreign subsidiaries that have a different functional currency into our functional currency, is reported separately in Accumulated Other Comprehensive Income.

During the three months ended ~~September 30, 2020,~~March 31, 2021, we derived approximately ~~20%~~52% of our revenue from sales to customers outside the UK, compared to ~~40%~~27% during the three months ended ~~September 30, 2019.~~

~~During the nine months ended September 30, 2020, we derived approximately 25% of our revenue from sales to customers outside the UK, compared to 38% during the nine months ended September 30, 2019.~~March 31, 2020.

In the section “Results of Operations” below, currency impacts shown have been calculated as the current-period average GBP:USD rate less the equivalent average rate in the prior period, multiplied by the current period amount in our functional currency (GBP). The remaining difference, referred to as functional currency at constant rate, is calculated as the difference in our functional currency, multiplied by the prior-period average GBP:USD rate. This is not a U.S. GAAP measure, but is one which management believes gives a clearer indication of results. In the tables below, variances in particular line items from period to period exclude currency translation movements, and currency translation impacts are shown independently.

Non-GAAP Financial Measures

We use certain financial measures that are not compliant with U.S. GAAP (“Non-GAAP financial measures”), including EBITDA and Adjusted EBITDA, to analyze our operating performance. In this discussion and analysis, we present certain non-GAAP financial measures, define and explain these measures and provide reconciliations to the most comparable U.S. GAAP measures. See “Non-GAAP Financial Measures” below.

Results of Operations

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

●

a discussion and analysis of the Company’s results of operations ~~of the Company, our SBG, Virtual Sports and Acquired Businesses business segments~~ for the three-month period ended ~~September 30, 2020,~~March 31, 2021, compared to the same period in ~~2019, including KPI analysis; and~~2020;

	●	a discussion and analysis of the results of operations of ~~the Company,~~ our ~~SBG, Virtual Sports and Acquired Businesses~~Gaming business ~~segments~~segment for the ~~nine-month~~three-month period ended ~~September 30, 2020,~~March 31, 2021, compared to the same period in ~~2019,~~2020, including KPI analysis;
	●	a discussion and analysis of the results of operations of our Virtual Sports business segment for the three-month period ended March 31, 2021, compared to the same period in 2020, including KPI analysis;
	●	a discussion and analysis of the results of operations of our Interactive business segment for the three-month period ended March 31, 2021, compared to the same period in 2020, including KPI analysis; and
	●	a discussion and analysis of the results of operations of our Leisure business segment for the three-month period ended March 31, 2021, compared to the same period in 2020, including KPI analysis.

~~Our fiscal year begins on January 1 and ends on December 31 of each calendar year. The results for the three months and nine months ended September 30, 2020 are unaudited.~~

Our results are affected by changes in foreign currency exchange rates, primarily between our functional currency (GBP) and our reporting currency (USD). In the three-month periods ended September 30, 2020 and September 30, 2019, the average GBP:USD rates were 1.29 and 1.23, respectively. In the nine-month periods ended September 30, 2020 and 2019, the average GBP:USD rates were 1.28 and 1.28, respectively.

Our results for the quarter ended September 30, 2020 have continued to be impacted by the COVID-19 pandemic. Most retail venues were able to re-open during the period; however, social distancing regulations meant that pre-COVID income levels were not achieved in all areas. With respect to the jurisdictions in which the Company operates, the UK, Italy, Greece, and US (Illinois) reopened for business, with certain limitations, on June 15, 2020, June 15, 2020, June 8, 2020, and July 1, 2020, respectively. Recurring revenue across the whole business returned to approximately 90% of pre-COVID levels, with online revenue performing well, even after retail venues re-opened. SBG income returned strongly in all areas, with income in Greece particularly robust. Overall revenue from the leisure sectors was slower to return, particularly in holiday parks; however, by the end of August/early September revenue was recovering well. Revenue from digital Category C machines in pubs recovered, but non-gaming machines had difficulty reaching pre-lockdown levels, largely as a result of social distancing measures. The last week of September saw the introduction of a 10 PM curfew for restaurants, pubs and other hospitality venues in the UK, leading to a reduction in revenue in affected sites.

In the discussion and analysis below, certain data may vary from the amounts presented in our consolidated financial statements due to rounding. The results for the three month periods ended March 31, 20201 and March 31, 2020 are unaudited.

Three Months ended ~~September 30, 2020~~March 31, 2021 compared to Three Months ended ~~September 30, 2019~~March 31, 2020

For the Three-Month
Period ended Variance
Unaudited Unaudited Functional
Sept 30, Sept 30, Variance Currency at Functional Currency
(In millions) 2020 2019 2020 vs 2019 Constant rate Currency Movement
Revenue:
Service $ 56.4 $ 23.8 $ 32.6 137.1 % $ 30.2 127.2 % $ 2.4
Hardware 3.7 2.8 0.9 32.1 % 0.7 24.9 % 0.2
Total revenue 60.1 26.6 33.5 125.9 % 30.9 116.2 % 2.6
Cost of sales, excluding depreciation and amortization:
Cost of service (11.2 ) (4.7 ) (6.4 ) 135.4 % (5.9 ) 124.7 % (0.5 )
Cost of hardware (2.5 ) (2.3 ) (0.3 ) 11.3 % (0.2 ) 8.7 % (0.1 )
Selling, general and administrative expenses (21.9 ) (11.5 ) (10.4 ) 90.5 % (9.5 ) 82.1 % (1.0 )
Stock-based compensation (1.1 ) (2.2 ) 1.1 (50.1 %) 1.2 (52.4 )% (0.1 )
Acquisition and integration related transaction expenses (1.2 ) (3.3 ) 2.1 (63.3 %) 2.2 (65.3 )% (0.1 )
Depreciation and amortization (14.0 ) (8.3 ) (5.7 ) 68.6 % (5.1 ) 60.9 % (0.6 )
Net operating Income (Loss) 8.2 (5.7 ) 13.9 NM 13.6 NM 0.2
Other income (expense)
Interest income 0.1 (0.0 ) 0.2 NM 0.2 NM 0.0
Interest expense (8.3 ) (4.4 ) (3.9 ) 89.2 % (3.5 ) 80.5 % (0.4 )
Change in fair value of earnout liability - - - - - - -
Change in fair value of derivative liability - 2.9 (2.9 ) (100.0 %) (2.9 ) (100.0 )% (0.0 )
Other finance income (expense) 0.3 (1.2 ) 1.6 NM 1.5 NM 0.0
Loss from equity method investee - - - - - - -
Total other income (expense), net (7.9 ) (2.7 ) (5.1 ) 187.5 % (4.8 ) 172.5 % (0.3 )
Net income (loss) from continuing operations before income taxes 0.3 (8.4 ) 8.8 NM 8.9 NM (0.1 )
Income tax expense (0.0 ) (0.1 ) 0.1 (75.5 %) 0.1 (77.3 )% (0.0 )
Net Income (Loss) $ 0.3 $ (8.5 ) $ 8.9 NM $ 9.0 NM $ (0.1 )
Exchange Rate - $ to £ 1.29 1.23

	For the Three-Month Period ended
(In millions)	Unaudited Mar 31, 2021			Unaudited Mar 31, 2020			Variance 2021 vs 2020			Total Functional Currency %			Total Variance %

Revenue:
Service	$	17.1		$	42.8		$	(25.7	)		(62.7	)%		(60.0	)%
Product		5.7			9.5			(3.8	)		(44.3	)%		(39.7	)%
Total revenue		22.8			52.3			(29.5	)		(59.4	)%		(56.4)	%
Cost of sales, excluding depreciation and amortization:
Cost of service		(2.1	)		(8.5	)		6.4			(76.8	)%		(75.3)	%
Cost of product		(3.2	)		(6.2	)		3.0			(52.7	)%		(48.2)	%
Selling, general and administrative expenses		(13.8	)		(28.0	)		14.2			(54.1	)%		(50.7)	%
Stock-based compensation		(1.4	)		(1.0	)		(0.4	)		30.7	%		39.5	%
Acquisition and integration related transaction expenses		(1.4	)		(3.2	)		1.8			(61.1	)%		(56.9)	%
Depreciation and amortization		(13.1	)		(12.6	)		(0.5	)		(3.4	)%		4.2	%
Net operating Income (Loss)		(12.2	)		(7.2	)		(5.0	)		55.3	%		69.9	%
Other income (expense)
Interest income		0.0			0.3			(0.3	)		(94.9	)%		(94.3)	%
Interest expense		(8.6	)		(6.1	)		(2.5	)		31.2	%		40.8	%
Change in fair value of warrant liability		(3.0	)		7.6			(10.6	)		(135.3	)%		(139.5)	%
Other finance income (expense)		6.4			(3.7	)		10.1			(257.6	)%		(273.9)	%
Loss from equity method investee		-			(0.5	)		0.5			(100.0	)%		(100.0)	%
Total other income (expense), net		(5.2	)		(2.4	)		(2.9	)		120.8	%		120.1	%
Net Income (loss) from continuing operations before income taxes		(17.4	)		(9.6	)		(7.9	)		70.6	%		82.4	%
Income tax expense		0.7			(0.2	)		0.9			(376.4	)%		(410.5	)%

Net Income (Loss)	$	(16.7	)	$	(9.8	)	$	(7.0	)		60.0	%		71.3	%

Exchange Rate - $ to £		1.38			1.28

Revenue

Total reported revenue for the three months ended ~~September 30, 2020 increased~~March 31, 2021 decreased by ~~$33.5~~$29.5 million, or ~~125.9%~~56.4%, to ~~$60.1~~$22.8 million on a reported basis. This ~~increase includes $24.3 million in revenue from Acquired Businesses, which was not in our results in the prior year quarter. In addition, we had~~included an increase from Interactive of $3.1 million, offset by declines in ~~revenue~~Gaming of ~~$9.3~~$14.1 million, ~~remitted to us by one~~Virtual Sports of ~~our major UK customers, to which we were entitled that was the result~~$1.4 million, and, Leisure of a UK tax ruling, creating a rebate of value added tax that had been incorrectly applied to certain gaming machines in their estate (the “VAT-related income”) in the past. As our contract with this customer is based on a revenue share after appropriate taxes, we are entitled to a pro rata share of this tax rebate, which we have recorded as revenue during the period in line with accounting standards.$17.0 million. Favorable currency movements accounted for a ~~$2.6~~$1.6 million impact. On a functional currency at(at constant ~~rate~~rate) basis, revenue ~~increased~~decreased by ~~$30.9~~$31.1 million, or ~~116.2%.~~59.4%, as detailed below:

SBG reported revenue increased by $7.2 million, comprised of an increase in service revenue of $8.2 million, reflecting the VAT-related income, offset by a $1.0 million decrease in hardware sales. Service revenue was impacted by COVID-19, as some venues had not reopened as of the beginning of the period. Customer gross win declined from the comparative period, reflecting growth in terminals in Greece, a lower customer gross win region, offset by strong performance in the UK.

Virtual Sports reported revenue increased by $2.6 million, or 31.6%. This increase included a $0.4 million decrease in retail recurring revenue from the COVID-19 national shutdowns, offset by growth in Scheduled Online Virtuals of $1.1 million and Interactive of $1.3 million.

Acquired Businesses revenue accounted for $24.3 million. As with the Company’s other businesses in the UK, revenue has increased significantly from the second quarter of 2020, as COVID-19 related shutdowns were lifted at the beginning of the period, although social distancing regulations have led to lower revenue than pre-COVID-19, particularly in holiday parks.

●

Gaming revenue decreased by $14.8 million, comprised of a decrease in Service revenue of $11.3 million and a decrease in Product sales of $3.5 million. The decrease in Service revenue includes VAT-related revenue of $2.9 million (using prior year exchange rate and $3.1 million on a reported basis). Excluding the VAT-related revenue, Service revenue would have declined by $14.2 million, primarily due to COVID-19, as many of our customers’ venues were closed during much of the period (the “COVID-19 closures”). Customer gross win also declined from the comparative period, reflecting the impact of the COVID-19 closures.

	●	Virtual Sports revenue decreased by $1.9 million, or 24.5%. This decrease included a $3.5 million decrease in retail revenue primarily as a result of the COVID-19 closures, partially offset by growth in Online Virtuals of $1.6 million.

	●	Interactive revenue increased by $2.7 million, or 124.9%. This growth was driven by the addition of new customers and territories and the consistent launch of new high-quality content as well as the increase in online demand as a result of the COVID-19 closures.

	●	Leisure revenue decreased by $17.0 million, comprised of a decrease in Service revenue of $16.3 million and a decrease in Product sales of $0.7 million. The decline in revenue was due to the impact of the COVID-19 closures, as venues were closed during the entire period.

Cost of sales, excluding depreciation and amortization

Cost of sales, excluding depreciation and amortization, ~~increased~~decreased by ~~$6.7~~$9.4 million, or ~~95.5%~~63.9%, on a reported basis, to ~~$13.7~~$5.3 million, including the impact of ~~$0.6~~$0.4 million from unfavorable currency movements.

Of this ~~increase, $7.2~~decrease, $6.4 million was attributable to ~~the inclusion~~cost of ~~Acquired Businesses, which~~Service and $3.0 million was ~~not included in our prior period results. This was offset by~~attributable to cost of Product sales. On a ~~$0.4 million reduction in SBG~~functional currency (at constant rate) basis, cost of sales ~~and a $0.6~~decreased by $9.8 million, ~~reduction in Virtual Sports cost of sales.~~or 66.5%, as detailed below:

	●	Gaming cost of sales decreased by $6.4 million, comprised of a decrease in Service costs of $3.7 million and $2.7 million decrease in Product costs. The Service cost decrease was driven primarily by the COVID-19 closures.

	●	Virtual Sports cost of sales decreased by $0.4 million, or 60.1%, driven by a $0.5 million decrease in the retail cost of sales due to COVID-19 closures, partly offset by an increase of $0.1 million in Online Virtuals.

	●	Interactive cost of sales increased by $0.5 million, or 193.0%. This increase was driven by the revenue growth in Interactive.

	●	Leisure cost of sales decreased by $3.4 million, comprised of a decrease in Service costs of $2.8 million and a decrease in Product sales of $0.6 million, which was driven primarily by the COVID-19 closures.

Selling, general and administrative expenses

Selling, general and administrative (“SG&A&A”) expenses ~~increased~~decreased by ~~$10.4~~$14.2 million, or ~~90.5%~~50.7%, on a reported basis, to ~~$21.9~~$13.8 million. This included ~~$1.0~~$0.9 million of unfavorable currency movements. ~~The reported increase~~On a functional currency (at constant rate basis), SG&A decreased by $15.1 million, or 54.1%. This decrease was driven primarily by ~~incremental SG&A expenses of $12.1 million from~~temporary furlough savings and pay reductions and permanent synergy and other savings realized in the ~~Acquired Businesses, offset by a $1.7 million decrease in selling, general and administrative expenses in SBG and Virtual Sports.~~ prior twelve months.

Stock-based compensation

During the three months ended ~~September 30, 2020,~~March 31, 2021, the Company recorded an expense of ~~$1.1~~$1.4 million with respect to outstanding awards. All of this expense related to costs from awards made under the 2018 ~~Plan and all costs related to recurring costs.~~Plan. During the three months ended ~~September 30, 2019,~~March 31, 2020, the charge for stock-based compensation was ~~$2.2~~$1.0 million. Of this expense, ~~$1.5~~$0.9 million related to awards made under the 2018 Plan and $0.1 million related to costs from awards made under ~~the~~a 2016 ~~Long Term Incentive Plan and $0.7 million from awards made under the 2018 Plan.~~long term incentive plan.

Acquisition and integration related transaction expenses

Acquisition and integration related transaction expenses decreased by ~~$2.1~~$1.8 million to ~~$1.2~~$1.4 million, on a reported basis. ~~The entirety of~~Both the ~~2019~~2021 and ~~the majority of the~~ 2020 ~~period~~ expenses were primarily related to ~~work~~the acquisitions made in ~~respect~~the fourth quarter of ~~potential acquisitions, with~~2019 as detailed in the ~~2019 expenses relating to~~annual report 10K for the acquisition and third party integration fees linked exclusively to the acquisition and integration of Novomatic UK’s Gaming Technology Group. In addition, there was a further $0.7 million of costs incurred in 2020 relating to potential merger and acquisition activity.fiscal year ending December, 2020.

Depreciation and amortization

Depreciation and amortization increased by ~~$5.7~~$0.5 million, or ~~68.6%~~4.2%, to ~~$14.0~~$13.1 million on a reported basis. This included the impact of unfavorable currency movements of ~~$0.6~~$1.0 million.

~~This increase was driven by the addition of $6.8 million in~~ On a functional currency (at constant rate) basis, depreciation and amortization ~~attributable~~decreased by $0.4 million, or 3.4%, driven primarily by a decrease of $1.3 million in Gaming due to ~~Acquired Businesses,~~assets being fully written down, partly offset by ~~a reduction~~an increase of $0.5 million in ~~depreciation~~Leisure and $0.3 million in ~~SBG as UK machines reached fully depreciated status.~~ Virtual Sports.

Net operating ~~profit~~loss

During the period, net operating ~~profit~~loss was ~~$8.2~~$12.2 million compared to a net operating loss of ~~$5.7~~$7.2 million in the prior period. The ~~increase~~decrease of $5.0 million in operating profit was attributable to ~~an increase~~the decrease of ~~$10.4 million~~revenue driven by the COVID-19 closures, partly offset by growth in ~~operating profit in SBG, largely attributable to the VAT-related income, an increase of $2.4 million in operating profit in Virtual Sports,~~Interactive, as well as ~~the $2.1 million decrease in acquisition related transaction expenses, offset by a $1.8 million operating loss in Acquired Businesses.~~cost savings across our Gaming, Virtual Sports and Leisure segments. This ~~increase~~decline also included a ~~$0.3~~$1.0 million ~~favorable~~unfavorable impact from foreign currency translation.

Interest expense

~~Interest~~Net interest expense increased by ~~$3.9~~$2.8 million in the ~~period,~~three months ended March 31, 2021 to ~~$8.3~~$8.6 million, on a reported basis, due to a ~~$3.1~~$2.0 million increase in debt interest primarily due to capitalization of debt interest in 2020 increasing debt levels and movements in the exchange rates, a $0.3 million increase in the amortization of capitalized debt fees and a $0.6 million ~~increase in debt fee amortization following the refinancing in October 2019.~~exchange rate impact.

Change in fair value of ~~derivative~~warrant liability

~~Following the termination~~Change in fair value of ~~the cross-currency swaps on October 1, 2019, there was no change in the fair values of derivative liabilities in~~warrant liability for the three months ended ~~September 30, 2020.~~March 31, 2021 resulted in a $3.0 million charge. The ~~current swaps qualify for hedge accounting and accordingly are not shown~~charge related 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 ~~derivative~~a liability ~~movements.~~of the entity measured at fair value, with changes in fair value each period reported in earnings. For the three months ended ~~September 30, 2019,~~March 31, 2020, the change in fair value ~~of derivative liability was~~resulted in a ~~$2.9~~$7.6 million credit.

Other finance income

Other finance income for the three months ended ~~September 30, 2020~~March 31, 2021 resulted in a ~~$0.3~~$6.4 million credit compared to a ~~$1.2~~$3.7 million charge in the three months ended ~~September 30, 2019. Movements~~March 31, 2020. This variance was driven by movements in the retranslation inwith respect to the principal balance of our senior debt ~~explain the changes, but 2019 also included a $3.0 million benefit from the GBP:USD cross-currency swap which was terminated on October 1, 2019.~~facilities.

Income tax expense

Our effective tax rate for the period ended ~~September 30, 2020~~March 31, 2021 was ~~0.0%~~(4.0%) and our effective tax rate for the period ended ~~September 30, 2019~~March 31, 2020 was ~~1.2%~~2.3%.

Net ~~profit~~loss

During the period, net ~~profit~~loss was ~~$0.3~~$16.7 million compared to a net loss of ~~$8.5~~$9.8 million in the prior period. On a functional currency at(at constant ~~rate~~rate) basis, net ~~profit~~loss increased by ~~$9.0~~$5.8 million, primarily due to the ~~VAT-related income and growth~~decline in ~~Virtual Sports as customers moved towards online Virtuals during~~revenue due to COVID-19 ~~related shutdowns.~~closures.

Three Months ended ~~September 30, 2020~~March 31, 2021 compared to Three Months ended ~~September 30, 2019~~March 31, 2020 – ~~Server Based~~ Gaming Segment

We generate revenue from our Gaming segment through the selling and rental of our gaming machines. We receive rental fees for machines, typically on a long-term contract basis, on both a participation and 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.

Revenue growth for our ~~SBG~~Gaming business is principally driven by the number of operator customers we have, the number of ~~SBG~~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.

~~SBG~~

Gaming Segment, Key Performance Indicators

For the Three-Month
Period ended
Unaudited Unaudited
Sept 30, Sept 30, Variance
SBG 2020 2019 2020 vs 2019
%
End of period installed base (# of terminals) 32,311 32,084 227 0.7 %
Average installed base (# of terminals) 32,698 34,764 (2,066 ) (5.9 %)
Customer Gross Win per unit per day (1)(2) £ 69.24 £ 74.06 £ (4.82 ) (6.5 %)
Customer Net Win per unit per day (1)(2) £ 50.85 £ 53.10 £ (2.24 ) (4.2 %)
Inspired Blended Participation Rate 6.2 % 6.3 % (0.1 %)

	For the Three-Month Period ended						Variance
	Unaudited Mar 31,			Unaudited Mar 31,			2021 vs 2020
Gaming	2021			2020						%

End of period installed base (# of terminals)		31,508			32,182			(674	)		(2.1	)%
Total Gaming - Average installed base (# of terminals)		31,509			32,069			(560	)		(1.7	)%
Participation - Average installed base (# of terminals)		29,564			30,311			(746	)		(2.5	)%
Fixed Rental - Average installed base (# of terminals)		1,945			1,758			187			10.6	%
Service Only - Average installed base (# of terminals)		21,738			21,114			624			3.0	%
Customer Gross Win per unit per day ^{(1) (2)}	£	0.6		£	64.5		£	(64.0	)		(99	)%
Customer Net Win per unit per day ^{(1) (2)}	£	0.4		£	47.7		£	(47.2	)		(99	)%
Inspired Blended Participation Rate		7.5	%		6.5	%		0.9	%		14.3	%
Inspired Fixed Rental Revenue per Gaming Machine per week	£	0.0		£	44.1		£	(44	)		(100	)%
Inspired Service Rental Revenue per Gaming Machine per week	£	0.76		£	3.7		£	(3	)		(79	)%
Gaming Long term license amortization (£’m)	£	1.3		£	1.2		£	0.0			3.8	%
Number of Machine sales		482			1,185			(703	)		(59	)%
Average selling price per terminal	£	6,944		£	4,361		£	2,583			59.2	%

(1)	Includes all ~~SBG~~Gaming terminals in which the company takes a participation revenue share across all territories

(2)	Includes all days of the ~~quarter,~~period, including the days during which the ~~SBG~~Gaming terminals were not operating due to ~~COVID-19.~~COVID-19 closures.

InPlease refer to our Annual Report on Form 10-K for the ~~table above:~~

~~“End~~year ended December 31, 2020 for definitions of Period Installed Base” is equal to the number of deployed SBG terminals at the end of each period that have been placed on a participation basis. SBG participation revenue, which comprises the majority of SBG service revenue, is directly related to the terminal installed base. This is the medium by which customers generate revenue and distribute a revenue share to the Company. To the extent all other KPIs and certain other factors remain constant, the larger the installed base, the higher the Company’s revenue will be for that period. Management gives careful consideration to this KPI in terms ~~of driving growth across the segment.~~

~~Revenue is derived from the performance of the installed base as described by the Gross and Net Win KPIs.~~

If the End of Period Installed Base is materially different from the Average Installed Base (described below), we believe this gives an indication as to potential future performance. The End of Period Installed Base is particularly useful for assessing new customers or markets, to indicate the progress being made with respect to entering new territories or jurisdictions.

~~“Average Installed Base” is the average number of deployed SBG terminals during the period. Therefore, it is more closely aligned to revenue~~used in the ~~period. This measure is particularly useful for assessing existing customers or markets to provide comparisons of historical size and performance.~~

“Customer Gross Win per unit per day” is a KPI used by our internal decision makers to (i) assess impact on the Company’s revenue, (ii) determine changes in the strength of the overall market and (iii) evaluate the impacts of regulatory change and our new content releases on our customers. Customer Gross Win per unit per day is the average per unit cash generated across all SBG terminals in which the Company takes a participation revenue share across all territories in the period, defined as the difference between the amounts staked less winnings to players divided by the Average Installed Base in the period, then divided by the number of days in the period.

SBG revenue share income accrued in the period is derived from Customer Gross Win accrued in the period after deducting gaming taxes (defined as a regulatory levy paid by the Customer to government bodies) and applying the Company’s contractual revenue share percentage.

Our internal decision makers believe Customer Gross Win measures are meaningful because they represent a view of customer operating performance that is unaffected by our revenue share percentage and allow management to (1) readily view operating trends, (2) perform analytical comparisons and benchmarking between customers and (3) identify strategies to improve operating performance in the different markets in which we operate.

~~“Customer Net Win per unit per day” is Customer Gross Win per unit per day after giving effect to the deduction of gaming taxes.~~

“Inspired Blended Participation Rate” is the Company’s average revenue share percentage across all terminals where revenue is earned on a participation basis, weighted by Customer Net Win per unit per day.

Our overall SBG revenue from terminals placed on a participation basis can therefore be described as the product of the Average Installed Base, the Customer Net Win per unit per day, the number of days in the period, and the Inspired Blended Participation Rate, to give “participation revenue”.above table.

~~SBG Segment, key events that affected results for the Three Months ended September 30, 2020~~

During the period Customer Gross Win per unit per day in the total UK market (including non-LBO markets) increased by 7.1%. This was due mainly to the strong recovery of incomes in the UK LBO market post COVID-19 shutdown of venues. However, while the comparative third quarter 2019 UK gross win per unit per day of £89 includes a diminishing impact from the reduction in maximum permitted bets on B2 gaming machines in the UK, effective as of April 1, 2019 (“the Triennial Implementation”), it does not include the impact of the September 2020 closure of 700 lower-performing venues, which positively impacts the average UK gross win per unit per day. A further 116 retail venues were permanently closed with the same customer post-reopening in June 2020.

~~In July 2020 the $9.3 million VAT-related income was received from a major UK customer. This amount has been recorded as revenue in our results.~~

In the UK Electronic Table Games (ETG) market, we sold 50 “Sabre Hydra” terminals to a major Casino customer, as the first batch of installs from an order of 156 terminals which was completed in October 2020.

During the period, new market sales continued in markets which we entered in December 2019. Hardware sales of a further 54 “Valor™” terminals were agreed between multiple customers in Illinois, North America, taking the total number of unit sales since launch to 331. Retail venues in Illinois reopened after the COVID-19 related shutdown in July 2020.

In Italy, Customer Net Win per unit per day (in EUR) decreased by 47.9% vs the comparative period, driven mainly by an increase in gaming tax on value played of 0.6% and the impact of card readers implemented in January 2020. When compared against first quarter 2020, which includes a comparable level of shutdowns due to COVID-19, Customer Net Win per unit per day (in EUR) decreased by 11%.

~~Greece Customer Gross Win per unit per day (in EUR) decreased by just 1.3%, despite the increase in average installed base year on year of 1,100 terminals.~~

Customer Gross Win per unit per day (in our functional currency, GBP) decreased by £5 or 6.5% across the entire estate due mainly to the impact of the introduction of card readers in the Italy market as well as COVID-19 related shutdowns. The blended participation rate decreased from 6.3% to 6.2%.

~~SBG Segment, Three Months ended September 30, 2020 compared to Three Months ended September 30, 2019~~

For the Three-Month
Period ended Variance
Server Based Gaming Unaudited Sept 30, Unaudited Sept 30, Variance Functional
Currency at Functional Currency
(In millions) 2020 2019 2020 vs 2019 Constant rate Currency Movement
Revenue:
Service $ 23.7 $ 15.5 $ 8.2 53.1 % $ 7.3 47.3 % $ 0.9
Hardware 1.8 2.8 (1.0 ) (35.3 %) (1.1 ) (38.3 %) 0.1
Total revenue 25.5 18.3 7.2 39.3 % 6.2 33.9 % 1.0

Cost of sales, excluding depreciation and amortization:
Cost of service (5.0 ) (4.1 ) (0.9 ) 20.7 % (0.6 ) 15.4 % (0.2 )
Cost of hardware (0.9 ) (2.3 ) 1.3 (58.4 %) 1.3 (59.8 %) (0.0 )
Total cost of sales (5.9 ) (6.4 ) 0.4 (6.7 %) 0.7 (10.8 %) (0.3 )
Selling, general and administrative expenses (4.5 ) (5.7 ) 1.2 (20.2 %) 1.3 (22.9 %) (0.1 )
Stock-based compensation (0.2 ) (0.4 ) 0.2 (51.6 %) 0.2 (56.4 %) (0.0 )
Depreciation and amortization (5.4 ) (6.8 ) 1.4 (21.2 %) 1.7 (24.7 %) (0.2 )
Net operating Income (Loss) $ 9.5 $ (1.0 ) $ 10.4 NM $ 10.1 NM $ 0.3
Exchange Rate - $ to £ 1.28 1.23

Note: Exchange rate in the table is calculated by dividing the USD total revenue by the GBP total revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.

~~SBG Segment Revenue~~

In the period revenue increased by $7.2 million to $25.5 million, on a reported basis. This increase was partly due to favorable currency movements of $1.0 million. On a functional currency at constant rate basis, SBG revenue increased by $6.2 million, or 33.9%.

Service revenue increased by $8.2 million on a reported basis. Favorable currency movements accounted for $0.9 million of the increase. On a functional currency at constant rate basis, SBG service revenue increased by $7.3 million, or 47.3%, to $23.7 million. This was primarily due to the VAT-related income and increased installed base in the Greek market of $0.6 million. These were partly offset by Italy tax, card reader impact and recovery of incomes post COVID-19 of $0.9 million, impact of a service contract that ceased in the UK Casino market and delayed UK Casino and Bingo venue openings of $0.6 million, and the impact of an incremental 600 UK LBO retail venue closures of $0.9 million.

Hardware revenue decreased by $1.0 million to $1.8 million on a reported basis. On a functional currency at constant rate basis, the revenue decrease was also $1.1 million or a decline of 38.3%. The decrease was due to the 30 additional “Sabre Hydra” sales in 2020 of $0.4 million and North America “Valor™” sales of $0.8 million offset by the reduction in sales of 365 SSBTs (Self Service Betting Terminals) in the UK LBO market of $1.4 million and 100 “Flex Cabinets” in the UK Bingo & Leisure market for $0.8 million from 2019 to 2020.

~~SBG Segment Operating Income~~

Cost of sales (excluding depreciation and amortization) decreased by $0.4 million to $5.9 million on reported basis, which included adverse currency movements of $0.3 million. On a functional currency at constant rate basis, SBG cost of sales decreased by $0.7 million or 10.8%.

Service cost of sales increased by $0.9 million to $5.0 million on a reported basis, including adverse currency movements of $0.2 million. On a functional currency at constant rate basis, service cost of sales increased by $0.6 million or 15.4%, driven by third party content cost of sale element related to the VAT-related income of $0.3 million and Colombia write offs of $0.5 million, partly offset by reduced costs in the UK and Italy of $0.2 million.

~~Hardware cost of sales decreased by $1.3 million to $0.9 million on both a reported and functional currency basis, reflecting the decrease in hardware sales.~~

SBG SG&A expense declined by $1.2 million on a reported basis. This decrease includes the impact of unfavorable currency movements of $0.1 million, reflecting ongoing restructuring, as well as synergies associated with the acquisition of the Acquired Businesses. Of this reduction, $1.0 million is attributable to reduced staffing costs, related to both staff reductions and reduced salaries implemented due to the COVID-19 pandemic.

Depreciation declined by $1.4 million on a reported basis, or 21.2%. The decrease in depreciation expense was due to the machines in the UK estate becoming fully depreciated, offset by additional depreciation from new machines in the Greek estate.

~~Operating income increased by $10.4 million year over year, from a $1.0 million reported operating loss to a $9.5 million operating profit year over year, due primarily to the VAT-related income.~~

~~SBG~~Gaming Segment, Recurring Revenue

Set forth below is a breakdown of our ~~SBG~~Gaming recurring revenue. ~~SBG~~Gaming recurring revenue consists principally of ~~SBG~~Gaming participation revenue and fixed rental revenue.

For the Three-Month
Period ended
Unaudited Unaudited
Sept 30, Sept 30,
Variance

(In £ millions) 2020 2019 2020 vs 2019 %
SBG Recurring Revenue
Total SBG Revenue £ 19.9 £ 14.9 £ 5.0 33.9 %

SBG Participation Revenue * £ 9.4 £ 10.6 £ (1.1 ) (10.8 %)
SBG Other Fixed Fee Recurring Revenue £ 0.2 £ 0.3 £ (0.2 ) (47.5 %)
Total SBG Recurring Revenue £ 9.6 £ 10.9 £ (1.3 ) (11.9 %)
SBG Recurring Revenue as a % of Total SBG Revenue 48.3 % 73.5 % (25.1 %)

	For the Three-Month Period ended						Variance
	Unaudited Mar 31,			Unaudited Mar 31,			2021 vs 2020
(In £ millions)	2021			2020						%
Gaming Recurring Revenue
Total Gaming Revenue	£	7.8		£	19.4		£	(11.6	)		(59.7	)%

Gaming Participation Revenue	£	0.2		£	8.7		£	(8.5	)		(98.1	)%
Gaming Other Fixed Fee Recurring Revenue	£	0.3		£	2.4		£	(2.1	)		(89.3	)%
Gaming Long term license amortization	£	1.3		£	1.2		£	0.0			3.8	%
Total Gaming Recurring Revenue *	£	1.7		£	12.4		£	(10.6	)		(86.1	)%
Gaming Recurring Revenue as a % of Total Gaming Revenue †		21.8	%		63.6	%		(41.7	)%

	*	Does not reflect VAT-related ~~income~~revenue
†	Total Gaming Revenue for the three-month period ended March 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 30.9% of Total Gaming Revenue for such period.

InPlease refer to our Annual Report on Form 10-K for the ~~table above:~~year ended December 31, 2020 for definitions of terms used in the above table.

“SBG Participation Revenue” includes our share of revenue generated from (i) our SBG terminals placed in gaming and lottery venues; and (ii) licensing of our game content and intellectual property to third parties.

~~“SBG Other Fixed Fee Recurring Revenue” includes service revenue in which the Company earns a periodic fixed fee on a contracted basis.~~

~~“Total SBG Recurring Revenue” is equal to SBG Participation Revenue plus SBG Other Fixed Fee Recurring Revenue.~~

~~SBG~~Gaming Segment, Service Revenue by Region

Set forth below is a breakdown of our ~~SBG~~Gaming service revenue by geographic region. ~~SBG~~Gaming service revenue consists principally of ~~SBG~~Gaming participation revenue, Gaming other fixed fee revenue, Gaming long term license amortization and Gaming other non-recurring revenue. See “— Gaming Segment Revenue” below for a discussion of gaming service revenue between the periods under review.

~~Server Based~~ Gaming Service Revenue by Region

	For the Three-Month Period ended									Variance
	Unaudited		Unaudited							Functional
	Sept 30,		Sept 30,		Variance					Currency at			Functional			Currency		For the Three-Month Period ended
(In millions)	2020		2019		2020 vs 2019					Constant rate			Currency			Movement		Unaudited Mar 31, 2021		Unaudited Mar 31, 2020		Variance 2021 vs 2020			Total Functional Currency %			Total Variance %

Service Revenue:
UK LBO	$	17.1	$	8.3	$	8.8		106.8	%	$	8.2			99.6	%	$	0.6	$	0.6	$	7.3	$	(6.7	)		(92.3	)%		(91.8	)%
UK VAT - Related Income																			3.1		-	$	3.1			n/a			n/a
UK Other	$	0.7	$	1.3		(0.6	)	(43.5	)%		(0.6	)		(46.1	)%		0.0		0.1		4.2		(4.1	)		(98.5	)%		(98.4	)%
Italy	$	0.9	$	1.7		(0.8	)	(46.1	)%		(0.8	)		(48.6	)%		0.0		0.1		0.8		(0.7	)		(89.5	)%		(88.8	)%
Greece	$	4.8	$	4.0		0.8		19.4	%		0.6			14.0	%		0.2		1.7		4.1		(2.4	)		(61.3	)%		(58.5	)%
Rest of the World	$	0.1	$	0.1		(0.0	)	(32.8	)%		(0.1	)		(36.6	)%		0.0		0.0		0.2		(0.2	)		(87.8	)%		(87.0	)%

Total service revenue	$	23.7	$	15.5	$	8.2		53.1	%	$	7.3			47.3	%	$	0.9	$	5.6	$	16.6	$	(11.0	)		(68.3)	%		(66.3	)%

Exchange Rate - $ to £		1.28		1.23															1.37		1.29

Note: Exchange rate in the table is calculated by dividing the USD total service revenue by the GBP total service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.

~~Virtual Sports~~Gaming Segment, key events that affected results for the Three Months ended March 31, 2021

Total Gaming Customer Gross Win per unit per day (in our functional currency, GBP) decreased by £63.96, or 99.1% which was due to COVID-19 closures during 2021. Very limited operations in the UK and Colombia were in operation during the period. The majority of the UK estate, all Greece retail venues and all Italy retail venues were shut during the quarter ended March 31, 2021. The participation rate increased from 6.5% to 7.5% due to a number of UK customers in operation who contractually pay higher than average terms.

Inspired received VAT-related revenue of $3.1 million in January 2021 from a major UK customer. This payment has been recorded as revenue in our results.

During the period, Inspired sold 40 “Valor™” terminals to a number of customers in Illinois, increasing the total number of North American unit sales since launch in December 2019 to 469. Retail venues in Illinois were shut down during the quarter ended December 31, 2020 due to COVID-19, which negatively impacted sales during this period. As of February, all eleven regions in Illinois had reopened.

Inspired delivered our first sales to Western Canada Lottery Corporation (“WCLC”), our second jurisdiction in North America. Inspired recorded the sale of 100 “Valor™” terminals to WCLC during March 2021, providing revenue of $1.6 million.

Inspired furthered its relationship with a major customer in the Dutch market with the sale and delivery of an additional 206 “Analogue” terminals.

In the UK market, outright product sales of 75 “Flex” terminals were recorded with a major customer during the months of January and February. This installed base also carries a future recurring rental income.

Three Months ended ~~September 30, 2020~~March 31, 2021 compared to Three Months ended ~~September 30, 2019~~March 31, 2020 – Gaming Segment

	For the Three-Month Period ended
(In millions)	Unaudited Mar 31,2021			Unaudited Mar 31, 2020			Variance 2021 vs 2020			Total Functional Currency %			Total Variance %

Revenue:
Service	$	5.6		$	16.6		$	(11.0	)		(68.3	)%		(66.3	)%
Product		5.2			8.3			(3.1	)		(42.4	)%		(37.5	)%
Total revenue		10.8			24.9			(14.1	)		(59.7	)%		(56.7	)%

Cost of sales, excluding depreciation and amortization:
Cost of service		(0.6	)		(4.3	)		3.7			(87.1	)%		(86.1	)%
Cost of product		(2.9	)		(5.4	)		2.5			(49.8	)%		(45.8	)%
Total cost of sales		(3.5	)		(9.7	)		6.2			(66.2	)%		(63.5	)%

Selling, general and administrative expenses		(4.1	)		(8.9	)		4.8			(56.6	)%		(53.6	)%

Stock-based compensation		(0.2	)		(0.1	)		(0.1	)		51.9	%		37.1	%

Depreciation and amortization		(6.6	)		(7.4	)		0.8			(17.0	)%		(11.2	)%

Net operating Income (Loss)	$	(3.6	)	$	(1.2	)	$	(2.5	)		182.6	%		209.6	%

Exchange Rate - $ to £		1.38			1.28

Gaming Segment Revenue

During the period, Gaming revenue decreased by $14.1 million, or 56.7%, to $10.8 million on a reported basis. On a functional currency (at constant rate) basis, Gaming revenue decreased by $14.8 million, or 59.7%. This was partially offset by favorable currency movements of $0.7 million.

Service revenue decreased by $11.0 million on a reported basis. On a functional currency (at constant rate) basis, Gaming Service revenue decreased by $11.3 million, or 68.3%, to $5.6 million. This was driven by a decline in UK (including Licensed Betting Offices (“LBO”) and UK other) sales of $10.9 million primarily driven by the COVID-19 closures during the period. Greece and Italy had revenue declines of $2.5 million and $0.7 million, respectively, driven by the COVID-19 closures. This was partially offset by favorable currency movements of $0.3 million.

Product revenue decreased by $3.1 million to $5.2 million on a reported basis. On a functional currency (at constant rate) basis, revenue decreased by $3.5 million, or 42.4%.

Gaming Segment Operating Income

Cost of sales (excluding depreciation and amortization) decreased by $6.2 million to $3.5 million on a reported basis, which included adverse currency movements of $0.3 million. On a functional currency (at constant rate) basis, Gaming cost of sales decreased by $6.4 million, or 66.2%. The reduction in cost of sales was driven by the corresponding reduction in revenue related to the COVID-19 closures.

SG&A expense declined by $4.8 million on a reported basis. This decrease included the impact of unfavorable currency movements of $0.3 million. On a functional currency (at constant rate) basis, Gaming SG&A decreased by $5.0 million, or 56.6%. This was driven by reduced staffing costs related to both staff reductions and reduced salaries implemented due to the COVID-19 closures as well as synergy and other cost savings.

Depreciation and amortization declined by $0.8 million on a reported basis, or 11.2%. This included the impact of unfavorable currency movements of $0.4 million. On a functional currency (at constant rate basis), Gaming depreciation and amortization decreased by $1.3 million, or 17.0%. This was driven by a decrease in UK LBO depreciation due to assets that have been fully written down.

Operating income decreased by $2.5 million on a reported basis, from a loss of $1.2 million to a loss of $3.6 million. This was primarily due to the COVID-19 closures and unfavorable currency movements of $0.2 million, partly offset by the VAT-related income.

Three Months ended March 31, 2021 compared to Three Months ended March 31, 2020 – Virtual Sports Segment

We generate revenue from our Virtual Sports segment through the licensing of our products. 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 Virtual Sports content placed on our customers’ websites or in our customers’ facilities. Typically, we recognize revenue from these arrangements on a daily basis over the term of the contract.

Revenue growth for our Virtual Sports segment is principally driven by the number of customers we have, the net win performance of the games and the net win percentage that we receive pursuant to our contracts with our customers.

Virtual Sports Segment, Key Performance Indicators

For the Three-Month
Period ended
Unaudited Unaudited
Sept 30, Sept 30, Variance
Virtuals 2020 2019 2020 vs 2019
%
No. of Live Customers at the end of the period 129 102 27 26.5 %
Average No. of Live Customers 128 101 27 26.7 %
Total Revenue (£‘m) £ 8.4 £ 6.7 £ 1.7 25.6 %

Total Virtual Sports Recurring Revenue (£‘m) £ 8.0 £ 6.0 £ 2.0 33.2 %
Total Revenue £‘m - Retail £ 3.2 £ 3.8 £ (0.6 ) (16.1 )%
Total Revenue £‘m - Scheduled Online Virtuals £ 3.2 £ 2.2 £ 1.0 45.0 %
Total Revenue £‘m - Interactive £ 2.0 £ 0.7 £ 1.3 196.9 %
Average Revenue Per Customer per day (£) £ 713 £ 717 £ (4 ) (0.6 )%

	For the Three-Month Period ended				Variance
	Unaudited Mar 31,		Unaudited Mar 31,		2021 vs 2020
Virtuals	2021		2020					%

No. of Live Customers at the end of the period		59		56		3			5.4	%
Average No. of Live Customers		59		56		3			5.4	%
Total Revenue (£’m)	£	4.6	£	6.1	£	(1.5	)		(24.5	)%
Total Revenue £’m - Retail	£	0.6	£	3.3	£	(2.7	)		(82	)%
Total Revenue £’m - Online Virtuals	£	4.0	£	2.7	£	1.3			46	%

~~In the table above:~~

“No. of Live Customers at the end of the period” and “Average No. of Live Customers” represent the number of customers from which there is Virtual Sports revenue at the end of the period and the average number of customers from which there is Virtual Sports revenue during the period, respectively.

~~“Total Revenue (£m)” represents total revenue~~Please refer to our Annual Report on Form 10-K for the ~~Virtual Sports segment, including recurring and upfront service revenue. Total revenue is also divided between “Total Revenue (£m) – Retail,” which consists~~year ended December 31, 2020 for definitions of revenue earned through players wagering at Virtual Sports venues, “Total Revenue (£m) – Scheduled Online Virtuals,” which consists of revenue earned through players wagering on Virtual Sports online, and “Total Revenue (£m) – Interactive,” which consists of revenue earned through our Interactive product.

“Recurring Revenue” includes our share of revenue generated from (i) our Virtual Sports products placed with operators; (ii) licensing our game content and intellectual property to third parties; and (iii) our games on third-party online gaming platforms that are interoperable with our game servers.

~~“Average Revenue per Customer per day” represents total revenue for the Virtual Sports segment~~terms used in the ~~period, divided by the Average No. of Live Customers, divided by the number of days in the period.~~above table.

Virtual Sports Segment, Recurring Revenue

For the Three-Month
Period ended
Unaudited Unaudited
Sept 30, Sept 30, Variance
(In £ millions) 2020 2019 2020 vs 2019
%
Virtual Sports Recurring Revenue
Total Virtual Sports Revenue £ 8.4 £ 6.7 £ 1.7 25.6 %

Recurring Revenue - Retail Virtuals £ 2.9 £ 3.3 £ (0.4 ) (11.4 )%
Recurring Revenue - Scheduled Online Virtuals £ 3.2 £ 2.1 £ 1.1 54.1 %
Recurring Revenue - Interactive £ 1.9 £ 0.7 £ 1.3 189.4 %
Total Virtual Sports Recurring Revenue £ 8.0 £ 6.0 £ 2.0 33.2 %
Virtual Sports Recurring Revenue as a Percentage of Total 95.7 % 90.3 % 5.5 %
Virtual Sports Revenue

Set forth below is a breakdown of our Virtual Sports recurring revenue.

	For the Three-Month Period ended						Variance
	Unaudited Mar 31,			Unaudited Mar 31,			2021 vs 2020
(In £ millions)	2021			2020						%
Virtual Sports Recurring Revenue
Total Virtual Sports Revenue	£	4.6		£	6.1		£	(1.5	)		(24.5	)%

Recurring Revenue - Retail Virtuals	£	0.5		£	2.9		£	(2.4	)		(82.5	)%
Recurring Revenue - Online Virtuals	£	3.9		£	2.6		£	1.3			50.7	%
Total Virtual Sports Long term license amortization	£	0.2		£	0.4		£	(0.3	)		(62.7	)%
Total Virtual Sports Recurring Revenue	£	4.6		£	5.9		£	(1.3	)		(22.6	)%
Virtual Sports Recurring Revenue as a Percentage of Total Virtual Sports Revenue		100.0	%		97.5	%		2.5	%

~~For~~Please refer to our Annual Report on Form 10-K for the year ended December 31, 2020 for definitions of ~~the~~ terms used in the ~~table~~ above ~~see the definitions provided above.~~table.

Virtual Sports Segment, key events that affected results for the Three Months ended ~~September 30, 2020~~March 31, 2021

During the ~~quarter most~~three months ended March 31, 2021, our key retail territories, the United Kingdom, Ireland, Italy, Greece and Belgium were ~~back online and~~ in full lockdown as a ~~recovery phase from~~result of the COVID-19 ~~related worldwide lockdown that severely~~closures. In the same quarter in the prior year only half of March 2020 was impacted by land-based closures. As a result, retail recurring revenues declined by $3.3 million which includes a positive currency impact of $0.2 million.

Online recurring growth of $1.8 million, or 50.7%, partially offset the ~~previous quarter. Whilst~~decline in retail ~~recovery has exceeded expectations,~~which includes an adverse currency impact of $0.1 million.

There was a further decline of $0.4 million from historical license fee amortization contracts reaching their expiration.

During the three months ended March 31, 2021, we launched two channels of our Matchday Soccer product with Sisal Sans in Turkey via our proprietary Virtual Plug & Play^{TM (“}VPP”) platform, which sits alongside the existing 11 channels of virtual sports. Since the launch of the Turkish and English Matchday leagues there has been a ~~year on year decline of $0.5 million. Online revenues across the Scheduled Virtuals and Interactive divisions have increased $3.0 million leading to a net~~significant increase in ~~revenue of $2.5 million.~~

~~At the end of September,~~GGR and in our ~~Scheduled Online Virtuals products were launched in Turkey with Misli, a major online operator.~~

~~Scheduled Online Virtuals were deployed with several GVC websites including BWIN, Sportingbet and Partypoker.~~market share.

In ~~New Jersey, Scheduled Online Virtuals were~~Poland we launched soccer and a mixed sports channel with Fortuna on 250 Self Service Betting Terminals (“SSBTs”) which complements our previously available over the counter offering.

V-Play Horses was launched with ~~Draftkings,~~LT Game in Macau in Casino Kam Pek on the Electronic Table Game (“ETG”) terminals with regulatory approval received for a ~~major strategic deployment in North America, representing our first US launch with VPP.~~further roll out.

~~The Interactive division added key~~A new five-year contract for global distribution of Virtual Sports was signed with Entain, covering both retail and online channels across multiple jurisdictions.

A new agreement was signed with Stoiximan to provide scheduled virtual sports to customers ~~during~~in multiple jurisdictions, including Greece where Stoiximan is one of the ~~period, including Kindred Europe, Stoiximan in Greece, Draftkings in New Jersey~~leading operators.

A new agreement was signed with CAGE Sports to provide Virtual Sports to customers on both the retail and ~~Caliente in Mexico. The summer blockbuster titles, Centurion Megaways™ and Reelking Megaways™ were launched to the wider estate driving significant growth~~online channels in the ~~period~~Caribbean.

The Average Number of Live Customers during the period increased by twenty-seven, from 101 to 128. Including the launch of new Interactive customers in the quarter, our Average Number of Live Interactive Customers for the period increased to 72.

~~Virtual Sports Segment,~~ Three Months ended ~~September 30, 2020~~March 31, 2021 compared to Three Months ended ~~September 30, 2019~~March 31, 2020 – Virtual Sports Segment

For the Three-Month
Period ended   Variance
Virtual Sports Unaudited
Sept 30, Unaudited
Sept 30, Variance Functional
Currency at Functional Currency
(In millions) 2020 2019 2020 vs 2019 Constant rate Currency Movement

Service Revenue $ 10.9 $ 8.3 $ 2.6 31.5 % $ 2.1 25.6 % $ 0.5
Cost of Service (1.2 ) (0.6 ) (0.6 ) 97.0 % (0.5 ) 87.8 % (0.1 )
Selling, general and administrative expenses (1.4 ) (1.9 ) 0.5 (28.3 %) 0.6 (32.8 %) (0.1 )
Stock-based compensation (0.2 ) (0.3 ) 0.1 (49.9 %) 0.2 (63.7 %) (0.1 )
Depreciation and amortization (1.5 ) (1.3 ) (0.3 ) 20.1 % (0.2 ) 16.2 % (0.1 )
Net operating Income (Loss) $ 6.6 $ 4.2 $ 2.5 58.4 % $ 2.2 53.8 % $ 0.2
Exchange Rate - $ to £ 1.29 1.23

	For the Three-Month Period ended
(In millions)	Unaudited Mar 31, 2021			Unaudited Mar 31, 2020			Variance 2021 vs 2020			Total Functional Currency %			Total Variance %

Service Revenue	$	6.3		$	7.8		$	(1.4	)		(24.5	)%		(18.6	)%

Cost of service		(0.3	)		(0.7	)		0.4			(60.1	)%		(57.3	)%

Selling, general and administrative expenses		(1.1	)		(1.2	)		0.1			(21.8	)%		(11.5	)%

Stock-based compensation		(0.1	)		(0.1	)		(0.0	)		22.0	%		31.4	%

Depreciation and amortization		(1.1	)		(0.8	)		(0.3	)		33.2	%		43.1	%

Net operating Income (Loss)	$	3.7		$	5.0		$	(1.3	)		(30.1	)%		(25.6	)%

Exchange Rate - $ to £		1.38			1.28

Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.

Virtual Sports Segment revenue.In

During the period, revenue ~~increased~~decreased by ~~$2.6~~$1.4 million, or ~~31.5%~~18.6%, on a reported basis. This ~~increase includes~~decrease included the impact of favorable currency movements of $0.5 million. On a functional currency at(at constant ~~rate~~rate) basis, ~~Virtual Sports~~ revenue ~~increased~~decreased by ~~$2.1~~$1.9 million, or ~~25.6%~~24.5%. This ~~increase included~~decrease was driven by a ~~$0.5~~$3.5 million ~~decline~~decrease in retail ~~recurring~~ revenue ~~from~~due to the COVID-19 ~~national shutdowns. Declines were~~closures. This decline was partially offset by growth in ~~Scheduled~~ Online Virtuals of ~~$1.4 million and Interactive of~~ $1.6 million.

Virtual Sports Segment operating income.

Cost of ~~service increased~~Service decreased by ~~$0.6~~$0.4 million to ~~$1.2~~$0.3 million on a reported basis, ~~due to increased third party platform provider costs~~with no impact from currency movements. This was driven by the ~~Interactive division,~~decline in ~~line with~~retail revenue, partly offset by the ~~significant revenue increase for the period.~~growth in Online Virtuals.

SG&A expenses decreased by ~~$0.5~~$0.1 million on a reported basis. ~~This decrease includes the impact of adverse currency movements of $0.1 million.~~ On a functional currency at(at constant ~~rate~~rate) basis, SG&A expenses decreased by ~~$0.6~~$0.3 million, or 21.8%. This decrease was driven by staff-related cost ~~savings.~~savings from the COVID-19 closures related furlough scheme and reduction in staff salaries.

Depreciation and amortization ~~increased~~decreased by $0.3 million on a reported ~~basis. This increase includes the impact of adverse~~and functional currency ~~movements of $0.1 million.~~(at constant rate) basis.

Operating profit ~~increased~~decreased by ~~$2.5~~$1.3 million on a reported basis which included the impact of favorable currency movements of $0.2 million. On a functional currency at(at constant ~~rate~~rate) basis operating profit ~~increased~~decreased by ~~$2.2~~$1.5 million. This was primarily due to ~~an increase~~the decrease in revenues ~~and reduced SG&A expenses.~~ resulting from COVID-19 closures.

~~Acquired Businesses Segment -~~ Three Months ended ~~September 30, 2020~~March 31, 2021 compared to Three Months ended ~~September 30, 2019~~March 31, 2020 – Interactive Segment

We generate revenue from our ~~Acquired Businesses~~Interactive segment through the ~~manufacturing, marketing,~~licensing of our products. 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. Typically, we recognize revenue from these arrangements on a daily basis over the term of the contract.

Revenue growth for our Interactive segment is principally driven by the number of customers we have, the number of live games, the net win performance of the games and the net win percentage that we receive pursuant to our contracts with our customers.

Interactive Segment, Key Performance Indicators

	For the Three-Month Period ended				Variance
	Unaudited		Unaudited		2021 vs 2020
Interactive	Mar 31, 2021		Mar 31, 2020				%

No. of Live Customers at the end of the period		96		57		39		68	%
Average No. of Live Customers		93		55		37		67	%
No. of Live Games at the end of the period		209		181		28		15	%
Average No. of Live Games		206		176		30		17	%
Total Revenue (£’m)	£	3.7	£	1.7	£	2.1		124	%

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2020 for definitions of terms used in the above table.

Interactive Segment, Recurring Revenue

Set forth below is a breakdown of our Interactive recurring revenue which consists principally of Interactive participation revenue. See “— Interactive Segment Revenue” below for a discussion of Interactive service revenue between the periods under review.

	For the Three-Month Period ended						Variance
	Unaudited			Unaudited			2021 vs 2020
(In £ millions)	Mar 31, 2021			Mar 31, 2020							%
Interactive Recurring Revenue
Total Interactive Revenue	£	3.7		£	1.7		£	2.1		124	%

Total Recurring Revenue - Interactive	£	3.7		£	1.7		£	2.1		124	%
Interactive Recurring Revenue as a Percentage of Total Interactive Revenue		100.0	%		100.0	%		0.0	%

Interactive Segment, key events that affected results for the Three Months ended March 31, 2021

During the three months ended March 31, 2021, 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 were key drivers of performance. As a result, was a $3.1 million increase in revenue compared to the prior year including a positive currency impact of $0.4 million.

There were nine new brand launches including BetMGM in New Jersey, Gamesys and Interwetten. We also launched with our first new operators in Spain, Luckia and 888.

We deployed nine new games in the quarter across the estate including Vegas Cash Spins and Fruity Bonanza Scatterdrops both of which were developed with brand new game mechanics.

Three Months ended March 31, 2021 compared to Three Months ended March 31, 2020 – Interactive Segment

	For the Three-Month Period ended									Total Functional			Total
	Unaudited			Unaudited			Variance			Currency			Variance
(In millions)	Mar 31, 2021			Mar 31, 2020			2021 vs 2020			%			%

Service Revenue	$	5.2		$	2.1		$	3.1			124.9	%		143.2	%

Cost of service		(0.8	)		(0.2	)		(0.5	)		193.0	%		217.5	%

Selling, general and administrative expenses		(1.0	)		(1.2	)		0.1			(16.3	)%		(10.1	)%

Stock-based compensation		(0.1	)		(0.0	)		(0.0	)		51.1	%		103.5	%

Depreciation and amortization		(0.7	)		(0.6	)		(0.1	)		2.0	%		9.4	%

Net operating Income (Loss)	$	2.6		$	0.1		$	2.5			4247.3	%		4485.4	%

Exchange Rate - $ to £		1.38			1.28

Interactive Segment revenue

During the period, revenue increased by $3.1 million, or 143.2%, on a reported basis. On a functional currency (at constant rate) basis, revenue increased by $2.7 million, or 124.9%. This was driven by recurring revenue growth due to the increase in online demand attributable to the addition of new customers and territories, the consistent launch of quality content, as well as the introduction of the product to customers migrating online due to the COVID-19 closures.

Interactive Segment operating income

Cost of Service increased by $0.5 million to $0.8 million on a reported and functional currency (at constant rate) basis, due to increased third party platform provider costs, in line with the significant revenue increase for the period.

SG&A expenses increased by $0.1 million on a reported basis. This increase included the impact of unfavorable currency movements of $0.1 million. On a functional currency (at constant rate) basis, SG&A increased by $0.2 million.

Depreciation and amortization increased by $0.1 million on a reported basis. On a functional currency (at constant rate) basis, depreciation and amortization was unchanged for the period versus prior year.

Operating profit increased by $2.5 million on a reported basis. On a functional currency (at constant rate) basis operating profit increased by $2.3 million. This was primarily due to the increase in revenue, partly offset by the increase in cost of sales.

Three Months ended March 31, 2021 compared to Three Months ended March 31, 2020 – Leisure Segment

We generate revenue from our Leisure segment through the rental of our gaming ~~machines~~ and ~~gaming software. We manufacture gaming machines for rental to UK pubs, adult gaming centers, bowling alleys, motorway service stations, and leisure parks, as well as for sale.~~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.

Revenue growth for our ~~Acquired Businesses~~Leisure segment is principally driven by the number of ~~operator~~ 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.

On October 1, 2019, the Company completed the acquisition of the Gaming Technology Group (“NTG”) of Novomatic UK Ltd., a division of Novomatic Group, a leading international supplier of gaming equipment and solutions. As per ASC 280, the Company reports the results of this acquisition as a business segment denoted as “Acquired Businesses.” Because the Company completed the transaction on October 1, 2019, it can only report the results since that date.

~~Acquired Businesses~~Leisure segment, Key Performance Indicators

For the Three-Month
Period ended
Unaudited
Sept 30, Unaudited
Sept 30, Variance
Acquired Businesses 2020 2019 2020 vs 2019
%
Pub Digital Cat C Gaming Machines - Average installed base (# of terminals) 5,772 5,106 666 13.0 %

Inspired Pubs Revenue per Digital Cat C Gaming Machine per week £ 49.25 £ 65.80 £ (16.56 ) (25.2 )%

Pub Analogue Digital Cat C Gaming Machines - Average installed base (# of terminals) 2,602 3,450 (848 ) (24.6 )%
��
Inspired Pubs Revenue per Analogue Cat C Gaming Machine per week £ 25.35 £ 42.30 £ (16.96 ) (40.1 )%

End of Period % of Digital Cat C Gaming Machines in Pub Market 69.7 % 60.8 % 8.9 %

Total Leisure Parks Revenue (Gaming and Non Gaming) (£‘m) £ 5.6 £ 11.4 £ (5.9 ) (51.4 )%

AGC and MSA Gaming Machines - Average installed base (# of terminals)⁽¹⁾ 5,016 5,074 (59 ) (1.2 )%

Inspired AGC and MSA Revenue per Gaming Machine per week £ 52.60 £ 72.36 £ (19.76 ) (27.3 )%

	For the Three-Month Period ended				Variance
	Unaudited		Unaudited		2021 vs 2020
Leisure	Mar 31, 2021		Mar 31, 2020						%

End of period installed base Gaming machines (# of terminals)		11,610		12,269		(659	)	(5.4	)%
Average installed base Gaming machines (# of terminals)		11,631		12,276		(645	)	(5.3	)%
End of period installed base Other (# of terminals)		7,169		8,235		(1,066	)	(13	)%
Average installed base Other (# of terminals)		7,193		8,274		(1,081	)	(13	)%
Pub Digital Gaming Machines - Average installed base (# of terminals)		5,801		5,746		56		1.0	%
Pub Analogue Gaming Machines - Average installed base (# of terminals)		2,236		2,737		(502	)	(18	)%
MSA and Bingo Gaming Machines - Average installed base (# of terminals)⁽¹⁾		3,338		3,510		(172	)	(4.9	)%
Inspired Leisure Revenue per Gaming Machine per week	£	0.1	£	53.6	£	(53.5	)	(100	)%
Inspired Pub Digital Revenue per Gaming Machine per week	£	0.0	£	60.2	£	(60.2	)	(100	)%
Inspired Pub Analogue Revenue per Gaming Machine per week	£	0.0	£	38.2	£	(38.2	)	(100	)%
Inspired MSA and Bingo Revenue per Gaming Machine per week	£	0.2	£	56.7	£	(56.4	)	(100	)%
Inspired Other Revenue per Machine per week	£	0.0	£	18.9	£	(18.9	)	(100	)%

Total Leisure Parks Revenue (Gaming and Non Gaming) (£’m)	£	0.0	£	1.6	£	(1.6	)	(100	%)

⁽¹⁾

~~Adult Gaming Centers and~~ Motorway Service Area machines

InPlease refer to our Annual Report on Form 10-K for the ~~table above:~~year ended December 31, 2020 for definitions of terms used in the above table.

End of period installed base and Average installed base represent the number of gaming machines installed from which there is participation or rental revenue at the end of the period or as an average over the period.

~~Revenue per machine unit per week represents the average weekly participation or rental revenue recognized during the period.~~

~~The % Digital Cat C represents the percentage of the Company’s UK pub gaming machine estate located with that is digital.~~

~~Acquired Businesses Segment, Three Months ended September 30, 2020~~

~~Acquired Businesses~~

For the Three-
Month Period
ended
Unaudited
Sept 30,
(In millions) 2020
Revenue:
Service $ 22.4
Hardware 1.9
Total revenue 24.3

Cost of sales, excluding depreciation and amortization:
Cost of service (5.6 )
Cost of hardware (1.6 )
Total cost of sales (7.2 )

Selling, general and administrative expenses (12.1 )
Depreciation and amortization (6.8 )
Net operating Income (Loss) $ (1.8 )

Exchange Rate - $ to £ 1.29

~~Acquired Businesses Segment Revenue~~

Acquired Businesses service revenue was $22.4 million in the quarter, of which $5.9 million was generated from Pub customers for gaming machines and other rental products. The Company’s average installed base within the Pub business included 8,374 Category C gaming machines. Digital gaming machines accounted for 69.7% of the total Category C gaming machines at the end of the period, an increase from 60.8% in the prior year. Revenue per digital Cat C declined 25.2% year on year, reflecting the restrictions in place due to COVID-19.

The Leisure business includes Leisure Parks, MSAs, Adult Gaming Centers (“AGCs”) and Bowling Alleys as well as software license fees associated with one-time hardware sales. Leisure parks contributed $7.2 million in revenue, which was $7.6 million lower than the prior year, caused by the gradual opening of leisure parks during the quarter, and restrictions on trade due to social distancing, all as a result of COVID-19. Revenue from MSAs and AGCs was $4.5 million in the quarter and included 5,016 machines on a rental basis, generating an average of £52.60 per week. Software license fees were $1.3 million in the quarter.

~~Acquired Businesses Hardware Revenue was $1.9 million and includes the sale of 173 machines and sales of spare parts.~~

~~Acquired Businesses Segment Operating Income~~

Acquired Businesses operating income reflects cost of sales of $7.2 million (comprised of manufacturing costs, content royalties, spare parts, distribution costs, and certain gaming taxes), SG&A expenses of $12.1 million including staff and vehicle costs, facilities and service network costs, and depreciation and amortization of $6.8 million, reflecting capitalized game development and machine deployment levels.

~~Nine Months ended September 30, 2020 compared to Nine Months ended September 30, 2019~~

For the Nine-Month
Period ended Variance
Unaudited
Sept 30, Unaudited
Sept 30, Variance Functional
Currency at Functional Currency
(In millions) 2020 2019 2020 vs 2019 Constant rate Currency Movement
Revenue:
Service $ 114.8 $ 80.2 $ 34.6 43.2 % $ 34.2 42.6 % $ 0.4
Hardware 13.2 6.8 6.4 94.3 % 6.4 93.3 % 0.1
Total revenue 128.0 87.0 41.0 47.2 % 40.5 46.6 % 0.5
Cost of sales, excluding depreciation and amortization:
Cost of service (20.9 ) (15.4 ) (5.4 ) 35.3 % (5.3 ) 34.6 % (0.1 )
Cost of hardware (9.8 ) (4.9 ) (4.9 ) 101.6 % (4.9 ) 101.3 % (0.0 )
Selling, general and administrative expenses (61.6 ) (39.0 ) (22.6 ) 58.0 % (22.4 ) 57.4 % (0.2 )
Stock-based compensation (3.1 ) (6.6 ) 3.5 (53.3 )% 3.5 (53.3 )% (0.0 )
Acquisition and integration related transaction expenses (5.6 ) (4.9 ) (0.7 ) 15.3 % (0.7 ) 14.7 % (0.0 )
Depreciation and amortization (39.9 ) (27.1 ) (12.8 ) 47.4 % (13.0 ) 48.0 % 0.2
Net operating Income (Loss) (12.9 ) (10.9 ) (2.1 ) 19.4 % (2.3 ) (21.1 )% 0.3
Other income (expense)
Interest income 0.5 0.1 0.5 NM 0.4 NM (0.0 )
Interest expense (22.5 ) (12.9 ) (9.6 ) 74.4 % (9.7 ) 74.7 % 0.1
Change in fair value of earnout liability - (2.3 ) 2.3 (100 )% 2.2 (100 )% 0.0
Change in fair value of derivative liability - 2.8 (2.8 ) (100 )% (2.9 ) (100 )% 0.0
Other finance income (expense) (5.9 ) (0.9 ) (4.9 ) 520.0 % (5.1 ) 503.2 % 0.1
Loss from equity method investee (0.5 ) - (0.5 ) NM (0.5 ) NM 0.0
Total other income (expense), net (28.4 ) (13.2 ) (15.1 ) 114.6 % (15.4 ) 116.0 % 0.2
Net loss from continuing operations before income taxes (41.3 ) (24.1 ) (17.2 ) 71.4 % (17.7 ) 73.0 % 0.5
Income tax expense (0.3 ) (0.1 ) (0.2 ) 121.9 % (0.2 ) 115.4 % (0.0 )

Net loss $ (41.6 ) $ (24.2 ) $ (17.4 ) 71.9 % $ (17.9 ) 73.2 % $ 0.5

Exchange Rate - $ to £ 1.28 1.28

~~Revenue~~

Total reported revenue for the nine months ended September 30, 2020 increased by $41.0 million, or 47.2%, to $128.0 million on a reported basis. Revenue was significantly impacted by the shutdown of non-essential businesses most of the second quarter of 2020 in all of the jurisdictions in which the Company operates, due to the ongoing COVID-19 pandemic , with diminishing impacts in the third quarter of 2020. Favorable currency movements accounted for a $0.5 million impact. On a functional currency at constant rate basis, revenue increased by $40.5 million, or 46.6%, with service revenue increasing by $34.2 million and hardware revenue increasing by $6.4 million.

SBG service revenue decreased by $12.0 million on a reported basis to $40.7 million, with the major drivers for the decrease being the impact of the Triennial Implementation and the venue closures due to COVID-19, which closed venues from March 21, 2020 through June 15, 2020. Customer Gross Win declined due to both of these factors, offset by the reopening of venues early in the period. The revenue decline was offset by the VAT-related income of $9.3 million.

SBG hardware revenue decreased by $1.3 million to $5.5 million on a reported basis, due to lower UK cabinet and SSBT sales, offset by $3.0 million in North American sales and $0.4 million of Italy spares sales.

Virtual Sports reported revenue increased by $2.2 million, or 8.0%, on a reported basis. This decrease includes the impact of adverse currency movements of $0.1 million. On a functional currency at constant rate basis, Virtual Sports revenue increased by $2.3 million, or 8.5%. This increase included a $5.1 million decline in retail recurring revenue from the COVID-19 national shutdowns. Declines were offset by growth in Scheduled Online Virtuals of $4.3 million and Interactive of $3.3 million.

Acquired Businesses service revenue was $45.6 million for the nine months ended September 30, 2020. The Company’s average installed base within the Pub business included 7,783 Category C gaming machines. Digital gaming machines accounted for 69.7% of the total Category C gaming machines at the end of the period, which was an increase from 60.8% at the end of the comparable period in 2019. Revenue per digital Cat C declined 37.0% year on year, reflecting the complete closure of the pub market during the second quarter and the continued restrictions currently in place due to COVID-19.

~~Cost of sales, excluding depreciation and amortization~~

Cost of sales, excluding depreciation and amortization, increased by $10.4 million, or 51.1%, to $30.7 million on a reported basis, including the impact of $0.1 million from unfavorable currency movements. On a functional currency at constant rate basis, cost of sales increased by $10.3 million.

Of this increase, $16.0 million was attributable the Acquired Businesses, comprised of $9.2 million in service costs and $6.8 million in hardware costs. This was offset by a $5.2 million decrease in SBG costs of sales due to reduced consumable usage in line with our reduced machine estate due to Triennial Implementation and COVID-19 impacts.

~~Selling, general and administrative expenses~~

SG&A expenses increased by $22.6 million, or 58.0%, on a reported basis, to $61.6 million. This included $0.2 million of unfavorable currency movements. On a functional currency at constant rate basis, SG&A increased by $22.4 million. The reported increase was driven by incremental SG&A expenses of $32.6 million from the Acquired Businesses, offset by a $8.8 million decrease in selling, general and administrative expenses in SBG and Virtual Sports, due to long-term reductions in staff costs, as well as staff furloughs attributable to the COVID-19 pandemic.

~~Stock-based compensation~~

During the nine months ended September 30, 2020, the Company recorded an expense of $3.1 million with respect to outstanding awards. Of this expense, $0.2 million related to costs from awards made under the 2016 Long Term Incentive Plan and $2.9 million from awards made under the 2018 Plan. During the nine months ended September 30, 2019, the charge for stock-based compensation was $6.6 million of which $4.5 million related to costs from awards made under the 2016 Long Term Incentive Plan and $2.1 million from awards made under the 2018 Plan.

~~Acquisition and integration related transaction expenses~~

Acquisition related transaction expenses increased by $0.7 million to $5.6 million, on a reported basis. The entirety of the 2019 and the majority of the 2020 period expenses were related to work in respect of potential acquisitions, with the 2019 expenses relating to the acquisition and third party integration fees linked exclusively to the acquisition and integration of Novomatic UK’s Gaming Technology Group and the 2020 expenses relating to the group integration costs following the acquisition. In addition, there were a further $0.7 million of costs incurred in 2020 relating to potential merger and acquisition activity.

~~Depreciation and amortization~~

~~Depreciation and amortization increased by $12.8 million, or 47.4%, to $39.9 million on a reported basis. This included the impact of favorable currency movements of $0.2 million.~~

On a functional currency at constant rate basis, depreciation and amortization increased by $13.0 million, or 48.0%. The reported increase was driven by incremental depreciation and amortization of $17.2 million from the Acquired Businesses. This was partially offset by a $4.0 million decrease of depreciation and amortization in SBG and Virtual Sports, due primarily to UK and Italy machine estates reaching full depreciation status.

~~Net operating loss~~

During the period on a reported basis, net operating loss increased by $2.1 million from $10.9 million to $12.9 million. On a functional currency at constant rate basis, net operating loss increased by $2.3 million, mainly due to the impact of shutdowns related to COVID-19, partially offset by the VAT-related income.

~~Interest expense~~

Interest expense increased by $9.6 million in the period, to $22.5 million, on a reported basis and functional currency at a constant rate basis. This was driven by increases of $7.4 million of cash interest due to a higher debt balance amount and $1.2 million higher debt fee amortization after the acquisition of Novomatic UK’s Gaming Technology Group in October 2019.

~~Change in fair value of earnout liability~~

Due solely to changes in the share price ($6.51 at March 25, 2019 and $4.80 at December 31, 2018) the charge in the nine months ended September 30, 2019 from a change in the fair value of earnout liability was $2.3 million. On March 25, 2019, the shares relating to the earnout liability were issued. There were no such liabilities in the nine months ended September 30, 2020.

~~Change in fair value of derivative liability~~

Following the termination of the cross-currency swaps on October 1, 2019 there was no change in the fair values of derivative liabilities in the nine months ended September 30, 2020. For the nine months ended September 30, 2019, the change in fair value of derivative liability was a $2.8 million credit.

~~Other finance income~~

Other finance income for the nine months ended September 30, 2020 was a charge of $5.9 million compared to a $0.9 million charge in the nine months ended September 30, 2019. This was primarily due to an adverse foreign exchange impact of $1.6 million in retranslating the debt balance and a $3.2 million gain in the nine months ended September 30, 2019 from the GBP:USD cross-currency swap which was terminated on October 1, 2019.

~~Income tax expense~~

~~Our effective tax rate for the period ended September 30, 2020 was 0.7% and our effective tax rate for the period ended September 30, 2019 was 0.4%.~~

~~Net loss~~

On a reported basis, net loss increased by $17.4 million, from a loss of $24.2 million to a loss of $41.6 million in the nine months ended September 30, 2020. On a functional currency at constant rate basis, net loss increased by $17.9 million, mainly due to the impact of the shutdowns associated with COVID-19, partially offset by the VAT-related income.

~~Nine Months ended September 30, 2020 compared to Nine Months ended September 30, 2019 – Server Based Gaming Segment~~

Revenue growth for our SBG business is principally driven by the number of operator customers we have, the number of SBG 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.

~~SBG Segment, Key Performance Indicators~~

For the Nine-Month
Period ended
Unaudited Unaudited
September 30, September 30, Variance
SBG 2020 2019 2020 vs 2019
%
End of period installed base (# of terminals) 32,311 32,084 227 0.7 %
Average installed base (# of terminals) 32,862 34,967 (2,105 ) (6.0 )%
Customer Gross Win per unit per day (1) £ 48.44 £ 83.78 £ (35.34 ) (42.2 )%
Customer Net Win per unit per day (1) £ 35.77 £ 59.29 £ (23.52 ) (39.7 )%
Inspired Blended Participation Rate 6.1 % 6.2 % (0.1 )%

~~(1)~~

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

~~SBG Segment, Nine Months ended September 30, 2020 compared to Nine Months ended September 30, 2019~~

For the Nine-Month Period ended Variance
Server Based Gaming Unaudited Sep 30, Unaudited Sep 30, Variance Functional
Currency at Functional Currency
(In millions) 2020 2019 2020 vs 2019 Constant rate Currency Movement
Revenue:
Service $ 40.7 $ 52.7 ($ 12.0 ) (22.7 %) ($ 12.1 ) (23.0 %) $ 0.1
Hardware 5.5 6.8 (1.3 ) (18.6 %) (1.3 ) (19.2 %) 0.0
Total revenue 46.2 59.5 (13.3 ) (22.3 %) (13.4 ) (22.6 %) 0.2
Cost of sales, excluding depreciation and amortization:
Cost of service (9.6 ) (12.9 )
3.3
(25.8 %) 3.4 (26.4 %) (0.1 )
Cost of hardware (3.0 ) (4.9 ) 1.9 (38.2 %) 1.9 (38.7 %) (0.0 )
Total cost of sales (12.6 ) (17.8 ) 5.2 (29.2 %) 5.3 (29.8 %) (0.1 )
Selling, general and administrative expenses (11.5 ) (18.3 ) 6.8 (36.9 %) 6.7 (36.9 %) 0.0
Stock-based compensation (0.5 ) (1.3 ) 0.8 (60.3 %) 0.8 (59.2 %) 0.0
Depreciation and amortization (17.6 ) (21.7 ) 4.2 (19.2 %) 4.1 (18.9 %) 0.1
Net operating Income (Loss) $ 4.0 $ 0.4 $ 3.7 NM $ 3.5 NM $ 0.2
Exchange Rate - $ to £ 1.28 1.28

~~SBG Segment Revenue~~

During the period, revenue decreased by $13.3 million, to $46.2 million, on a reported basis. On a functional currency at constant rate basis, SBG revenue decreased by $13.4 million, or 22.6%, reflecting $0.2 million in favorable currency movement.

Service revenue decreased by $12.0 million on a reported basis and $12.1 million on a functional currency at constant rate basis. The major driver for the decrease was the impact of COVID-19. Universal retail shop closures from March 2020 through June 2020 drove a reduction in service revenue of $14.8 million, with revenue by region decreasing $10.5 million in the UK, $2.4 million in Greece and $1.9 million in Italy. Further declines came from the UK LBO market with $4.6 million as a result of the Triennial Implementation, increased Italy taxes of $0.8 million, the adverse impact of the introduction in Italy of player cards of $1.7 million, 2019 one-off Italy sales of $0.4 million, and the expiry of a UK service contract of $0.4 million. These negative impacts were partly offset by VAT-related income of $9.3 million as well as growth in the Greek market of $2.3 million due to the continued rollout of contracted VLTs.

Hardware revenue decreased by $1.3 million to $5.5 million on a reported basis. On a functional currency at constant rate basis, the revenue decrease was also $1.3 million or 19.2% with minimal currency movement impact. This adverse variance to 2019 was due to lower UK market sales of $4.6 million, ETG Sabre Hydra sales of $1.3 million, SSBT sales in the UK LBO market of $1.9 million and “Flex Cabinet” sales of $1.4 million in the UK Leisure ~~market. These were partly offset by continued sales growth of “Valor™” in the North America market $3.0 million and Italy spares sales revenue of $0.4 million.~~

~~SBG Segment Operating Income~~

Cost of sales (excluding depreciation and amortization) decreased by $5.2 million to $12.6 million, on a reported basis. On a functional currency at constant rate basis, SBG cost of sales decreased by $5.3 million, or 29.8%, reflecting $0.1 million in adverse currency movements.

Service cost of sales decreased by $3.3 million on both a reported and functional currency basis. This reduction was due mainly to the impact of retail venue closures due to COVID-19, with the UK LBO retail shops accounting for $2.2 million with significant savings on consumable and third party content costs, a further $1.2 million from Greece and $0.4 million from Italy. A further $0.4 million decrease came from lower consumables spend during the three months ended March 31, 2020 on the UK LBO estate due to the Triennial Implementation. These were offset by the third-party content cost of sales element related to the VAT-related income of $0.3 million and Colombia write-offs of $0.5 million.

Hardware cost of sales decreased by $1.9 million to $3.0 million on both a reported and functional currency basis. This decrease of 38.7% was due to higher margin North America sales in the current period that replaced lower margin UK sales in the prior period.

SBG SG&A expense declined by $6.8 million, reflecting significant staff furloughs due to COVID-19, ongoing restructuring, and synergies associated with the acquisition of the Acquired Businesses. Of this reduction, $5.6 million was related to both COVID-19 related furloughs as well as long-term reductions in staff costs.

Depreciation and amortization declined by $4.2 million or 19.2%, on a reported basis. On a functional currency basis depreciation declined by $4.1 million. The decrease in depreciation expense was due to the machines in the UK estate becoming fully depreciated, offset by additional depreciation from new machines in the Greek estate.

Operating income increased by $3.7 million, from a $0.4 million to $4.0 million, as the decline in revenue related to the Triennial Implementation and COVID-19 was offset by the VAT-related income, as well as declines in cost of sales, SG&A, and depreciation and amortization.

~~SBG~~ Segment, Recurring Revenue

Set forth below is a breakdown of our ~~SBG~~Leisure recurring ~~revenue. SBG recurring~~ revenue which consists principally of ~~SBG~~Leisure participation revenue and Leisure other fixed fee revenue.

For the Nine-Month
Period ended
Unaudited Unaudited
Sept 30, Sept 30, Variance
(In £ millions) 2020 2019 2020 vs 2019 %
SBG Recurring Revenue
Total SBG Revenue £ 36.1 £ 46.6 £ (10.5 ) (22.6 )%
SBG Participation Revenue * £ 19.7 £ 35.2 £ (15.5 ) (44.0 )%
SBG Other Fixed Fee Recurring Revenue £ 0.4 £ 1.0 £ (0.6 ) (60.5 )%
Total SBG Recurring Revenue £ 20.1 £ 36.2 £ (16.1 ) (44.4 )%
SBG Recurring Revenue as a % of Total SBG Revenue 55.7 % 77.6 % (21.9 )%

~~Does not reflect VAT-related income~~

~~SBG~~ See “— Leisure Segment ~~Service Revenue by Region~~Revenue” below for a discussion of leisure service revenue between the periods under review.

Set forth below is a breakdown of our ~~SBG service revenue by geographic region. SBG service revenue consists principally of SBG participation~~Leisure recurring revenue.

~~Server Based Gaming Service Revenue by Region~~

	For the Three-Month Period ended						Variance
	Unaudited			Unaudited			2021 vs 2020
(In £ millions)	Mar 31, 2021			Mar 31, 2020							%
Leisure Recurring Revenue
Total Leisure Revenue	£	0.4		£	13.6		£	(13.2	)	(97.1	)%

Total Leisure Recurring Revenue	£	0.0		£	12.6		£	(12.6	)	(100.0	)%
Leisure Recurring Revenue as a Percentage of Total Leisure Revenue		0.5	%		93.0	%		(92.6	)%

For the Nine-Month
Period ended Variance
Unaudited
Sept 30, Unaudited
Sept 30, Variance Functional
Currency at Functional Currency
(In millions) 2020 2019 2020 vs 2019 Constant rate Currency Movement
Service Revenue:
UK LBO $ 25.5 $ 30.2 $ (4.7 ) (15.4 )% $ (4.7 ) (15.5 )% $ 0.0
UK Other $ 1.7 $ 3.9 (2.2 ) (55.7 )% (2.2 ) (56.2 )% 0.0
Italy $ 1.9 $ 6.0 (4.2 ) (68.8 )% (4.2 ) (69.2 )% 0.0
Greece $ 11.3 $ 12.0 (0.7 ) (6.2 )% (0.8 ) (6.7 )% 0.1
Rest of the World $ 0.3 $ 0.5 (0.3 ) (48.3 )% (0.3 ) (48.3 )% 0.0
Total service revenue $ 40.7 $ 52.7 $ (12.0 ) (22.7 )% $ (12.1 ) (23.0 )% $ 0.1

Exchange Rate - $ to £ 1.28 1.28

~~Virtual Sports Segment~~, ~~Nine Months ended September 30, 2020 compared to Nine Months ended September 30, 2019~~

~~Virtual Sports Segment, Key Performance Indicators~~

For the Nine-Month
Period ended
Unaudited
September 30, Unaudited
September 30, Variance
Virtuals 2020 2019 2020 vs 2019
%
No. of Live Customers at the end of the period 129 102 27 26.5 %
Average No. of Live Customers 126 102 24 23.8 %
Total Revenue (£‘m) £ 23.4 £ 21.5 £ 1.8 8.5 %

Total Virtual Sports Recurring Revenue (£‘m) £ 21.5 £ 19.6 £ 1.9 9.7 %
Total Revenue £‘m - Retail £ 7.5 £ 12.0 £ (4.5 ) (37.3 )%
Total Revenue £‘m - Scheduled Online Virtuals £ 11.1 £ 7.5 £ 3.6 47.4 %
Total Revenue £‘m - Interactive £ 4.8 £ 2.0 £ 2.7 132.7 %
Average Revenue Per Customer per day (£) £ 678 £ 776 £ (99 ) (12.7 )%

~~Virtual Sports Segment, Recurring Revenue~~

For the Nine-Month
Period ended
Unaudited
Sept 30, Unaudited
Sept 30, Variance
(In £ millions) 2020 2019 2020 vs 2019
%
Virtual Sports Recurring Revenue

Total Virtual Sports Revenue £ 23.4 £ 21.5 £ 1.8 8.5 %

Recurring Revenue - Retail Virtuals £ 6.6 £ 10.7 £ (4.1 ) (38.3 )%
Recurring Revenue - Scheduled Online Virtuals £ 10.3 £ 6.9 £ 3.4 49.1 %
Recurring Revenue - Interactive £ 4.6 £ 2.0 £ 2.6 132.1 %
Total Virtual Sports Recurring Revenue £ 21.5 £ 19.6 £ 1.9 9.7 %
Virtual Sports Recurring Revenue as a Percentage of Total 92.0 % 91.0 % 1.0 %

~~For definitions of the terms used in the table above, see the definitions provided above.~~

~~Virtual Sports~~Leisure Segment, key events that affected results for the ~~Nine~~Three Months ended ~~September 30, 2020~~March 31, 2021

The COVID-19 pandemic significantly impacted retail recurring revenues, partially during the first quarter of 2020 and for the entirety of the second quarter of 2020. During the third quarter all territories were back online; however, this was a period of gradual recovery. As a result, retail recurring revenue has declined $5.2 million. This was offset by growth in Scheduled Online Virtuals and Interactive of $7.6 million.

~~Virtual Sports Segment, Nine Months ended September 30, 2020 compared to Nine Months ended September 30, 2019~~

For the Nine-Month
Period ended Variance
Virtual Sports Unaudited
Sep 30, Unaudited
Sep 30, Variance Functional
Currency at Functional Currency
(In millions) 2020 2019 2020 vs 2019 Constant rate Currency Movement

Service Revenue $ 29.7 $ 27.5 $ 2.2 8.0 % $ 2.3 8.5 % ($ 0.1 )
Cost of Service (3.3 ) (2.5 ) (0.8 ) 32.2 % (0.8 ) 33.0 % 0.0
Selling, general and administrative expenses (4.2 ) (6.2 ) 2.1 (32.9 %) 2.1 (33.2 %) (0.0 )
Stock-based compensation (0.4 ) (1.0 ) 0.7 (66.1 %) 0.7 (66.9 %) (0.0 )
Depreciation and amortization (4.3 ) (4.2 ) (0.2 ) 3.9 % (0.2 ) 5.3 % 0.0
Net operating Income (Loss) $ 17.5 $ 13.6 $ 4.0 29.1 % $ 4.1 30.0 % ($ 0.1 )
Exchange Rate - $ to £ 1.27 1.28

~~Virtual Sports Segment revenue.~~ InDuring the ~~period revenue increased by $2.2 million, or 8.0%, on a reported basis. This increase includes~~three months ended March 31, 2021, all major sectors of the impact of adverse currency movements of $0.1 million. On a functional currency at constant rate basis, Virtual Sports revenue increased by $2.3 million, or 8.5%. Growth in recurring revenue from Scheduled Online Virtuals of $4.3 millionLeisure segment (Pubs, Holiday Parks, Motoway Service Area’s and ~~Interactive of $3.3 million was partly offset by a $5.2 million decline in retail recurring revenue from~~Bingo Halls) remained closed due to the COVID-19 ~~national shutdowns.~~closures in the UK.

~~Virtual Sports Segment operating income.~~ ~~Cost of service increased by $0.8 million to $3.3 million, on a reported basis. There was de minimis impact from currency movements.~~

~~SG&A expenses decreased by $2.1 million on a reported basis, attributed to staff-related cost savings. There was de minimis impact from currency movements.~~

~~Depreciation and amortization increased by $0.2 million, to $4.3 million, on a reported basis. There was de minimis impact from currency movements.~~

Operating profit increased by $4.0 million to $17.5 million on a reported basis, which included an impact of $0.1 million from adverse currency movements. On a functional currency at constant rate basis, this represented an increase of $4.1 million, or 30.0%. This was primarily due to increased revenues and lower SG&A expenses.

~~Acquired Businesses Segment,~~ Three Months ended ~~September 30, 2020~~March 31, 2021 compared to Three Months ended ~~September 30, 2019~~March 31, 2020 – Leisure Segment

	For the Three-Month Period ended									Total Functional			Total
(In millions)	Unaudited Mar 31, 2021			Unaudited Mar 31, 2020			Variance 2021 vs 2020			Currency %			Variance %

Revenue:
Service	$	0.0		$	16.3		$	(16.3	)		(100.0	)%		(100.0	)%
Product		0.5			1.2			(0.7	)		(57.9	)%		(55.6	)%
Total revenue		0.5			17.5			(17.0	)		(97.1	)%		(96.9	)%

Cost of sales, excluding depreciation and amortization:
Cost of service		(0.4	)		(3.3	)		2.8			(87.1	)%		(86.3	)%
Cost of product		(0.3	)		(0.8	)		0.6			(71.5	)%		(69.5	)%
Total cost of sales		(0.7	)		(4.1	)		3.4			(83.9	)%		(82.8	)%

Selling, general and administrative expenses		(3.2	)		(11.0	)		7.8			(73.1	)%		(71.0	)%

Stock-based compensation		(0.1	)		(0.0	)		(0.1	)		165.0	%		5308.1	%

Depreciation and amortization		(4.2	)		(3.4	)		(0.8	)		15.1	%		24.3	%

Net operating Income (Loss)		(7.7	)		(1.0	)	$	(6.6	)		530.3	%		647.4	%

Exchange Rate - $ to £		1.38			1.29

~~Acquired Businesses Segment, Key Performance Indicators~~

For the Nine-Month
Period ended
Unaudited Unaudited
Sept 30, Sept 30, Variance
Acquired Businesses 2020 2019 2020 vs 2019
%
Pub Digital Cat C Gaming Machines - Average installed base (# of terminals) 5,764 4,635 1,129 24.4 %

Inspired Pubs Revenue per Digital Cat C Gaming Machine per week £ 36.47 £ 64.86 £ (28.39 ) (43.8 )%

Pub Analogue Digital Cat C Gaming Machines - Average installed base (# of terminals) 2,676 3,766 (1,089 ) (28.9 )%

Inspired Pubs Revenue per Analogue Cat C Gaming Machine per week £ 21.18 £ 43.22 £ (22.04 ) (51.0 )%

End of Period % of Digital Cat C Gaming Machines in Pub Market 69.7 % 60.8 % 8.9 %

Total Leisure Parks Revenue (Gaming and Non Gaming) (£‘m) £ 7.0 £ 21.2 £ (14.2 ) (66.9 )%

AGC and MSA Gaming Machines - Average installed base (# of terminals)⁽¹⁾ 5,077 5,587 (510 ) (9.1 )%

Inspired AGC and MSA Revenue per Gaming Machine per week £ 40.13 £ 65.85 £ (25.73 ) (39.1 )%

⁽¹⁾

~~Adult Gaming Centers and Motorway Service Area machines~~

~~Acquired Businesses segment, Nine Months ended September 30, 2020~~

For the Nine-
Acquired Businesses Month Period
ended
Unaudited
Sept 30,
(In millions) 2020
Revenue:
Service $ 45.6
Hardware 7.9
Total revenue 53.5

Cost of sales, excluding depreciation and amortization:

Cost of service (9.2 )
Cost of hardware (6.8 )
Total cost of sales (16.0 )

Selling, general and administrative expenses (32.6 )

Depreciation and amortization (17.2 )

Net operating Income (Loss) $ (12.3 )

Exchange Rate - $ to £ 1.29

~~Acquired Businesses~~

Leisure Segment Revenue

~~Acquired Businesses service~~During the period, revenue decreased by $17.0 million, or 96.9%, to $0.5 million on a reported basis, with no impact from currency movements.

Service revenue decreased by $16.3 million on both a reported and functional currency (at constant rate) basis to nil. This was ~~$45.6 million~~driven by the COVID-19 closures, with all of the major sectors of the Leisure segment being closed for the ~~nine~~entire three months ended September 30, 2020, of which $13.9 million was generated from Pub customers for gaming machines and other rental products. The Company’s average installed base within the Pub business included 8,440 Category C gaming machines. Digital gaming machines accounted for 69.7% of the total Category C gaming machines at the end of the period, which was an increase from 60.8% at the end of the comparable period in 2019. Revenue per digital Cat C declined 43.8% year on year, reflecting the complete closure of the pub market during the second quarter and the continued restrictions currently in place due to COVID-19.March 31, 2021.

~~In addition, Acquired Businesses includes services~~Product revenue decreased by $0.7 million to ~~Leisure Parks, MSAs, AGCs~~$0.5 million on a reported and ~~bowling alleys. Leisure parks contributed $9.0 million in revenue, which~~functional currency (at constant rate) basis. This decrease was ~~$18.3 million lower than the prior year, caused~~driven by the ~~impact of~~ COVID-19 as described above. Revenue from MSAs and AGCs was $10.3 million in the period and included 5,077 machines on a rental basis, generating an average of £40.13 per week, which was a reduction of 39.1% to the prior year.

~~Acquired Businesses hardware revenue was $7.9 million and includes the sale of 1,116 machines, which accounted for $5.3 million, as well as spare parts and repairs.~~ closures.

~~Acquired Businesses~~Leisure Segment Operating Income

~~Acquired Businesses operating income reflects~~Cost of sales (excluding depreciation and amortization) decreased by $3.4 million to $0.7 million on reported and functional currency (at constant rate) basis.

Service cost of sales decreased by $2.8 million to $0.4 million on a reported and functional currency (at constant rate) basis, driven by the reduction in Service revenue due to the COVID-19 closures.

Product cost of ~~$16.0~~sales decreased by $0.6 million ~~(comprised of manufacturing costs, content royalties, spare parts, distribution costs,~~to $0.3 million on a reported and ~~certain gaming taxes),~~ functional currency (at constant rate) basis, driven by the reduction in Product revenue due to the COVID-19 closures.

SG&A expenses ~~of $32.6~~decreased by $7.8 million on a reported basis to $3.2 million, which included ~~staff and vehicle costs, facilities and service network costs, and depreciation and amortization~~the impact of ~~$17.2 million, reflecting capitalized game development and machine deployment levels.~~unfavorable currency movements of $0.3 million. On a functional currency (at constant rate) basis, SG&A expenses ~~for the period were impacted~~decreased by ~~furloughs of operations~~$8.1 million, or 73.1%. This was driven by reduced staffing costs related to both staff ~~effected to reflect the cessation of revenue from gaming operations~~reductions and reduced salaries implemented due to the COVID-19 closures as well as synergy and other cost savings.

Depreciation and amortization increased by $0.8 million on a reported basis to $4.2 million. This included an impact of unfavorable currency movements of $0.3 million. On a functional currency (at constant rate basis), Leisure depreciation increased by $0.5 million or 15.1%.

Operating income decreased by $6.6 million on a reported basis from a loss of $1.0 million to a loss of $7.7 million, which included the impact of unfavorable currency movements of $0.6 million. On a functional currency (at constant rate) basis operating income decreased by $6.0 million. This was primarily due to the COVID-19 ~~pandemic.~~closures.

Non-GAAP Financial Measures

We use certain non-GAAP financial measures, including EBITDA and Adjusted EBITDA, to analyze our operating performance. We use these financial measures to manage our business on a day-to-day basis. We believe that these measures are also commonly used in our industry to measure performance. For these reasons, we believe that these non-GAAP financial measures provide expanded insight into our business, in addition to standard U.S. 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. 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. GAAP. You should consider our non-GAAP financial measures in conjunction with our U.S. GAAP financial measures.

We define our non-GAAP financial measures as follows:

EBITDA is defined as net loss excluding depreciation and amortization, interest expense, interest income and income tax expense.

Adjusted EBITDA is defined as net loss excluding depreciation and amortization, interest expense, interest income and income tax expense, and other additional exclusions and adjustments. Such additional excluded amounts include stock-based compensation U.S. GAAP charges where the associated liability is expected to be settled in stock, and changes in the value of earnout liabilities and income and expenditure in relation to legacy portions of the business (being those portions where trading no longer occurs) including closed defined benefit pension schemes. Additional adjustments are made for items considered outside the normal course of business, including (1) restructuring costs, which include charges attributable to employee severance, management changes, restructuring, dual running costs, costs related to facility closures and integration costs, (2) merger and acquisition costs and (3) gains or losses not in the ordinary course of business. This does not include any adjustments related to COVID-19.

We believe Adjusted EBITDA, when considered along with other performance measures, is a particularly useful performance measure, because it focuses on certain operating drivers of the business, including sales growth, operating costs, selling and administrative expense and other operating income and expense. We believe Adjusted EBITDA can provide a more complete understanding of our operating results and the trends to which we are subject, and an enhanced overall understanding of our financial performance and prospects for the future. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income or loss, because it does not take into account certain aspects of our operating performance (for example, it excludes non-recurring gains and losses which are not deemed to be a normal part of underlying business activities). Our use of Adjusted EBITDA may not be comparable to the use by other companies of similarly termed measures. Management compensates for these limitations by using Adjusted EBITDA as only one of several measures for evaluating our operating performance. In addition, capital expenditures, which affect depreciation and amortization, interest expense, and income tax benefit (expense), are evaluated separately by management.

Functional Currency at Constant rate. Currency impacts ~~shown~~discussed have been calculated as the current-period average GBP: USD rate less the equivalent average rate in the prior period, multiplied by the current period amount in our functional currency (GBP). The remaining difference, referred to as functional currency at constant rate, is calculated as the difference in our functional currency, multiplied by the prior-period average GBP: USD rate, as a proxy for functional currency at constant rate movement.

Currency Movement represents the difference between the results in our reporting currency (USD) and the results on a functional currency at(at constant ~~rate~~rate) basis.

Reconciliations from net loss, as shown in our Consolidated Statements of Operations and Comprehensive Loss, to Adjusted EBITDA are shown below. ~~The 2019/2020 EBITDA comparison does not include the Acquired Businesses in the 2019 results.~~

Reconciliation to Adjusted EBITDA

	For the Three-Month Period ended
	Unaudited		Unaudited			For the Three-Month Period ended
	Sept 30,		Sept 30,			Unaudited			Unaudited
(In millions)	2020		2019			Mar 31, 2021			Mar 31, 2020
Net loss	$	0.3	$	(8.5	)

Items Relating to Discontinued Activities:
Net Income (loss)						$	(16.7	)	$	(9.8	)

Items Relating to Legacy Activities:
Pension charges (1)		0.2		0.1			0.2			0.2

Items outside the normal course of business:
Costs of group restructure (2)		0.4		0.5			-			0.1
Acquisition and integration related transaction expenses (3)		1.2		3.3			1.4			3.2
Impairment on interest in equity method investee(4)							-			0.7

Stock-based compensation expense		1.1		2.2			1.4			1.0


Depreciation and amortization		14.0		8.3			13.1			12.6
Total other expense, net		7.9		2.7
Interest Income							(0.0	)		(0.3	)
Interest Expense							8.6			6.1
Change in fair value of warrant liability							3.0			(7.6	)
Other finance expenses / (income)							(6.4	)		3.7
Income tax		0.0		0.1			(0.7	)		0.2
Adjusted EBITDA	$	25.0	$	8.7		$	3.9		$	10.1

Adjusted EBITDA	£	19.5	£	7.1		£	2.8		£	7.8

Exchange Rate - $ to £ (6)		1.29		1.23
Exchange Rate - $ to £ (5)							1.37			1.28

For the Nine-Month
Period ended
Unaudited Unaudited
September 30, September 30,
(In millions) 2020 2019
Net loss $ (41.6 ) $ (24.2 )

Items Relating to Discontinued Activities:
Pension charges (1) 0.5 0.4

Items outside the normal course of business:
Costs of group restructure (2) 0.8 3.1
Acquisition and integration related transaction expenses (3) 5.6 4.9
Impairment on interest in equity method investee(4) 0.7 --
Stock-based compensation expense 3.1 6.6
Depreciation and amortization 39.9 27.1
Total other expense, net(5) 27.9 13.3
Income tax 0.3 0.1
Adjusted EBITDA $ 37.2 $ 31.3

Adjusted EBITDA £ 29.0 £ 24.5

Exchange Rate - $ to £ (6) 1.28 1.28

Reconciliation to Adjusted EBITDA by segment for the Three Months ended March 31, 2021

	For the Three-Month Period ended
(In millions)	Unaudited Mar 31, 2021

	Total			Gaming			Virtual Sports		Interactive		Leisure			Corporate
Net Income/ (loss)	$	(16.7	)	$	(3.6	)	$	3.7	$	2.6	$	(7.7	)	$	(11.7	)

Items Relating to Legacy Activities:
Pension charges (1)		0.2													0.2

Items outside the normal course of business:
Costs of group restructure (2)		-													-
Acquisition and integration related transaction expenses (3)		1.4													1.4
Impairment on interest in equity method investee(4)		-													-

Stock-based compensation expense		1.4			0.2			0.1		0.1		0.1			0.9


Depreciation and amortization		13.1			6.6			1.1		0.7		4.2			0.5
Interest Income		(0.0	)												(0.0	)
Interest Expense		8.6													8.6
Change in fair value of warrant liability		3.0													3.0
Other finance expenses / (income)		(6.4	)												(6.4	)
Income tax		(0.7	)												(0.7	)
Adjusted EBITDA	$	3.9		$	3.2		$	4.9	$	3.4	$	(3.4	)	$	(4.2	)

Adjusted EBITDA	£	2.8

Exchange Rate - $ to £ (5)		1.37

Note: 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.

Reconciliation to Adjusted EBITDA by segment for the Three Months ended March 31, 2020

	For the Three-Month Period ended
(In millions)	Unaudited Mar 31, 2020

	Total			Gaming			Virtual Sports		Interactive		Leisure			Corporate
Net Income/ (loss)	$	(9.8	)	$	(1.2	)	$	5.0	$	0.1	$	(1.0	)	$	(12.7	)

Items Relating to Legacy Activities:
Pension charges (1)		0.2													0.2

Items outside the normal course of business:
Costs of group restructure (2)		0.1													0.1
Acquisition and integration related transaction expenses (3)		3.2													3.2
Impairment on interest in equity method investee(4)		0.7													0.7

Stock-based compensation expense		1.0			0.1			0.1		0.0		0.0			0.8


Depreciation and amortization		12.6			7.4			0.8		0.6		3.4			0.4
Interest Income		(0.3	)												(0.3	)
Interest Expense		6.1													6.1
Change in fair value of warrant liability		(7.6	)												(7.6	)
Other finance expenses / (income)		3.7													3.7
Income tax		0.2													0.2
Adjusted EBITDA	$	10.1		$	6.3		$	5.9	$	0.7	$	2.4		($	5.2	)

Adjusted EBITDA	£	7.8

Exchange Rate - $ to £ (5)		1.28

Notes to ~~table:~~Adjusted EBITDA reconciliation tables above:

(1)

“Pension charges” are profit and loss charges included within selling, general and administrative expenses, relating to a defined benefit scheme which was closed to new entrants in 1999 and to future accrual in 2010. As well as the amortization of net loss, the figure also includes charges relating to the Pension Protection Fund (which were historically borne by the pension scheme) and a small amount of associated professional services expenses. These costs are included within Corporate Functions.

(2)

“Costs 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.

(3)

Acquisition 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 income.

(4)

In 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.

(5)

~~Excludes loss from equity method investee of $0.5 million.~~

~~(6)~~

Exchange 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.

Liquidity and Capital Resources

~~Nine~~Three Months ended ~~September 30, 2020~~March 31, 2021 compared to ~~Nine~~Three Months ended ~~September 30, 2019~~March 31, 2020

	3 Months ended						Variance
(in millions)	Mar 31,			Mar 31,
	2021			2020			2021 to 2020
Net loss	$	(16.7	)	$	(9.8	)	$	(6.9	)

Amortization of debt fees		1.3			0.5			0.8

Change in fair value of derivative and warrant liabilities and stock-based compensation expense		4.6			(6.2	)		10.8
Impairment expense		0.0			0.6			(0.6	)
Foreign currency translation on senior bank debt and cross currency swaps		(6.1	)		3.9			(10.0	)
Depreciation and amortization (incl RoU assets)		13.7			13.5			0.2
Other net cash generated by operating activities		1.2			8.6			(7.4	)
Net cash (used)/provided by operating activities		(2.0	)		11.1			(13.1	)

Net cash used in investing activities		(4.8	)		(11.0	)		6.2
Net cash (used)/generated by financing activities		(0.2	)		22.2			(22.4	)
Effect of exchange rates on cash		1.1			(2.9	)		4.0
Net (decrease)/increase in cash and cash equivalents	$	(5.9	)	$	19.4		$	(25.3	)

Nine Months ended Variance
Sept 30, Sept 30, 2020
(in millions) 2020 2019 to 2019
Net loss $ (41.6 ) $ (24.2 ) $ (17.4 )
Non-cash interest expense including amortization of fees 2.2 1.4 0.8
Change in fair value of derivative and earnout liabilities and stock-based compensation expense 3.8 6.1 (2.3 )
Impairment expense 0.7 0.0 0.7
Foreign currency translation on senior bank debt and cross currency swaps 6.6 1.0 5.6
Depreciation and amortization (incl RoU assets) 42.6 27.1 15.5
Other net cash generated/(utilized) by operating activities 17.2 11.0 6.2
Net cash provided by operating activities 31.5 22.4 9.1

Net cash used in investing activities (22.0 ) (16.5 ) (5.5 )
Net cash generated by financing activities 5.4 9.0 (3.6 )
Effect of exchange rates on cash (0.1 ) (1.3 ) 1.2
Net increase in cash and cash equivalents $ 14.8 $ 13.6 $ 1.2

Net cash (used)/provided by operating activities. In

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net cash ~~inflow~~outflow provided by operating activities was ~~$31.5~~$2.0 million, compared to a ~~$22.4~~$11.1 million inflow for the three months ended March 31, 2020, representing a $13.1 million decrease in cash generation driven by COVID-19 related closures and interest expense timing differences resulting in payments of $6.8 million compared to $0.1 million in the prior ~~year’s nine-month period, representing~~period. In addition, a ~~$9.1~~larger VAT payment made in the three months ended March 31, 2021 resulted in an $8.9 million ~~increase in cash generation.~~ higher outflow compared to the prior period.

~~Non-cash interest expense~~Amortization of debt fees increased by $0.8 million to ~~$2.2~~$1.3 million. The current ~~period’s~~and prior year’s non-cash interest expense related to amortization of debt fees incurred in relation to the business refinancing in October 2019. ~~The prior year’s expense related to the amortization of debt fees incurred in relation to the business refinancing in August 2018.~~

Change in fair value of derivative and ~~earnout~~warrant liabilities and stock-based compensation expense ~~reduced~~increased by ~~$2.3~~$10.8 million, from an ~~inflow~~outflow of ~~$6.1~~$6.2 million to an inflow of ~~$3.8~~$4.6 million. Movements in the ~~market value~~fair valuation of warrant liabilities increased the ~~stock price resulted in~~inflow by $10.6 million and there was also a ~~$2.3 million higher earnout inflow and a $2.9~~$0.4 million higher inflow relating to stock-based compensation expense in the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2021. These were offset by a ~~$3.5~~$0.2 million movement relating to cross-currency swaps. ~~On March 25, 2019, the shares relating to the earnout liability were issued resulting in no further inflows or outflows after this date.~~

Foreign currency translation on senior bank debt and cross currency swaps ~~following the refinancing on October 1, 2019~~ resulted in a ~~gain~~loss in the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 of ~~$6.6~~$6.1 million as a result of the movement in exchange rates during the period, compared to a ~~$1.0~~$3.9 million gain in the ~~corresponding nine~~three months ~~of the prior year.~~ended March 31, 2020.

Depreciation ~~amortization~~ and ~~impairment~~amortization increased by ~~$15.5~~$0.2 million to ~~$42.6~~$13.7 million with increases of ~~$9.9 million in machine asset charges and $3.0~~$1.1 million in development costs and licenses ~~following the acquisition~~and $0.3 million in machine depreciation offset by a $0.8 million reduction in amortization of ~~the Acquired Businesses on October 1, 2019. In addition, a $2.7~~intangible assets and $0.4 million ~~charge has been incurred in the nine months ended September 30, 2020~~ relating to the amortization of Right of Use assets under ~~ASC842. This standard was not applied to the prior periods.~~ASC 842.

Other net cash generated by operating activities ~~increased~~decreased by ~~$6.2~~$7.4 million, to a ~~$17.2~~$1.2 million inflow ~~despite~~following the significant impact in the current year of the COVID-19 ~~pandemic. Timing~~closures. Movements in ~~interest payments drove~~trading levels resulted in a ~~$13.3~~$17.1 million benefit from accounts receivable ($5.4 million inflow in ~~other creditors which~~the three months ended March 31, 2021 compared to an $11.7 million outflow in the prior period) but this was ~~partly~~ offset by a ~~$6.8~~$8.7 million outflow from accrued tax levels and a $7.1 million outflow from other creditors (driven by a $5.7 million interest accrual outflow through the different timing of debt interest payments). Further adverse ~~movement~~movements were seen on deferred revenue creditors $3.8 million, other debtors and prepayments $2.0 million, accounts payable $2.0 million and inventory $0.6 million. Many of these movements were impacted by the COVID-19 closures in ~~accounts receivable. This impacts strong performance which, since~~ the ~~acquisition of NTG in October 2019 has a seasonal aspect with the low trading levels at the start of the year and peak trading (and hence increases in account receivable levels)~~three months ended March 31, 2021. However, throughout the ~~second and third quarters.~~period, management have actively managed our cash levels to seek to optimize our liquidity position.

Included within net cash provided by operating activities were $6.5 million of payments relating to transaction and integration expenses and $0.6 million of payments relating to restructuring costs. This compares to $1.4 million relating to transaction expenses and $2.5 million relating to restructuring costs in the prior year.

Net cash used in investing activities.

Net cash used in investing activities ~~increased~~decreased by ~~$5.5~~$6.2 million to ~~$22.0~~$4.8 million in the ~~nine~~three months ended ~~September 30, 2020. The increase was~~March 31, 2021, primarily due to ~~a $7.0 million higher~~minimal spend on ~~property and equipment following the acquisition of NTG in October 2019, offset by a $1.5 million reduction in the spend on capitalized software~~capital as a ~~direct consequence~~result of the COVID-19 ~~pandemic.~~closures.

Net cash ~~generated~~used by financing activities.In

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net cash ~~generated~~used by financing activities was ~~$5.4~~an outflow of $0.2 million, compared to a ~~$9.0~~$22.2 million inflow in the ~~nine~~three months ended ~~September 30, 2019. An~~March 31, 2020. The outflow in the three months ended March 31, 2021 was solely related to finance lease payments. In the three months ended March 31, 2020, an increase in the ~~level of~~amount drawn on the revolver ~~drawn resulted in~~provided a ~~$9.2~~$22.3 million inflow which was partly offset by a ~~$3.1~~$0.1 million ~~payment of lender fees associated with the changes made~~outflow relating to ~~the debt terms and covenant levels as a result of the COVID-19 pandemic and $0.7 million of~~ finance lease payments. ~~The prior year’s inflow was due to a $9.3 million increase in the level of revolver drawn offset by $0.3 million of finance lease payments.~~

Funding Needs and Sources

To fund our obligations we have relied historically ~~relied~~ on a combination of cash flows provided by operations and the incurrence of additional debt or the refinancing of existing debt. As of ~~September 30, 2020,~~March 31, 2021, we had liquidity of ~~$43.9~~$41.2 million in cash and cash equivalents ~~plus~~and a further ~~$12.9~~$27.6 million of an undrawn revolver facility. This compares to ~~$29.6~~$48.5 million of cash and cash equivalents as at ~~September 30, 2019 plus a further $9.5~~March 31, 2020 but $24.8 million ~~of an undrawn~~drawn on the revolver facility. We had a working capital inflow of ~~$17.3~~$1.2 million for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, compared to an ~~$11.0~~$8.6 million inflow for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. The level of our working capital surplus or deficit varies with the level of machine production we are undertaking and our capitalization ~~and also with~~as well as the seasonality evident in some of the ~~companies~~businesses purchased as part of the ~~acquisition of NTG.~~NTG Acquisition. In periods with minimal machine volumes and capital spend, our working capital is more stable. In periods where significant numbers of machines are being produced, the levels of inventory and creditors are higher than typical 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. In periods 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.

Some of our business operations require cash to be held within the machines. As of ~~September 30, 2020, $4.2~~March 31, 2021, $1.6 million of our ~~$43.9~~$41.2 million of cash and cash equivalents were held as operational floats within the machines. In addition, we held a further ~~$6.8~~$7.1 million of ~~cash was held within restricted bank accounts.~~ring-fenced cash.

Management currently believes that despite the reduced trading levels caused by the COVID-19 ~~pandemic,~~closures, the Company’s cash balances on hand, cash flows expected to be generated from operations, ~~the refinancing of the business following the acquisition of the Novomatic UK’s Gaming Technology Group in October 2019~~ and the ability to control and defer capital projects will be sufficient to fund the Company’s net cash requirements through ~~November 2021.~~May 2022.

Long Term and Other Debt

(In millions) (unaudited) Sept 30,
2020 Sept 30,
2019
Cash held £ 34.0 $ 43.9 £ 24.0 $ 29.6
Revolver drawn (10.0 ) (12.9 ) (7.3 ) (9.0 )
Original principal senior debt (230.9 ) (297.6 ) (113.6 ) (140.0 )
Cash interest accrued (9.8 ) (12.7 ) (0.0 ) (0.0 )
Finance lease creditors (0.7 ) (0.9 ) (0.1 ) (0.1 )
Total £ (216.9 ) $ (280.3 ) £ (97.0 ) $ (119.5 )

On October 1, 2019, pursuant to the Share Purchase Agreement, dated as of June 11, 2019 (the “SPA”), by and between Inspired Gaming (UK) Limited, a subsidiary of the Company (the “Buyer”), and Novomatic UK Ltd., (the “Seller”), the Buyer completed its acquisition from the Seller of (i) all of the outstanding equity interests of each of (a) Astra Games Ltd, (b) Bell-Fruit Group Limited, (c) Gamestec Leisure Limited, (d) Harlequin Gaming Limited, and (e) Playnation Limited, and (ii) 40% of the outstanding equity interests of Innov8 Gaming Limited (“Innov8”, and the entities described in clauses (i) and (ii), together with certain of their subsidiaries, the “Acquired Companies” and the transactions contemplated by the SPA, the “Acquisition”). The Acquired Companies comprised the Seller’s Gaming Technology Group (“NTG”). The consideration for the Acquisition totaled approximately €104.6 million (USD $120.0 million) in cash.

(In millions)	March 31, 2021						March 31, 2020
Cash held	£	29.9		$	41.2		£	39.1		$	48.5
Revolver drawn		0.0			0.0			(20.0	)		(24.8	)
Original principal senior debt		(225.1	)		(310.6	)		(219.6	)		(272.4	)
Cash interest accrued		(4.8	)		(6.7	)		(8.5	)		(10.6	)
Finance lease creditors		(1.5	)		(2.0	)		(0.0	)		(0.0	)
Total	£	(201.6	)	$	(278.1	)	£	(209.0	)	$	(259.2	)

In connection with the Acquisition, on September 27, 2019, Gaming Acquisitions Limited, together with Inspired Entertainment, Inc. (“Inspired”), and certain other direct and indirect wholly-owned subsidiaries of Inspired, entered into a Senior Facilities Agreement with Lucid Agency Services Limited, as agent, Nomura International plc and Macquarie Corporate Holdings Pty Limited (UK Branch) as arrangers and/or bookrunners and each lender party thereto (the “Lenders”), pursuant to which the Lenders agreed to provide, subject to certain conditions, two tranches of senior secured term loans (the “Term Loans”), in an original principal amount of £140.0 million and €90.0 million, respectively and a secured revolving facility loan in an original principal amount of £20.0 million. Proceeds from the Term Loans were used, among other things, to pay the purchase price of the Acquisition and to refinance existing indebtedness of the Company.

The new term loans have a five-year duration and are repayable in full on October 1, 2024. The £140.0 million loan carries a cash interest rate of 7.25% plus 3-month LIBOR, the €90.0 million loan carries a cash interest rate of 6.75% plus a 3-month EUROLIBOR. The £20.0 million revolving credit facility is available until September 1, 2024 and carries a cash interest rate on any utilization at 5.50% plus 3-month LIBOR, with any unutilized amount carrying a cash interest cost at 30% of the applicable margin on the revolving credit facility loan. On April 6, 2020, the Company entered into an Extended Grace Period Letter Agreement amendment to the Senior Facilities Agreement that provided for, among other things, an increase in the applicable margin on the term loans and revolving credit facility of 100 basis points, as described in the notes to the financial statements –See Note 413 Long Term and Other Debt. On June 25, 2020, the Extended Grace Period Letter Agreement amendment became effective with the increase in the applicable margin on the terms loans and revolving credit facility being backdated to April 1, 2020. In addition, the cash interest due on the term loans at this date was capitalized and also attracted interest at the increased margin levels.

~~In connection with the refinancing on October 1, 2019, the existing three-year, fixed-rate, cross-currency swaps were terminated and the remaining capitalized debt fees totaling $7.3 million expensed.~~ Debt ~~fees of approximately $16.1 million were incurred and capitalized as part~~ of the ~~refinancing as relating to the costs incurred in obtaining the new term loan facilities. These fees will be amortized over the length~~Financial Statements for detail of the ~~new term loans. On June 25,~~debts held during 2020 ~~as part of the Extended Grace Period Letter Agreement becoming effective a further $3.1 million of debt fees were incurred~~ and ~~capitalized. These fees will also be amortized over the term loan length.~~

In the prior year, the Company’s senior term and revolving facilities comprised with senior notes of $140.0 million and a revolving credit facility of £7.5 million (equivalent to approximately $9.7 million). The senior notes carried a cash interest rate of 9% plus 3-month LIBOR, and the revolving credit facility carried a cash interest rate on any utilization at 4% plus 3-month LIBOR, any unutilized amount carried a 1.4% cash interest cost. The Company had also entered into a three-year, fixed-rate, cross-currency swap. This debt and associated swaps were repaid on the refinancing following the acquisition of the Novomatic UK’s Gaming Technology Group in October 2019.

As of September 30, 2020, the Company had bank facilities of £165.8 million and €93.1 million (equivalent to approximately $323.5 million), consisting of senior term loan facilities of £145.8 million and €93.1 million (equivalent to $188.4 million and $109.2 million respectively) and a revolving credit facility of £20.0 million (equivalent to approximately $25.8 million). As of September 30, 2020, the £145.8 million term loan facility had a cash interest rate which was the equivalent of 8.97% per annum. The €93.1 million term loan facility had a cash interest rate at September 30, 2020 was the equivalent of 7.75% per annum. Both term loan facilities are scheduled to mature on October 1, 2024.

As of September 30, 2019, the Company had bank facilities of £121.1 million (equivalent to approximately $149.2 million), consisting of a senior term loan facility of £113.6 million (equivalent to $140.0 million) and a revolving credit facility of £7.5 million (equivalent to approximately $9.2 million). As of September 30, 2019, the term loan facility imposed a cash interest rate which was the equivalent of 11.33% per annum. Under the cross-currency swaps executed this was reduced to a rate of 10.87%.

As of September 30, 2020, the Company had aggregate borrowings under the revolving credit facility of £10.0 million (equivalent to $12.9 million). As of September 30, 2020, the revolving credit facility imposed a cash interest rate of6.55% per annum. In addition, a commitment fee was payable with respect to unutilized borrowing capacity at a rate of 1.95% per annum. The revolving credit facility is scheduled to mature on September 1, 2024.

As of September 30, 2019, the Company had aggregate borrowings under the revolving credit facility of £7.3 million (equivalent to $9.0 million). As of September 30, 2019, the revolving credit facility imposed a cash interest rate of 4.70% per annum. In addition, a commitment fee was payable with respect to unutilized borrowing capacity at a rate of 1.40% per annum. This facility was terminated at the time of the refinancing on October 1, 2019.

Debt issuance fees were capitalized at the time the debt was issued, with further lender debt fees capitalized on June 25, 2020 as part of the Extended Grace Period Letter Agreement becoming effective. As of September 30, 2020, the amount of debt issuance fees capitalized was $19.5 million, including $12.2 million of original issue discount and $2.3 million of structuring fees with the remainder being professional fees incurred from the refinancing. Of the total debt issuance fees capitalized, $3.4 million had been charged by September 30, 2020. 2021.

Debt Covenants

Under our debt facilities in place as of ~~September 30,~~March 31, 2021 and March 31, 2020 we are subject to covenant testing at quarterly intervals. The covenant testing is set at the level of Inspired Entertainment Inc., the ultimate holding company, and consists of a test on Leverage (Consolidated Total Net Debt/Consolidated Pro Forma EBITDA) and a test on the level of capital expenditure. These are measured under U.S. GAAP. Leverage is to be tested at quarterly intervals commencing for the period ending June 30, 2020 and capital expenditure is tested annually commencing on December 31, 2019.

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

Under our debt facilities in place as of September 30, 2019, we were subject to covenant testing at quarterly intervals. The covenant testing is set at the level of Inspired Entertainment Inc., the ultimate holding company, and consists of a test on Leverage (Consolidated Total Debt/Consolidated Adjusted EBITDA) and a test of the Fixed Charge Coverage Ratio (Net Cash Provided by Operating Activities/Calculation of Consolidated Fixed Charges). These are measured under U.S. GAAP. In addition to the quarterly tests, there was the requirement that the minimum liquidity not be less than $5.0 million. With the refinancing of the Company on October 1, 2019, these tests were replaced by a revised set of covenant tests.

There were no breaches of the debt covenants in the periods ended ~~September 30, 2020~~March 31, 2021 and ~~September 30, 2019.~~March 31, 2020.

Liens and Encumbrances

As of ~~September 30, 2020,~~March 31, 2021, our senior bank debt was secured by the imposition of a fixed and floating charge in favor of the lender over all the assets of the Company and certain of the Company’s subsidiaries.

Contractual Obligations

As of ~~September 30, 2020,~~March 31, 2021, our contractual obligations were as follows:

			Less than						More than
Contractual Obligations (in millions)	Total		1 yr		1-3 years		3-5 years		5 yrs
Operating activities
Interest on long term debt	$	94.5	$	25.0	$	50.5	$	19.0	$	-

Financing activities
Senior bank debt - principal repayment		310.6		-		-		310.6		-
Finance lease payments		2.0		0.9		0.6		0.5		-
Operating lease payments		12.2		3.6		4.0		2.2		2.4
Interest on non-utilisation fees		2.0		0.5		1.1		0.4		-
Total	$	421.3	$	30.0	$	56.2	$	332.7	$	2.4

Less than More than
Contractual Obligations (in millions) Total 1 yr 1-3 years 3-5 years 5 yrs
Operating activities
Interest on long term debt $ 114.6 $ 31.6 $ 51.0 $ 32.9 $ -

Financing activities
Revolver repayment 13.0 13.0 - - -
Senior bank debt - principal repayment 297.6 - - 297.6 -
Finance lease payments 0.9 0.6 0.3 - -
Operating lease payments 12.1 3.1 4.1 2.4 2.5
Interest on non-utilisation fees 2.1 0.4 1.0 0.7 -
Total $ 440.3 $ 48.7 $ 56.4 $ 332.7 $ 2.5

Off-Balance Sheet Arrangements

As of ~~September 30, 2020,~~March 31, 2021, there were no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, promulgated by the U.S. Securities and Exchange Commission.

Critical Accounting Policies

The preparation of our unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions. We exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenue and expenses, and our disclosure of commitments and contingencies at the date of the consolidated financial statements. On an on-going basis, we evaluate our estimates and judgments. We base our estimates and judgments on a variety of factors, including our historical experience, knowledge of our business and industry and current and expected economic conditions, that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.

For a discussion of other recently issued accounting standards, and assessments as to their impacts on the Company, see Nature of Operations, Management’s Plans and Summary of Significant Accounting Policies, Note 1 to the consolidated financial statements included elsewhere in this report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our principal market risks are our exposure to changes in interest rates and foreign currency exchange rates.

Interest Rate Risk

We have external borrowings that are subject to the risk of higher interest charges associated with increases in interest rates. As of ~~September 30, 2020,~~March 31, 2021, we had £145.8 million ($~~188.4~~201.1 million) and €93.1 million ($~~109.2~~109.5 million) of senior bank debt that is subject to a floating interest rate charge that can vary with the 3-month LIBOR and the 3-month ~~EUROLIBOR~~EUROBOR rates. If the floating interest rates increased by 1%, the additional interest charge would be approximately ~~$2.2~~$0.8 million. If the floating interest rates increased by 5%, the additional interest charge would be approximately ~~$10.8~~$3.9 million.

The above additional interest charges do not consider the interest rate swaps that the Company has entered into in connection with the refinancing. These swaps, which are effective until October 1, 2023 cover approximately 2/3rds of the debt level and have been designed to negate the impact of any interest rate increases and should the interest rates move as above, then the actual additional interest charge would be significantly less than shown.

Foreign Currency Exchange Rate Risk

Our operations are conducted in various countries around the world and we receive revenue and pay expenses from these operations in a number of different currencies. As such, our earnings are subject to movements in foreign currency exchange rates when transactions are denominated in (i) currencies other than GBP, which is our functional currency, or (ii) the functional currencies of our subsidiaries, which is not necessarily GBP. Excluding intercompany balances, our Euro functional currency net liabilities total approximately ~~$92.5~~$97.2 million and our US Dollar functional currency net ~~assets~~liabilities total approximately ~~$1.1~~$15.0 million. We use a sensitivity analysis model to measure the impact of a 10% adverse movement of foreign currency exchange rates against the US Dollar. A hypothetical 10% adverse change in the value of the Euro and the US Dollar relative to GBP as of ~~September 30, 2020~~March 31, 2021 would result in translation adjustments of approximately ~~$7.9~~$8.3 million and ~~$0.1~~$1.5 million, respectively, recorded in other comprehensive loss.

Included within our trading results are earnings outside of our functional currency. Retained ~~earnings~~losses earned in Euros and in US Dollars in the ~~period~~three months ended ~~September 30, 2020~~March 31, 2021 were ~~€0.8~~€0.3 million and ~~a loss of $8.3~~$5.5 million, respectively. A hypothetical 10% adverse change in the value of the Euro and the US Dollar relative to GBP as of ~~September 30, 2020~~March 31, 2021 would result in translation adjustments of approximately ~~$0.1 million~~$0.0million and ~~$0.8~~$0.5 million, respectively, recorded in trading operations.

The majority of the Company’s trading is in GBP, the functional currency, although the reporting currency of the Company is the US Dollar. As such, changes in the GBP:USD exchange rate have an effect on the Company’s results. A 10% weakening of GBP against the US Dollar would change the trading operational results by approximately ~~$3.1~~$0.7 million and would result in translation adjustments of approximately ~~$0.1~~$0.3 million, recorded in other comprehensive loss.

For further information regarding the new external borrowings, see Note 4 to the Consolidated Financial Statements, “Long Term and Other Debt”.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer (together, the “Certifying Officers”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of ~~September 30, 2020~~March 31, 2021 due to the material weakness described in Item 9A of Amendment No. 1 to the Annual Report on Form ~~10-K~~10-K/A filed with the SEC on ~~March 30, 2020.~~May 10, 2021. Management ~~has~~have implemented additional controls designed to remediate this material weakness; however, these controls have not operated effectively over a sufficient period of time in order to conclude that the material weakness has been fully remediated.

Notwithstanding the identified material weakness and management’s assessment that our disclosure controls and procedures were not effective at the reasonable assurance level as of ~~September 30, 2020,~~March 31, 2021, management believes that the interim consolidated financial statements and footnote disclosures included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations, cash flows and disclosures as of and for the periods presented in accordance with generally accepted accounting principles.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in lawsuits and legal proceedings arising in the ordinary course of business. While we believe that, currently, we have no such matters that are material, there can be no assurance that existing or new matters arising in the ordinary course of business will not have a material adverse effect on our business, financial condition or results of operations.

ITEM 1A. RISK FACTORS

You should carefully consider the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020 and Amendment No. 1 thereto, which could materially affect our business, financial position and results of operations.

~~The ongoing coronavirus (COVID-19) pandemic is adversely affecting our business.~~

Our business has been, and continues to be, affected by the rapidly expanding coronavirus (COVID-19) pandemic. Our ability to offer land-based gaming generally has been affected by the closures of all venues that offer gaming in the jurisdictions in which we operate. Although such closures were largely been lifted, we are now experiencing a “second wave” of COVID-19 and experiencing further full and partial closures of venues in areas in which we operate which may continue to partially or completely reoccur in during future increases or spikes in the number of COVID-19 cases in areas in which we operate.

In addition, the economic impact of the pandemic may result in the permanent closure of certain venues and/or a decrease in the willingness or ability of consumers to engage in gambling activities, both during and possibly after the pandemic. The pandemic may also adversely affect a broad range of our operations, including our ability to obtain and ship our products, our ability to continue to develop new products and services as well as the ability of our customers to pay outstanding amounts due to us. In addition, the pandemic may have long-term impacts on the global economy, trade relations, consumer behavior, our industry and our business operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

Exhibit Number		Description
~~3.1(a)~~10.1*#		~~Second Amended and Restated Certificate of Incorporation of Inspired Entertainment, Inc., incorporated by reference~~Letter dated April 12, 2021 to ~~Exhibit 3.1 to the Current Report on Form 8-K of the Company, filed with the SEC on December 30, 2016~~.
~~3.1(b)~~		Certificate of Elimination of Series A Junior Participating Preferred Stock, dated August 13, 2020, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on August 14, 2020.
~~10.1#~~		~~Employment Agreement, dated as of October 9, 2020, by and between the Company and~~ A. Lorne ~~Weil (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on October 9, 2020).~~Weil.
31.1*		Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2*		Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1**		Certification of Principal Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
32.2**		Certification of Principal Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase
101.DEF*		XBRL Taxonomy Extension Definition Linkbase
101.LAB*		XBRL Taxonomy Extension Label Linkbase
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase

#	Indicates management contract or compensatory plan.

Filed herewith.

Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	INSPIRED ENTERTAINMENT, INC.

Date: ~~November 12, 2020~~May 14, 2021	/s/ A. Lorne Weil
	Name:	A. Lorne Weil
	Title:	Executive Chairman
		(Principal Executive Officer)

Date: ~~November 12, 2020~~May 14, 2021	/s/ Stewart F.B. Baker
	Name:	Stewart F.B. Baker
	Title:	Executive Vice President and
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

	Principal			Unamortized deferred financing charge			Book value, September 30, 2020
	(in millions)
Senior bank debt	$	310.6		$	(16.1	)	$	294.5
Finance lease liabilities		0.9			—			0.9
Total long-term debt outstanding		311.5			(16.1	)		295.4
Less: current portion of long-term debt		(13.5	)		—			(13.5	)
Long-term debt, excluding current portion	$	298.0		$	(16.1	)	$	281.9

Offsetting of Derivative Liabilities
September 30, 2020
							Gross Amounts Not Offset in the Statement of Financial Position
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Liabilities presented in the Statement of Financial Position		Financial Instruments		Cash Collateral Received		Net Amount
	(in millions)
Fair value of hedging instrument	$	2.5	$	—	$	2.5	$	—	$	—	$	—

	Foreign Currency Translation Adjustments			Change in Fair Value of Hedging Instrument		Unrecognized Pension Benefit Costs			Accumulated Other Comprehensive (Income)
	(in millions)
Balance at January 1, 2020	$	(76.5	)	$	1.4	$	30.0		$	(45.1	)
Change during the period		(3.1	)		1.1		(4.4	)		(6.4	)
Balance at March 31, 2020		(79.6	)		2.5		25.6			(51.5	)
Change during the period		(0.4	)		0.5		8.7			8.8
Balance at June 30, 2020		(80.0	)		3.0		34.3			(42.7	)
Change during the period		4.2			0.1		0.3			4.6
Balance at September 30, 2020	$	(75.8	)	$	3.1	$	34.6		$	(38.1	)

	For the Three-Month
	Period ended											Variance
	Unaudited			Unaudited								Functional
	Sept 30,			Sept 30,			Variance					Currency at			Functional			Currency
(In millions)	2020			2019			2020 vs 2019					Constant rate			Currency			Movement
Revenue:
Service	$	56.4		$	23.8		$	32.6		137.1	%	$	30.2			127.2	%	$	2.4
Hardware		3.7			2.8			0.9		32.1	%		0.7			24.9	%		0.2
Total revenue		60.1			26.6			33.5		125.9	%		30.9			116.2	%		2.6
Cost of sales, excluding depreciation and amortization:
Cost of service		(11.2	)		(4.7	)		(6.4	)	135.4	%		(5.9	)		124.7	%		(0.5	)
Cost of hardware		(2.5	)		(2.3	)		(0.3	)	11.3	%		(0.2	)		8.7	%		(0.1	)
Selling, general and administrative expenses		(21.9	)		(11.5	)		(10.4	)	90.5	%		(9.5	)		82.1	%		(1.0	)
Stock-based compensation		(1.1	)		(2.2	)		1.1		(50.1	%)		1.2			(52.4	)%		(0.1	)
Acquisition and integration related transaction expenses		(1.2	)		(3.3	)		2.1		(63.3	%)		2.2			(65.3	)%		(0.1	)
Depreciation and amortization		(14.0	)		(8.3	)		(5.7	)	68.6	%		(5.1	)		60.9	%		(0.6	)
Net operating Income (Loss)		8.2			(5.7	)		13.9		NM			13.6			NM			0.2
Other income (expense)
Interest income		0.1			(0.0	)		0.2		NM			0.2			NM			0.0
Interest expense		(8.3	)		(4.4	)		(3.9	)	89.2	%		(3.5	)		80.5	%		(0.4	)
Change in fair value of earnout liability		-			-			-		-			-			-			-
Change in fair value of derivative liability		-			2.9			(2.9	)	(100.0	%)		(2.9	)		(100.0	)%		(0.0	)
Other finance income (expense)		0.3			(1.2	)		1.6		NM			1.5			NM			0.0
Loss from equity method investee		-			-			-		-			-			-			-
Total other income (expense), net		(7.9	)		(2.7	)		(5.1	)	187.5	%		(4.8	)		172.5	%		(0.3	)
Net income (loss) from continuing operations before income taxes		0.3			(8.4	)		8.8		NM			8.9			NM			(0.1	)
Income tax expense		(0.0	)		(0.1	)		0.1		(75.5	%)		0.1			(77.3	)%		(0.0	)
Net Income (Loss)	$	0.3		$	(8.5	)	$	8.9		NM		$	9.0			NM		$	(0.1	)
Exchange Rate - $ to £		1.29			1.23

	For the Three-Month Period ended											Variance
Server Based Gaming	Unaudited Sept 30,			Unaudited Sept 30,			Variance					Functional Currency at			Functional			Currency
(In millions)	2020			2019			2020 vs 2019					Constant rate			Currency			Movement
Revenue:
Service	$	23.7		$	15.5		$	8.2		53.1	%	$	7.3			47.3	%	$	0.9
Hardware		1.8			2.8			(1.0	)	(35.3	%)		(1.1	)		(38.3	%)		0.1
Total revenue		25.5			18.3			7.2		39.3	%		6.2			33.9	%		1.0

Cost of sales, excluding depreciation and amortization:
Cost of service		(5.0	)		(4.1	)		(0.9	)	20.7	%		(0.6	)		15.4	%		(0.2	)
Cost of hardware		(0.9	)		(2.3	)		1.3		(58.4	%)		1.3			(59.8	%)		(0.0	)
Total cost of sales		(5.9	)		(6.4	)		0.4		(6.7	%)		0.7			(10.8	%)		(0.3	)
Selling, general and administrative expenses		(4.5	)		(5.7	)		1.2		(20.2	%)		1.3			(22.9	%)		(0.1	)
Stock-based compensation		(0.2	)		(0.4	)		0.2		(51.6	%)		0.2			(56.4	%)		(0.0	)
Depreciation and amortization		(5.4	)		(6.8	)		1.4		(21.2	%)		1.7			(24.7	%)		(0.2	)
Net operating Income (Loss)	$	9.5		$	(1.0	)	$	10.4		NM		$	10.1			NM		$	0.3
Exchange Rate - $ to £		1.28			1.23

	For the Three-Month Period ended
	Unaudited Sept 30,			Unaudited Sept 30,			Variance
Acquired Businesses	2020			2019			2020 vs 2019
										%
Pub Digital Cat C Gaming Machines - Average installed base (# of terminals)		5,772			5,106			666			13.0	%

Inspired Pubs Revenue per Digital Cat C Gaming Machine per week	£	49.25		£	65.80		£	(16.56	)		(25.2	)%

Pub Analogue Digital Cat C Gaming Machines - Average installed base (# of terminals)		2,602			3,450			(848	)		(24.6	)%
											��
Inspired Pubs Revenue per Analogue Cat C Gaming Machine per week	£	25.35		£	42.30		£	(16.96	)		(40.1	)%

End of Period % of Digital Cat C Gaming Machines in Pub Market		69.7	%		60.8	%		8.9	%

Total Leisure Parks Revenue (Gaming and Non Gaming) (£‘m)	£	5.6		£	11.4		£	(5.9	)		(51.4	)%

AGC and MSA Gaming Machines - Average installed base (# of terminals)⁽¹⁾		5,016			5,074			(59	)		(1.2	)%

Inspired AGC and MSA Revenue per Gaming Machine per week	£	52.60		£	72.36		£	(19.76	)		(27.3	)%

	For the Three-
	Month Period
	ended
	Unaudited
	Sept 30,
(In millions)	2020
Revenue:
Service	$	22.4
Hardware		1.9
Total revenue		24.3

Cost of sales, excluding depreciation and amortization:
Cost of service		(5.6	)
Cost of hardware		(1.6	)
Total cost of sales		(7.2	)

Selling, general and administrative expenses		(12.1	)
Depreciation and amortization		(6.8	)
Net operating Income (Loss)	$	(1.8	)

Exchange Rate - $ to £		1.29

	For the Nine-Month
	Period ended											Variance
	Unaudited Sept 30,			Unaudited Sept 30,			Variance					Functional Currency at			Functional			Currency
(In millions)	2020			2019			2020 vs 2019					Constant rate			Currency			Movement
Revenue:
Service	$	114.8		$	80.2		$	34.6		43.2	%	$	34.2			42.6	%	$	0.4
Hardware		13.2			6.8			6.4		94.3	%		6.4			93.3	%		0.1
Total revenue		128.0			87.0			41.0		47.2	%		40.5			46.6	%		0.5
Cost of sales, excluding depreciation and amortization:
Cost of service		(20.9	)		(15.4	)		(5.4	)	35.3	%		(5.3	)		34.6	%		(0.1	)
Cost of hardware		(9.8	)		(4.9	)		(4.9	)	101.6	%		(4.9	)		101.3	%		(0.0	)
Selling, general and administrative expenses		(61.6	)		(39.0	)		(22.6	)	58.0	%		(22.4	)		57.4	%		(0.2	)
Stock-based compensation		(3.1	)		(6.6	)		3.5		(53.3	)%		3.5			(53.3	)%		(0.0	)
Acquisition and integration related transaction expenses		(5.6	)		(4.9	)		(0.7	)	15.3	%		(0.7	)		14.7	%		(0.0	)
Depreciation and amortization		(39.9	)		(27.1	)		(12.8	)	47.4	%		(13.0	)		48.0	%		0.2
Net operating Income (Loss)		(12.9	)		(10.9	)		(2.1	)	19.4	%		(2.3	)		(21.1	)%		0.3
Other income (expense)
Interest income		0.5			0.1			0.5		NM			0.4			NM			(0.0	)
Interest expense		(22.5	)		(12.9	)		(9.6	)	74.4	%		(9.7	)		74.7	%		0.1
Change in fair value of earnout liability		-			(2.3	)		2.3		(100	)%		2.2			(100	)%		0.0
Change in fair value of derivative liability		-			2.8			(2.8	)	(100	)%		(2.9	)		(100	)%		0.0
Other finance income (expense)		(5.9	)		(0.9	)		(4.9	)	520.0	%		(5.1	)		503.2	%		0.1
Loss from equity method investee		(0.5	)		-			(0.5	)	NM			(0.5	)		NM			0.0
Total other income (expense), net		(28.4	)		(13.2	)		(15.1	)	114.6	%		(15.4	)		116.0	%		0.2
Net loss from continuing operations before income taxes		(41.3	)		(24.1	)		(17.2	)	71.4	%		(17.7	)		73.0	%		0.5
Income tax expense		(0.3	)		(0.1	)		(0.2	)	121.9	%		(0.2	)		115.4	%		(0.0	)

Net loss	$	(41.6	)	$	(24.2	)	$	(17.4	)	71.9	%	$	(17.9	)		73.2	%	$	0.5

Exchange Rate - $ to £		1.28			1.28

	For the Nine-Month Period ended
	Unaudited			Unaudited
	September 30,			September 30,			Variance
SBG	2020			2019			2020 vs 2019
									%
End of period installed base (# of terminals)		32,311			32,084			227		0.7	%
Average installed base (# of terminals)		32,862			34,967			(2,105	)	(6.0	)%
Customer Gross Win per unit per day (1)	£	48.44		£	83.78		£	(35.34	)	(42.2	)%
Customer Net Win per unit per day (1)	£	35.77		£	59.29		£	(23.52	)	(39.7	)%
Inspired Blended Participation Rate		6.1	%		6.2	%		(0.1	)%

	For the Nine-Month Period ended											Variance
Server Based Gaming	Unaudited Sep 30,			Unaudited Sep 30,			Variance					Functional Currency at			Functional			Currency
(In millions)	2020			2019			2020 vs 2019					Constant rate			Currency			Movement
Revenue:
Service	$	40.7		$	52.7		($	12.0	)	(22.7	%)	($	12.1	)		(23.0	%)	$	0.1
Hardware		5.5			6.8			(1.3	)	(18.6	%)		(1.3	)		(19.2	%)		0.0
Total revenue		46.2			59.5			(13.3	)	(22.3	%)		(13.4	)		(22.6	%)		0.2
Cost of sales, excluding depreciation and amortization:
Cost of service		(9.6	)		(12.9	)		3.3		(25.8	%)		3.4			(26.4	%)		(0.1	)
Cost of hardware		(3.0	)		(4.9	)		1.9		(38.2	%)		1.9			(38.7	%)		(0.0	)
Total cost of sales		(12.6	)		(17.8	)		5.2		(29.2	%)		5.3			(29.8	%)		(0.1	)
Selling, general and administrative expenses		(11.5	)		(18.3	)		6.8		(36.9	%)		6.7			(36.9	%)		0.0
Stock-based compensation		(0.5	)		(1.3	)		0.8		(60.3	%)		0.8			(59.2	%)		0.0
Depreciation and amortization		(17.6	)		(21.7	)		4.2		(19.2	%)		4.1			(18.9	%)		0.1
Net operating Income (Loss)	$	4.0		$	0.4		$	3.7		NM		$	3.5			NM		$	0.2
Exchange Rate - $ to £		1.28			1.28

	For the Nine-Month Period ended
	Unaudited September 30,		Unaudited September 30,		Variance
Virtuals	2020		2019		2020 vs 2019
								%
No. of Live Customers at the end of the period		129		102		27			26.5	%
Average No. of Live Customers		126		102		24			23.8	%
Total Revenue (£‘m)	£	23.4	£	21.5	£	1.8			8.5	%

Total Virtual Sports Recurring Revenue (£‘m)	£	21.5	£	19.6	£	1.9			9.7	%
Total Revenue £‘m - Retail	£	7.5	£	12.0	£	(4.5	)		(37.3	)%
Total Revenue £‘m - Scheduled Online Virtuals	£	11.1	£	7.5	£	3.6			47.4	%
Total Revenue £‘m - Interactive	£	4.8	£	2.0	£	2.7			132.7	%
Average Revenue Per Customer per day (£)	£	678	£	776	£	(99	)		(12.7	)%

	For the Nine-Month Period ended											Variance
Virtual Sports	Unaudited Sep 30,			Unaudited Sep 30,			Variance					Functional Currency at			Functional			Currency
(In millions)	2020			2019			2020 vs 2019					Constant rate			Currency			Movement

Service Revenue	$	29.7		$	27.5		$	2.2		8.0	%	$	2.3			8.5	%	($	0.1	)
Cost of Service		(3.3	)		(2.5	)		(0.8	)	32.2	%		(0.8	)		33.0	%		0.0
Selling, general and administrative expenses		(4.2	)		(6.2	)		2.1		(32.9	%)		2.1			(33.2	%)		(0.0	)
Stock-based compensation		(0.4	)		(1.0	)		0.7		(66.1	%)		0.7			(66.9	%)		(0.0	)
Depreciation and amortization		(4.3	)		(4.2	)		(0.2	)	3.9	%		(0.2	)		5.3	%		0.0
Net operating Income (Loss)	$	17.5		$	13.6		$	4.0		29.1	%	$	4.1			30.0	%	($	0.1	)
Exchange Rate - $ to £		1.27			1.28

	For the Nine-
Acquired Businesses	Month Period
	ended
	Unaudited
	Sept 30,
(In millions)	2020
Revenue:
Service	$	45.6
Hardware		7.9
Total revenue		53.5

Cost of sales, excluding depreciation and amortization:

Cost of service		(9.2	)
Cost of hardware		(6.8	)
Total cost of sales		(16.0	)

Selling, general and administrative expenses		(32.6	)

Depreciation and amortization		(17.2	)

Net operating Income (Loss)	$	(12.3	)

Exchange Rate - $ to £		1.29

	Nine Months ended						Variance
	Sept 30,			Sept 30,			2020
(in millions)	2020			2019			to 2019
Net loss	$	(41.6	)	$	(24.2	)	$	(17.4	)
Non-cash interest expense including amortization of fees		2.2			1.4			0.8
Change in fair value of derivative and earnout liabilities and stock-based compensation expense		3.8			6.1			(2.3	)
Impairment expense		0.7			0.0			0.7
Foreign currency translation on senior bank debt and cross currency swaps		6.6			1.0			5.6
Depreciation and amortization (incl RoU assets)		42.6			27.1			15.5
Other net cash generated/(utilized) by operating activities		17.2			11.0			6.2
Net cash provided by operating activities		31.5			22.4			9.1

Net cash used in investing activities		(22.0	)		(16.5	)		(5.5	)
Net cash generated by financing activities		5.4			9.0			(3.6	)
Effect of exchange rates on cash		(0.1	)		(1.3	)		1.2
Net increase in cash and cash equivalents	$	14.8		$	13.6		$	1.2

(In millions) (unaudited)	Sept 30, 2020						Sept 30, 2019
Cash held	£	34.0		$	43.9		£	24.0		$	29.6
Revolver drawn		(10.0	)		(12.9	)		(7.3	)		(9.0	)
Original principal senior debt		(230.9	)		(297.6	)		(113.6	)		(140.0	)
Cash interest accrued		(9.8	)		(12.7	)		(0.0	)		(0.0	)
Finance lease creditors		(0.7	)		(0.9	)		(0.1	)		(0.1	)
Total	£	(216.9	)	$	(280.3	)	£	(97.0	)	$	(119.5	)