Inspired Q2 2026 Earnings: Portfolio Shift Lifts EBITDA Margin to 45%

Inspired Entertainment (NASDAQ: INSE) reported Q2 2026 revenue of $60.8 million, down 24% from $80.3 million a year earlier, while diluted EPS improved to $0.01 from a loss of $0.27. The reported revenue decline reflected the divestiture of the UK holiday parks business and restructuring of the pubs business, which management said reduced revenue by approximately 30% year over year. Adjusted EBITDA was $27.1 million, down 5% year over year but up 14% sequentially, with the adjusted EBITDA margin reaching 45%.

Core earnings data

The quarter combined a smaller reported revenue base with higher GAAP operating income. Net operating income increased 25% to $9.9 million as cost of services and selling, general and administrative expenses declined alongside the portfolio changes.

The return to positive net income was also influenced by taxes. Pretax income decreased to $0.6 million from $1.0 million, while income tax expense fell to $0.4 million from $8.8 million. Net interest expense increased to $9.5 million from $7.1 million.

Adjusted EBITDA and adjusted net income are company-defined non-GAAP measures and may not be directly comparable with similarly named metrics used by other companies.

Business and segment performance

Interactive was the only segment to report double-digit growth in both revenue and adjusted EBITDA. Retail Solutions remained the largest business, but its reported comparison included the effects of the UK holiday parks divestiture and pubs restructuring.

Management attributed Retail Solutions’ underlying performance to North American retail sales and terminal activity in the UK and Greece. The segment’s adjusted EBITDA declined much less than revenue, consistent with the change in business scope.

Interactive continued to gain market share despite the higher UK remote gaming duty that took effect on April 1. Virtual Sports was described as stable, and Inspired launched the first customer under its software-as-a-service agreement with Playtech after the quarter. Corporate adjusted EBITDA expense increased to $8.3 million from $7.8 million.

Portfolio exits reduced revenue faster than earnings

The central feature of the quarter was the divergence between reported revenue and profitability. Portfolio optimization reduced revenue by approximately 30% year over year, exceeding the company’s total reported revenue decline of 24%. Inspired said revenue grew on a like-for-like basis after excluding the divestiture and adjusting for the pubs operating-model change, although it did not provide the growth rate.

At the same time, adjusted EBITDA declined only 5%, and its margin expanded by 10 percentage points to 45%. Interactive also increased its share of company revenue to 25.8% from 16.9%, shifting the mix toward the higher-margin digital business. The 45% margin was a quarterly company record when excluding periods that benefited from UK VAT rebates.

Cash flow and balance sheet

Cash flow figures were provided for the six months ended June 30 rather than for the second quarter alone. First-half operating cash flow was $29.5 million, down from $40.7 million a year earlier. The comparison included a smaller cash benefit from accounts receivable and a $10.3 million use of cash from accounts payable and accrued expenses, compared with a $10.4 million source of cash in the prior-year period.

First-half investing outflows decreased to $18.7 million from $31.2 million. Financing activities used $30.5 million, including $23.3 million of debt repayment and $5.2 million of share repurchases. During Q2 specifically, Inspired repaid $10.0 million of debt principal and repurchased 319,995 shares for $2.6 million.

Cash declined to $22.0 million at June 30 from $42.0 million at the end of 2025. Long-term debt decreased to $319.4 million from $345.2 million over the same period. The company therefore reduced debt, but part of that capital allocation also contributed to the lower cash balance.

Guidance

Inspired reaffirmed its full-year adjusted EBITDA target after incorporating the UK remote gaming duty increase. Management expects adjusted EBITDA to grow sequentially through the year and believes product launches, geographic expansion and a new content studio scheduled to come online in the fourth quarter will support second-half performance.

The adjusted EBITDA target assumes GBP-to-USD exchange rates remain broadly consistent with current levels. The revised cash conversion wording establishes a floor of 20% rather than the previous defined range.

Recent insider transactions

The supplied insider dataset contains conflicting fields: its six-month summary reports zero purchases, while the detailed transaction log lists three purchases in March 2026. The detailed entries disclose transaction values but not share quantities, so the information should be interpreted with that limitation and without drawing conclusions about insiders’ outlook.

The three detailed entries represent approximately $545,789 in disclosed transaction value.

Risks investors should watch

• UK gaming taxes: The higher UK remote gaming duty has been in effect since April 1. Interactive grew despite the increase in Q2, but the tax remains a direct pressure on the economics of UK digital activity.
• Portfolio-transition comparability: The holiday parks divestiture and pubs restructuring materially distort year-over-year revenue comparisons. Investors will need to distinguish reported growth from like-for-like performance until the prior-year base fully reflects the new scope.
• Interest burden: Q2 net interest expense rose to $9.5 million and nearly matched net operating income of $9.9 million, limiting how much operating profit reaches pretax income.
• Cash generation and liquidity: First-half operating cash flow declined, while debt repayment and share repurchases contributed to cash falling to $22.0 million. Delivery of the updated free cash flow conversion outlook is therefore an important follow-up measure.
• Execution on second-half launches: The outlook depends partly on new customers, geographic expansion, the Playtech distribution relationship and the planned fourth-quarter content studio.

Summary

Inspired’s Q2 2026 results reflect a smaller company by reported revenue but a more profitable operating mix. Portfolio changes drove most of the top-line decline, while Interactive growth, lower operating costs and a shift toward digital revenue supported a 45% adjusted EBITDA margin. The next points to monitor are execution against the reaffirmed EBITDA target, conversion of earnings into cash, the impact of UK gaming taxes and continued debt reduction without placing excessive pressure on liquidity.