Inspired Entertainment (NASDAQ: INSE) reported Q3 EPS of ($0.38), $0.12 worse than the analyst estimate of ($0.26). Revenue for the quarter came in at $26.6 million versus the consensus estimate of $29.03 million.

"Results for the third quarter were in line with our expectations, considering the negative impact from the Triennial Implementation. Additionally, we are seeing a considerable improvement in trend in the UK in the fourth quarter," said Lorne Weil, Executive Chairman of Inspired. "As stated previously, a large part of our mitigation efforts will be driven by shop closures. Since the September 30th closing of 700 shops within our estate, our revenue appears to be tracking higher than we initially anticipated, prior to the Triennial Implementation, with a significant improvement in the observed decline in gross win per unit per day to 24.5% in October from 44.1% in April and 37.9% in August. This trend illustrates, in practice, our previously outlined thesis that a substantial portion of revenue lost due to shop closures would be recovered throughout our remaining estate. Additionally, because our costs are generally aligned with our total machine count, the overall industry restructuring and consolidation is likely to assist our cost mitigation efforts going forward due to the benefits of supporting a smaller, more profitable estate. We're now quite confident that the projected adverse impact on Adjusted EBITDA will be at the lower end of the guidance range of approximately $10 million to $11 million annually on a steady state basis."

"We continue to make excellent progress with growth initiatives in other areas of our business. In the fourth quarter we completed the acquisition of NTG and have been very pleased with the positive trends in the business, particularly in the cash box performance of the pub estate. Our North American business has been building momentum and we had outstanding feedback on our new Valor™ terminal at G2E in Las Vegas. In October we delivered our first gaming terminals in Illinois and are very pleased with the performance thus far. We continue to lead the industry in Virtuals innovation and are excited about our new license agreements with NHL legend Jaromir Jágr and with NFL Alumni. The popularity of our Gaming and Virtuals content is fueling the growth in our Interactive business, where we are in the process of launching new content and integrating several customers," said Weil.

Weil concluded, "We believe we have reached a turning point in the implementation of our three-pronged strategy to (1) mitigate the Triennial, (2) generate new business to offset the impact of Triennial and return to pre-Triennial Adjusted EBITDA levels, and (3) integrate the NTG acquisition and realize additional revenue opportunities between the complementary businesses, and we are extremely excited for our growth prospects in 2020 and beyond."

Management Outlook and Commentary

Management remains confident in its plan to manage the Triennial Implementation and the projected adverse impact on Adjusted EBITDA at the lower end of the range of approximately $10 million to $11 million annually on a steady state basis, assuming exchange rates remain stable.

Management continues to expect to achieve $12.3 million to $13.3 million of annual cost synergies (across cost of sales and selling, general and administrative costs and excluding one off implementation costs) from the NTG acquisition, within six months of consummation based upon the USD/GBP spot exchange rate at the time of signing of the transaction,through shared costs and increased scale.

"The acquisition of NTG has changed the profile of our business, not only adding size, scope and scale but also strengthening our balance sheet," said Stewart Baker, Executive Vice President and Chief Financial Officer of Inspired. "Pro forma for the acquisition, we have lowered our annual coupon cost of debt and we remain focused on generating free cash flow."

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