In a recent move that underscores the stringency and oversight of financial markets, Inspired Entertainment has been granted approval for a compliance plan by Nasdaq. Submitted last month, the plan outlines a detailed roadmap for Inspired to get back on track with its regulatory filings.
The approved plan stipulates that Inspired will file its pending 10-Q form for the third quarter of 2023 with Nasdaq by the deadline of February 28. In tandem, the company is diligently working to complete an amended 10-K for the fiscal year ending December 31, 2022, which will include restated financial statements. Furthermore, Inspired is committed to revising Forms 10-Q/A for the first and second quarters of 2023 by the designated date.
This positive development comes after Nasdaq reached out to Inspired in November regarding the late submission of its Q3 2023 financial results. Inspired had acknowledged the need for additional time to finalize these results, primarily due to the necessity of restating certain financial statements previously issued.
Inspired’s tardiness in filing led to a breach of Nasdaq’s listing rules, prompting the exchange to set a January 22 deadline for Inspired to submit a comprehensive plan to restore its compliance status. The company narrowly missed this deadline, formally presenting its plan on January 23.
Delving into the causes of the delay, Inspired has identified accounting errors with respect to United States Generally Accepted Accounting Principles (US GAAP), especially concerning its policies for capitalizing software development costs. These errors surfaced in financial statements for periods starting January 1, 2021, rendering those statements unreliable and necessitating restatements.
Moving beyond just the impacted periods, Inspired has also cast doubt on the reliability of any subsequent financial statements that include data from after the identified start date.
Recognizing “material weaknesses” in its internal controls over financial reporting, Inspired is now proactively remedying these deficiencies. The corrective measures are expected to culminate in the release of Q3 figures before the month’s end.
Inspired, while acknowledging these challenges, has sought to reassure its stakeholders. The company believes that the corrections being made will not have a material effect on its cash position or its business strategies, thus providing a measure of security to its investors.
The last time Inspired released financial figures was back in August 2023 for Q2 and the first half of the year. The results showed a commendable 12.3% increase in Q2 revenue to $80.1 million, indicative of growth across the company’s various business segments.
Despite this revenue upturn, higher expenses led to an 85.4% decrease in net profit to $2.3 million. In contrast, the adjusted EBITDA experienced a rise, reaching $26.2 million.
Looking at the first half of the year, there was an 11.0% increase in revenue, amounting to $146.4 million. However, net profit experienced a substantial drop of 53.6%, settling at $3.9 million over the six-month period.
In summary, with Nasdaq’s blessing, Inspired Entertainment’s carefully crafted strategy to regain compliance is set in motion. The focus now turns to the timely submission of the effected financial documents in line with Nasdaq’s regulations. As the company grapples with accounting missteps, the overarching sentiment is one of cautious optimism, rooted in the expectation that Inspired’s core financial disposition will emerge unscathed.
