Inspired Entertainment, Inc. Income Taxes Disclosure

22. Income Taxes

 

The effective tax rates for the years ended December 31, 2025 and 2024 were (188.6)% and (3,466.2)%, respectively. For the year ended December 31, 2025, the Company’s effective tax rate differs from the federal statutory rate primarily due to an inclusion for global intangible low-taxed income. For the year ended December 31, 2024, the Company’s effective tax rate differs from the federal statutory rate primarily due to the reversal of a majority of the Company’s valuation allowance on its deferred tax assets in various jurisdictions as well as an inclusion for global intangible low-taxed income.

 

The components of (loss) earnings before income taxes on the Company’s consolidated statement of operations by the U.S. and foreign jurisdictions were as follows:

 

Schedule of Earnings (Loss) Before Income Tax

		Year Ended December 31, 2025				Year Ended December 31, 2024
		(in millions)
United States		$	(12.4	)		$	(21.6	)
Foreign jurisdictions			6.5				23.4
Ending balance		$	(5.9	)		$	1.8

 

Income tax provision, as reflected in the Company’s consolidated statement of operations, consists of the following: 

 

Schedule of Provision for Income Taxes 

		Year Ended December 31, 2025				Year Ended December 31, 2024
		(in millions)
Current provision (benefit)
Federal		$	2.8			$	4.6
State			—				(0.1	)
Foreign			5.4				1.9
Total current		$	8.2			$	6.4

 

		Year Ended December 31, 2025				Year Ended December 31, 2024
		(in millions)
Deferred provision (benefit)
Federal		$	0.3			$	(2.7	)
Foreign			2.6				(66.7	)
Total deferred		$	2.9			$	(69.4	)
Total provision		$	11.1			$	(63.0	)

 

Supplemental disclosure of cash paid during the period for income taxes (net of refunds received) is as follows:

 

Schedule of Income Taxes 

		Year Ended December 31, 2025
			(in millions)
Federal		$	6.4
UK			(0.2	)
Brazil			2.4
Dominican Republic			1.1
Greece			1.5
Other			0.2
Total cash paid for income taxes, net of refunds received		$	11.4

 

 

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024

 

Reconciliation of the differences between the effective income tax rate and federal statutory rate for the year ended December 31, 2025:

 Schedule of Effective Income Tax Rate Reconciliation

		December 31, 2025
		(in millions)
Statutory income tax		$	(1.2	)			21.0	%
State (net of federal)			—				(0.6	)%
Foreign tax effects
Brazil
Foreign withholding taxes			2.4				(40.1	)%
Dominican Republic
Foreign withholding taxes			1.1				(18.6	)%
United Kingdom
Change in valuation allowance			—				0.3	%
Effects of rates different than statutory			0.7				(12.0	)%
Non-deductible loss on disposal			1.3				(22.5	)%
Foreign tax credit on withholding taxes			(2.4	)			40.1	%
Non-deductible expenses			0.8				(14.0	)%
Stock option deduction			0.3				(5.7	)%
Prior year true ups			0.5				(7.5	)%
Greece
Prior year tax assessment			1.8				(30.9	)%
Other foreign jurisdictions
Other			—				(0.5	)%
Effects of cross-border tax laws
Global intangible low-taxed income			3.9				(65.3	)%
Other			(0.2	)			3.9	%
Nontaxable or nondeductible items
Non-deductible officers’ compensation			0.9				(15.2	)%
Other			(0.1	)			2.4	%
Change in valuation allowances			1.5				(26.1	)%
Other adjustments			(0.2	)			2.7	%
Effective income tax rate		$	11.1				(188.6	)%

 

As previously disclosed for the year ended December 31, 2024, prior to the adoption of ASU 2023-09, the following is a reconciliation of the difference between the effective income tax rate and the federal statutory rate:

 

Schedule of Differences Between the Federal Statutory Tax Rate and Effective Rate

		December 31, 2024
Statutory income tax			21.0	%
State taxes (net of federal)			(7.4	)%
Non-deductible officers’ compensation			41.9	%
Global intangible low-taxed income			295.2	%
Other permanent differences			(14.4	)%
Prior year true ups			(59.1	)%
Effect of rates different than statutory			59.9	%
Non-creditable withholding taxes			83.4	%
Subpart F			105.4	%
Other			12.8	%
Change in valuation allowance			(4,005.0	)%
Effective income tax rate		$	(3,466.2	)%

 

 

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024

 

The net deferred tax assets and liabilities arising from temporary differences are as follows:

 

Schedule of Deferred Tax Assets and Liabilities

		December 31, 2025				December 31, 2024
		(in millions)
Depreciation		$	34.4			$	45.8
Net operating losses			30.7				19.7
Other temporary differences			1.5				0.7
Intangible Assets			5.9				7.4
Interest limitation carry forward			5.0				3.3
Right of Use liability			6.7				9.0
Total gross deferred tax assets			84.2				85.9
Valuation allowance balance			(10.4	)			(8.5	)
Gross deferred tax assets			73.8				77.4
Other temporary differences			(1.5	)			(1.1	)
Right of Use asset			(7.0	)			(8.9	)
Gross deferred tax liabilities			(8.5	)			(10.0	)
Net deferred tax assets		$	65.3			$	67.4

 

Changes in the valuation allowance are as follows:

 

Schedule of Changes in the Valuation Allowance 

		December 31, 2025				December 31, 2024
		(in millions)
Beginning balance		$	8.5			$	81.2
Increase (decrease)			1.9				(5.3	)
Reversal of allowance			—				(67.4	)
Ending balance		$	10.4			$	8.5

 

The One Big Beautiful Bill Act (the “OBBBA”) was signed into law on July 4, 2025. The OBBBA contains significant tax law changes with various effective dates affecting business taxpayers. Among the tax law changes that will impact the Company relate to the timing and amount of interest expense deductions within global low-taxed income calculation, and deductions and foreign tax credit calculations related to the global low-taxed income calculation. The tax provision was impacted by the timing and amount of interest expense deductions within the global low-taxed income calculations in 2025.

 

As of December 31, 2025 the Company’s cumulative state net operating losses are $48.6 million, which begin to expire in 2026. The utilization of the Company’s state net operating losses may be subject to a limitation in the future due to the “change of ownership provisions” under Section 382 of the Internal Revenue Code. As of December 31, 2025, the Company is not aware of an ownership change under Section 382.

 

As of December 31, 2025 and 2024, the Company also has gross net operating losses in foreign jurisdictions, primarily the UK, totaling $110.7 million and $66.8 million, respectively. The majority of these net operating losses have an unlimited carry forward period.

 

Management evaluates both positive and negative evidence to estimate whether sufficient future taxable income will be available to utilize existing deferred tax assets. A key piece of objective positive evidence considered is the cumulative income generated over a three-year period. In the fourth quarter of 2024, the Company determined that, due to positive income generation in the United Kingdom in recent years leading to a cumulative income position, and based on forecasted future taxable income, while considering expected permanent and temporary timing tax differences, a significant portion of the valuation allowance against its deferred tax assets was no longer necessary. As of December 31, 2025, the Company maintains a valuation allowance of $8.2 million in the United States and $2.2 million in the United Kingdom. The remaining valuation allowance relates to capital loss carryovers in the United Kingdom, state net operating losses unable to be utilized in the United States and United States interest expected to be limited under Section 163(j).

 

The Company has not recognized deferred tax liabilities in respect of unremitted earnings that are considered indefinitely reinvested in foreign subsidiaries. We do not provide for taxes on our undistributed earnings of foreign subsidiaries that have not been previously taxed because we intend to invest such undistributed earnings indefinitely outside of the United States.

 

Currently, there are no federal, state or foreign jurisdiction tax audits pending. The Company’s corporate federal and state tax returns from 2022 to 2024 remain subject to examination by tax authorities and the Company’s foreign tax returns from 2017 to 2024 remain subject to examination by tax authorities.

 

In accordance with ASC 740, the Company has evaluated its tax positions to determine if there are any uncertain tax positions. As of December 31, 2025 and 2024, the Company has no unrecognized tax benefits for uncertain tax positions and has no accrued interest or penalties related to uncertain tax positions. The Company does not anticipate any material change in the total amount of unrecognized tax benefits will occur within the next twelve months.

 

 

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024