Leases

12 Months Ended

Dec. 31, 2021

Leases

Leases

23. Leases

The Company as Lessee

The Company is party to operating leases with third parties with respect to various real estate and vehicles. Real estate leases typically include a lease (of the property) and a non-lease (provision of services) component which are accounted for separately. Where lease costs are variable due to future rent reviews, these are treated as part of the lease asset and lease liabilities as they are considered to qualify as variable lease costs which are subject to an index or rate. These costs are included at the amount prior to any reviews, as it is not permitted to estimate future rent reviews. Where real estate leases contain an option to terminate, any period beyond the option date is only included as part of the lease term if the Company is reasonably certain not to exercise the option. Vehicle leases typically contain a lease (of the vehicle) and a non-lease (provision of services) component which are accounted for separately.

The leases have remaining terms of 1 to 11 years.

During the year to December 31, 2021 and 2020, certain concessions were granted with respect to the Company’s operating leases in light of Covid-19. These have taken the form of lease extensions, where nothing is paid for a period of time with that same period of time and payments added onto the lease at the end, payment holidays, where payments are deferred until a later date, but with no lease extension, and discounted payments, where payments are reduced and are not repaid either at a later date or through lease extensions. The Company has elected to use the practical expedient granted by the FASB and account for the concessions as if they were part of the enforceable rights and obligations of the parties under the existing lease contract for all affected operating leases. Lease extensions and discounted payments are accounted using the ‘cash basis’ approach, with the lease liability and right-of-use asset continuing to be accounted for as if payments are still being made under the original terms of the lease. Payment holidays are accounted for using the ‘remeasurement consistent with resolving a contingency’ approach, which involves remeasuring the liability and the right-of-use asset and continuing to recognize the total cost of the lease on a straight line basis over the period to which it relates.

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED

DECEMBER 31, 2021, 2020 AND 2019

The Company is also party to finance leases with third parties, with respect to gaming machines and fit out works at the Company’s main UK office. The leases have remaining terms of between 4 and 36 months.

The components of lease expense were as follows:

	Year Ended December 31, 2021		Year Ended December 31, 2020		Year Ended December 31, 2019
	(in millions)
Finance lease costs:
Depreciation	$	0.5	$	0.1	$	—
Interest		0.2		0.1		—
Operating lease costs		4.4		4.3		2.1
Short-term lease costs		1.3		1.5		0.9
Variable lease costs		2.9		1.7		0.7
Total	$	9.3	$	7.7	$	3.7

	December 31, 2021			December 31, 2020
Weighted average remaining lease term – finance leases		39.1 months			16.0 months
Weighted average remaining lease term – operating leases		69.4 months			79.2 months
Weighted average discount rate – finance leases		8.9	%		7.9	%
Weighted average discount rate – operating leases		8.7	%		8.6	%

Assets leased under finance leases had a cost of $4.2 million and $1.7 million at December 31, 2021 and 2020, respectively, and accumulated depreciation associated with these assets was $0.6 million and $0.1 million at December 31, 2021 and 2020, respectively.

Future minimum finance lease payments as of December 31, 2021 were as follows:

Year ending December 31, (in millions)
2022	$	1.2
2023		0.7
2024		1.0
2025		0.6
2026		—
Thereafter		—
Total future minimum lease payments		3.5
Less: imputed interest		(0.7	)
Total	$	2.8

Future minimum operating lease payments as of December 31, 2021 were as follows:

Year ending December 31, (in millions)
2022	$	3.5
2023		2.3
2024		2.1
2025		1.4
2026		1.1
Thereafter		3.8
Total future minimum lease payments		14.2
Less: imputed interest		(3.5	)
Total	$	10.7

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED

DECEMBER 31, 2021, 2020 AND 2019

The Company as Lessor

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 leases have remaining terms of 1 to 5 years.

During the year to December 31, 2021 and 2020, the Company granted concessions to customers in the form of lease extensions granted during the lockdown period, where nothing is paid during the concession period, with that same period of time and payments added onto the lease at the end. The Company has elected to use the practical expedient granted by the FASB and account for the concessions as if they were part of the enforceable rights and obligations of the parties under the existing lease contract for all affected leases.

Assets leased under operating leases had a cost of $6.8 million and $5.9 million at December 31, 2021 and 2020, respectively, and accumulated depreciation associated with these assets was $2.8 million and $1.8 million at December 31, 2021 and 2020, respectively. Depreciation expense for the year ended December 31, 2021, 2020 and 2019 amounted to $1.4 million, $1.5 million and $0.3 million, respectively.

The components of lease income were as follows:

	Year Ended December 31, 2021		Year Ended December 31, 2020		Year Ended December 31, 2019
	(in millions)
Interest receivable from sales type leases	$	—	$	0.1	$	0.1
Operating lease income		3.3		2.3		0.9
Variable income from sales type leases		0.1		0.7		0.3
Total	$	3.4	$	3.1	$	1.3

Future minimum sales type lease receivables as of December 31, 2021 were as follows:

Year ending December 31, (in millions)
2022	$	0.7
2023		0.3
2024		—
2025		—
2026		—
Total future minimum lease receivables		1.0
Less: imputed interest		—
Total	$	1.0

Future minimum operating lease receivables as of December 31, 2021 were as follows:

Year ending December 31, (in millions)
2022	$	1.1
2023		1.6
2024		2.2
2025		—
2026		—
Total future minimum lease receivables	$	4.9

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED

DECEMBER 31, 2021, 2020 AND 2019