Ainsworth Game Technology’s first half 2026 results reveal a sharp revenue drop driven by North American and Latin American market pressures, offset partially by Asia Pacific growth and a key patent licensing deal.
- 23% revenue decline to AUD 116.5 million
- 78% net profit drop to AUD 1.1 million
- North America revenue down 38% but margin improved
- Patent settlement with Aristocrat for AUD 8.5 million
- Strong R&D investment and new product launches
Revenue and Profit Slide Amid Market Headwinds
Ainsworth Game Technology (ASX:AGI) posted a 23% fall in revenue to AUD 116.5 million for the six months ended 30 June 2026, with net profit after tax plunging 78% to just AUD 1.1 million. The decline was primarily driven by weaker land-based sales across North America and Latin America & Europe, compounded by regulatory changes such as increased gaming taxes in Mexico and the removal of Historical Horse Racing (HHR) machines in New Hampshire.
Despite the revenue hit, gross margin improved to 62% from 56% in the prior corresponding period, largely due to a tariff refund under the International Emergency Economic Powers Act (IEEPA) and higher average selling prices in Asia Pacific and North America. Underlying profit before tax, which excludes foreign currency impacts and one-off items including a patent claim provision, dropped 66% to AUD 4.7 million.
North America Revenue Declines but Margins Strengthen
North America, Ainsworth’s largest market, saw revenues fall 38% to AUD 51.9 million, representing 44% of group revenue compared to 55% a year earlier. The decline reflects a lack of compelling new products recently and regulatory headwinds. Participation and lease revenue fell as the installed base shrank to 2,360 units from 2,961 units in the prior year.
However, the segment’s profit margin improved sharply to 54%, up 11 percentage points, boosted by the tariff refund and a higher proportion of recurring revenue from the HHR system, which had 10,737 units connected at period end. The Dragon Legacy game family, launched in late May, ranked first and second in the June 2026 Eilers Report of Top 25 New Core Videos, showing early signs of rebuilding operator confidence.
Asia Pacific Growth Offsets Some Weaknesses
The Asia Pacific segment, including Australia and New Zealand, bucked the broader trend with revenue rising 7% to AUD 36.9 million, driven by strong sales of the A-STAR Raptor™ single-screen cabinet and expansions such as Double Dragons™ and Loot Express™. Segment profit margin increased to 25%, supported by a strong average selling price of AUD 27,800 per unit and 1,087 units sold.
The region’s product innovation, including the patent-pending Hybrid Technology in the A865 cabinet launched in H1 2026, provides operators with flexibility to run portrait and dual-screen content on the same platform, enhancing deployment options.
Latin America and Europe Face Regulatory and Economic Pressures
Revenue in Latin America and Europe declined 20% to AUD 25.4 million amid geopolitical challenges, inflation in Argentina, and regulatory uncertainty in Mexico. The installed base dropped to 3,284 units, with participation and lease revenue contributing AUD 9.2 million. Despite lower sales, segment profit margin improved to 26%, aided by a favorable product mix focusing on higher-margin cabinets.
Patent Licensing Deal and Cost Management
Ainsworth recognised a AUD 2.3 million provision related to a patent claim by Aristocrat Technologies Australia concerning the Hold & Spin family of game features. In August 2026, the company entered a licensing agreement with Aristocrat Leisure Limited for AUD 8.5 million payable over three and a half years, settling potential claims and securing rights to incorporate these features in Australian products.
Cost discipline was evident with sales, service and marketing expenses down 13% to AUD 28.7 million, reflecting lower variable costs. Research and development expenses rose slightly to AUD 25.8 million, representing 22% of revenue, underscoring Ainsworth’s commitment to innovation, including AI-assisted game development tools.
Balance Sheet and Cash Flow
The company improved operating cash flow to AUD 8.9 million from a negative AUD 4.7 million in the prior year, enabling a reduction in net debt to AUD 8.5 million from AUD 11.8 million at December 2025. Cash balances stood at AUD 12.3 million with an undrawn loan facility of AUD 89.1 million, providing liquidity to support ongoing investments.
All financial covenants under the US$75 million secured bank loan facility with Western Alliance Bank were met. The loan is secured against the Las Vegas building, a key asset for the group’s US operations.
Looking Ahead: Product Innovation and Market Recovery
CEO Ryan Comstock highlighted the company’s focus on a refreshed product roadmap, aiming for a consistent release cadence anchored by the Dragon Legacy family extending into Class 2 and HHR markets. The company is encouraged by early success in Asia Pacific and plans to roll out the A865 cabinet more broadly in Latin America and North America in the second half.
However, the company faces ongoing challenges in its core North American and Latin American markets, with regulatory headwinds and competitive pressures dampening sales volumes. The licensing deal with Aristocrat removes a key legal overhang, but its financial impact will weigh on profitability over the medium term.
Ainsworth’s commitment to R&D and AI-driven development aims to accelerate innovation and improve market responsiveness, but whether this will translate into a sustained revenue recovery remains to be seen.
Bottom Line?
Ainsworth’s H1 2026 results reflect a tough trading environment and costly patent settlement, but renewed product innovation and improved cash flow set the stage for a critical second half.
Questions in the middle?
- Will the Dragon Legacy product cadence restore North American market share?
- How materially will the Aristocrat patent license impact future earnings and cash flow?
- Can Asia Pacific’s growth momentum offset ongoing challenges in Latin America and Europe?