Aristocrat Leisure Limited (ASX: ALL, Aristocrat or the Group) is a global gaming content, technology business and mobile games publisher and gambling machine manufacturer. The Company produced its first gambling machine in 1953 and listed on the ASX in 1996.
North America Gaming Operations driving earnings growth
Aristocrat’s Gaming Operations segment was the major contributor to Segment Profit for the financial year to 30 September 2024 and this trend looks set to continue. Significantly, eighty percent of Aristocrat’s Gaming revenue is derived from North America.
Gaming Operations is a high margin business segment with extraordinary operating leverage that generated a 58 percent profit margin on Revenue in FY24. Lower supply chain costs contributed to this strong profit margin.
Aristocrat’s North America Gaming Operations grew the installed base of gaming machines by 7,100 units to 71,131 in the 12 months to September 2024, taking US market share to 40 percent. This places Aristocrat as the leading supplier of slot machines in the US. The market-leading fee per day for each machine remained strong at US$55.41 across the expanded footprint, delivering a portfolio performance of 1.4 times the floor average.
Expansion is continuing into attractive Gaming Operations adjacencies including the Video Lottery Terminal segment and entry into the Coin Operated Amusement Machine market.
The Gaming segment accounts for 55 percent of Segment Revenue and 66 percent of Segment Profit and is considered by investors to be the defensive growth unit of the Group. This is because of the large addressable market in the US and the recurring nature of revenues generated from electronic gaming machines.
Pixel United
Pixel United (formerly Aristocrat Digital) accounts for 40 percent of the Group’s Segment Revenue and 31 percent of Segment Profit and generated a 36 percent margin on flat revenue in FY24. Lower User Acquisition (UA) investment is driving improved returns in this business segment and UA costs are currently sitting at 21 percent of Pixel United revenue (US$182 million), down from 27.5 percent (US$262 million) two and a half years ago.
Aristocrat Interactive
The acquisition of NeoGames for $1.8 billion cash in May 2023 is shaping as a key decision in support of Aristocrat’s foundation strategy to create the world’s greatest gaming content at scale. The acquistion provides Aristocrat with material revenue upside by combining Aristocrat’s industry leading Gaming content, and long-term customer and regulatory relationships with Neogames’ technology and platforms.
NeoGames is a global leader in content for the US$81 billion online Real Money Gaming industry that provides content and technology platforms across iLottery, iGaming and Online Sports Betting.
The iLottery platform provides a comprehensive iLottery solution to predominantly government customers mainly across North America and Europe and is the leading iLottery platform in the US with an approximate 67 percent market share.
The iGaming business segment provides iGaming content through a proprietary aggregation platform, as well as operating its own inhouse content studio that assists others in game creation through its game development kit. These products position it as a leading iGaming content aggregator in Europe.
The Sportsbook platform services 20 partners and 50 brands across Africa, Europe and Latin America.
The Interactive segment currently accounts for 5 percent of Segment Revenue at US$223 million and less than 2 percent of Segment Profit at US$70 million and generates a 31 percent gross profit margin on revenue. It is significant that management have set a FY29 Revenue Target of US$1 billion for Interactive, buoyed by the NeoGames acquisition.
The Future
Aristocrat’s diversified portfolio of scaled, world-class assets across Aristocrat Gaming, Pixel United, and Aristocrat Interactive, has demonstrated competitiveness and earnings resilience over many years. The Group’s well established Gaming operations in North America continue to grow on the back of superior execution, and the US$1 billion FY29 Revenue Target for Aristocrat Interactive looks achievable given the low earnings risk profile of Lottery, Gaming, and Online Sports Betting activities.
Aristocrat’s ongoing investment in product and technology, combined with innovation, operational excellence, and customer engagement, should drive further market share gains in key markets and genres. This organic growth is consistent with higher earnings per share and dependable dividends over the medium-term.
