Key Points
- Statutory profit after tax dropped sharply by 77.6% to A$1.1m due to lower sales in North America from 1,357 to 492 units in the half-year.
- Gross margin increased from 56% to 62%; however, this was mainly due to a one-off A$3.8m tariff refund under the IEEPA law. The reality is that EBITDA has fallen by 36.4.
- Dragon Legacy Metal and Dragon Legacy Wood ranked first and second on the June 2026 Eilers Report for new core video games, and their Class II and HHR expansion lands in September.
Ainsworth Game Technology (ASX: AGI) threw out some figures that would have made any boardroom cringe at their H1 2026 earnings report. Net profit attributable to equity shareholders plunged by 78% year-over-year (YoY) to A$1.1 million, while net income fell by 23.4% to A$116.5 million. Shares fell by 4.5% to A$1.06. It was not necessarily the headline figures that caught investors’ attention, however. Gross margin increased from 56% to 62%, operating cash flow became positive at A$8.9 million compared to negative A$4.7 million in the same period last year, and two new products found themselves leading the industry in the top performance charts of North America.
North America Did Not Slow Down – It Fell Apart
North America generated 44% of group revenue but delivered the half-year’s worst regional performance by a significant distance. Revenue from the region fell 38% year-on-year to A$51.9 million. Unit sales collapsed from 1,357 to 492. The installed gaming operations base shrank from 2,961 units to 2,360. CEO Ryan Comstock, who took the acting role in October 2025, did not sidestep the problem.
“A lack of compelling new product offerings in recent times in our largest market, North America, has adversely impacted our performance,” Comstock said. “We have taken steps to address this and are focused over the next six months on a product roadmap with a consistent release cadence off the back of the Dragon Legacy.”
Two regulatory headwinds made the product gap worse. New Hampshire began removing Historical Horse Racing machines from certain facilities following a state-level review that exposed structural concerns around Ainsworth’s market position, cutting into a revenue stream the company had spent years building through its proprietary HHR system. Separate to that, Mexico’s 2026 fiscal reform package pushed the gaming gross revenue tax from 30% to 50%, one of the highest rates in the world, effective from 1 January 2026. That single policy shift dragged Latin America and Europe revenue down 19.6% to A$25.4 million, as operators pulled back on machine purchases to absorb the blow to their margins.
The Margin Recovery Is Real, but Read the Fine Print
The gross margin expansion to 62% dominated analyst commentary after the results landed. The improvement is genuine, but it arrived with a significant one-off attached. The statutory result absorbed an A$2.3 million provision for a patent claim brought by Aristocrat Technologies Australia over its Hold & Spin game features, alongside A$1.1 million in transaction costs tied to a terminated scheme of arrangement. Strip those out alongside currency movements, and underlying EBITDA still fell 36.4% to A$17.1 million. Underlying profit before tax landed at A$4.7 million, against A$13.9 million in H1 2025.
The tariff refund is the cleaner part of the margin story. Ainsworth received an A$3.8 million IEEPA tariff refund during the half under United States tariff policy, and that figure, combined with higher average selling prices in Asia Pacific and North America, accounts for much of the 600 basis point margin expansion. The more durable part of the improvement is the shift in revenue mix. Lower unit volumes meant fewer lower-margin hardware sales went through the books, and recurring revenue from Historical Horse Racing connection fees now represents 37% of total group revenue. HHR fees alone account for 36% of North American segment revenue, up from 22% a year earlier, and that shift toward recurring income reduces some of the volatility tied to hardware sale cycles.
Asia Pacific Picked Up the Business When Nothing Else Could
In terms of growth, the Asia Pacific segment remains the sole bright spot for Ainsworth in the period, with sales up 7% to A$36.9 million and unit volumes up 3% from 1,049 to 1,087 units. Profit margins also improved to 25% from 23%. Driving growth were the single-screen Raptor model introduced into Australia in February 2026 and Double Dragons and Loot Express, which debuted above casino floor average performance and have maintained that position since. The segment represents 32% of total company revenues, which is exactly why North America’s downturn has been so significant.
Raptor A865, the product that houses patent-pending Hybrid Technology, continues to be the biggest hardware story. The Hybrid Technology enables the running of portrait/dual-screen game content within one physical cabinet, something the industry does not have the option to do currently through different hardware purchases. Launch to Latin America and North America is expected in H2 2026 and it has already been established by Ainsworth as an important tool to rebuild floor placement interest in those areas.
Dragon Legacy and the Test That Actually Matters
Product performance data, not management commentary, is what rebuilds operator trust in this industry. That is why the June 2026 Eilers Report result carries real weight. Dragon Legacy Metal ranked first and Dragon Legacy Wood ranked second among all new core video games, with performance indices of 2.12x and 1.96x the house average respectively. These are Class 3 market results from a launch that happened in late May 2026, meaning the data reflects barely five weeks of floor time. The Dragon Legacy brand will launch into the Class II and HHR market segments in September 2026, which accounts for an estimated 61% of Ainsworth’s North America regional sales.
R&D investment climbed to 22% of revenue from 16% in the previous period. Each developer at Ainsworth is using AI-driven programming software; generative processes have sped up the time from concept to asset for graphics and animation; and the AI-driven game Just Chillin’ has been nominated for Product Innovation of the Year at the 2026 Global Gaming Awards. A heavy R&D spend during a period of falling revenue is a calculated bet. The wager is that H2 product volume justifies it. Q3 releases include Train Heist, Digging Dollars, Fortune Bull, Kaiju Cash and Mustang. Q4 brings Thunder Cash, Eagle Bucks Deluxe and The Enforcer Reloaded. The A832L value cabinet, built specifically for price-sensitive Latin American operators, is also due for H2.
The Aristocrat Deal Cleared Legal Risk but Added a New Cost Line
The majority of reports focused on the provision worth A$2.3 million provided to Aristocrat. Fewer reports referred to what happened afterwards. The validity of Aristocrat’s patents covering Hold & Spin and other electronic gaming machine features was determined by the 2025 ruling of the Federal Court. Subsequent negotiations followed leading to Ainsworth confirming a licensing deal with Aristocrat on 14 August 2026. According to the terms of the licensing deal, Ainsworth gets a non-exclusive license to Hold & Spin and other patents covering the Australian gameplay features. Furthermore, the licensing deal also includes pass-through rights for the company’s customers as well as the release of all claims against each other for historic use of the licensed technology. In addition, Comstock directly commented on the solution of the problem, saying, “The agreement we have entered into with Aristocrat provides us with the certainty required to confidently implement our strategic growth initiatives in the Australian market.”
The dividends are still suspended until the company addresses its debt problems and finances the development of new products. The net debt decreased to A$8.5 million as of 30 June 2026 from A$11.8 million as of 31 December 2025. Moreover, the debt-to-equity ratio decreased to 23% from 28%. All covenants of the US$75 million WAB loan facility were complied with.
Expert Analysis
We have seen Ainsworth navigate product-gap cycles before, and the pattern is familiar enough to warrant caution. Floor space lost during a slow product period is rarely reclaimed at the same speed it was lost. Competitors do not hold their placements in reserve while waiting for a rival’s pipeline to recover. Aristocrat and Light & Wonder release titles continuously, and operators making floor allocation decisions work from what is available now, not from roadmaps presented at half-year results. The Dragon Legacy floor data is the most honest positive signal in this entire report, because it comes from actual player spending rather than company slides. Two titles at the top of the Eilers Report in a single month is meaningful. What we think investors and operators should track in H2 2026 is whether that becomes three, four, five titles across multiple months, or whether Dragon Legacy turns out to be an isolated performance peak in an otherwise thin pipeline. The HHR connection fee base, now contributing 36% of North American segment revenue, is the most defensible revenue line Ainsworth carries into the second half. Our read is that the company is in a structurally better position than the 78% profit drop suggests, but the recovery is not secured. It requires consistent execution in a market that has already watched Ainsworth under-deliver in North America more than once.
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