Australia-listed slot machine maker and online gaming content provider Aristocrat Leisure Ltd expects to achieve “at least” US$1 billion in revenue from its interactive segment by financial year 2029. The revenue target was mentioned at a briefing for investors on Wednesday.
The update was to provide detail on Aristocrat Leisure’s growth plans across its three operating businesses. They are: Aristocrat Gaming, the group’s land-based gaming technology segment; Aristocrat Interactive, the firm’s segment focused on online real money gaming (RMG); and mobile games division Pixel United.
Aristocrat Leisure completed in late April the acquisition of RMG provider NeoGames SA, and announced Moti Malul, previously CEO of NeoGames, as CEO of Aristocrat Interactive.
On Wednesday, the group officially launched Aristocrat Interactive, confirming the structure of the new business. It consists of: iLottery; content and aggregation; gaming systems; iGaming and sports; and iGaming white-label business. Aristocrat Leisure says the latter offers full front-end and back-end services to independent casino and sportsbook operators.
During the briefing, the group’s management outlined the “opportunities ahead” for Aristocrat Interactive, “including across iLottery and iGaming segments”.
The group said the US$1-billion revenue target by financial year 2029 from the interactive business, “would represent a five-year compound annual growth rate above 20 percent” from that segment.
JP Morgan said in a Wednesday note that the RMG opportunity was “significant” for the Australian maker.
Aristocrat Leisure “has the opportunity to position itself as not only the market leader in land-based gaming, but also clip the ticket across various verticals of the real-money gaming market and value chain,” wrote analysts Don Carducci and Michael James.
According to the bank, assuming Aristocrat Leisure reaches the US$1-billion revenue target by financial year 2029, “and achieves margins of circa 30 percent … the implied US$270 million EBITA [earnings before interest, taxation and amortisation]” would be “about 50-percent higher than current circa US$175 million forecasts”.
JP Morgan said Aristocrat Leisure’s management suggested the profitability of the interactive division would be “somewhere between” that of the gaming division, with an “EBITA margin of circa 55 percent in financial first half,” and Pixel United, “first-half 2024 EBITA margin of about 35 percent”.
The institution expressed caution however regarding some risks. These included “the pace of state-based legalisation in the United States, particularly iLottery”. The bank said that ‘while sports betting has progressed steadily – legal in over 30 states –, both iGaming and iLottery have been slower”.
It added: “While not drawn on details, achievement of US$1-billion [revenue] by financial year 2029, in our view, would likely include at least some further legalisation/additional [U.S.] states to be won and entered.”
Aristocrat Leisure reported revenue of just under AUD3.27 billion (US$2.19 billion) for its financial first half, up 6.1 percent from the prior-year period.
Land based, social games
Aristocrat Leisure said in its financial first-half results that its gaming segment recorded revenue of nearly AUD1.83 billion in the period, an 8.3-percent increase from a year ago. It accounted for about 56.0 percent of the group’s aggregate revenue for the period.
Revenue in North America rose by 5.8 percent year-on-year, to US$950.2 million.
In the “Rest of World” segment, revenue increased 6.6 percent year-on-year, to AUD376.7 million. The performance in this segment was “driven mainly by growth in Asia,” stated the gaming supplier at the time of the results announcement.
JP Morgan observed that the North American gaming business will in likelihood remain the “key contributor” to Aristocrat Leisure’s “sales, earnings and growth in the near term”.
“We believe the 6,000-unit growth target for financial year 2024 is very achievable – with likely upside to consensus estimates,” stated Mr Carducci and Mr James.
Aristocrat Leisure announced in May, at the time of its first-half results, a “strategic review of its casual and mid-core gaming assets”, including its Big Fish Games – excluding the Big Fish Social Casino assets – and Plarium Global, part of Pixel United.
Aristocrat Leisure’s management told investors on Wednesday that the review of Pixel United was ongoing.
For the social casino operations, a National Football League-themed application “is to be launched in financial year 2025,” following the roll-out of the land-based title this year, noted JP Morgan.
“Given the highly cash generative nature of the business, we believe Aristocrat Leisure will return to a net cash position within the next 12 months,” said the bank, adding that it should happen even “before the – potential – sale of social casual”.
