Would now like to hand the conference over to Mr. Harald Neumann, CEO. Please go ahead.
Thank you, Ashley. Good morning, everyone, and thank you for joining me for the Ainsworth conference call for the release of our audited financial results for the 12-month period ended 31st of December 2024. Lynn, our CFO, and Mark Ludsky, our Company Secretary, will also be attending the conference call. On the call today, I will concentrate on the key points, including our progress and the regional review. Lynn will take you through the financials. At the end of the presentation, would you please answer any questions? All the numbers Lynn and I quote throughout the call are denominated in Australian dollars unless otherwise specified. I note that with the completion of the previous change in reporting periods, the comparative period within the presentation represents the corresponding 12-month period ending 31st December 2023. Coming to page number five, results summary. Let's make a start.
Yeah, the overall reported results for calendar year 2024 were profit after tax of AUD 30.3 million, with normalized Profit Before Tax, excluding currency translation and one-off items, of AUD 23.2 million on a revenue of AUD 264.1 million. Underlying EBITDA for the period was AUD 48.2 million compared to AUD 59 million in the prior period. Profit Before Tax, excluding currency impact and one-off items, results in the second-half PBT on the same basis of AUD 8.9 million and was in line with the market guidance outlined by the company in November 2024. As you have previously reported, all disputes with the Mexican tax authorities on import duties and associated charges have been completed, and are reflected in the interim financial report for the first half of calendar year 2024.
Although we have now resolved all financial obligations on the Mexican matter, the Board has decided to maintain the suspension of dividends to shareholders at the present time, given the company's priority for commercializing of product initiatives and to maintain a strong financial position. The Board is committed to re-evaluating the payment of dividends in calendar year 2025, depending on the maintenance of current product-related investments and the necessary working capital requirements to support anticipated production requirements. Page number six, gaming operations. On page number six, we outlined that at the reporting date, we had a total of 6,871 under gaming operations, a slight increase on the 6,790 at the end of the first half. Class II units, including HHR units, represented 31% of total units. Installations in new and expanded properties in Alabama and Wyoming occurred in the current period.
International revenue accounted for 85% of the group's total revenue, consistent with the prior period. Recurring revenues, including HHR connection fees, are a strong feature at AGT business model was AUD 95.5 million in calendar year 2024, consistent with the AUD 96.5 million in the prior period. It is expected that additional HHR opportunities will occur in the coming year following the passing of legislation for a new facility in Wichita, Kansas, more locations becoming available in Ontario, Canada, as well as expansions in New Hampshire, Wyoming, and Kentucky. Page number eight, profit and loss summary. As I note, that revenue was AUD 264 million, down 7% on the AUD 285 million in the prior period. The reduction was attributable to reduced revenue within Latin America in the current period due to accelerated sales in Argentina in the prior period to capitalize on import licenses and the introduction of import license restrictions within Mexico.
The reduced revenue in the digital segment from contract amendment with GAN was also a contributing factor. Despite these regulatory restrictions in Latin America, revenue in the second half was AUD 142.7 million, a 17.5% increase to the AUD 121.4 million last year. Calendar year 2024 was higher than 12% growth noted in the market updated announcement provided, reflecting the positive momentum. Reflecting this momentum, offshore revenue in the key region of North America contributed total revenue of AUD 147 million for calendar year 2024, a 16.5% increase on the AUD 67.9 million in the first half, and a 5% increase compared to last year. International revenue represented 85% of the group's total revenue, consistent with the AUD 86 million in the prior period. The gross margin achieved in the current period was 61%, consistent with the 62% of last year.
Margins were adversely impacted in the second half of the period by a range of factors, including the product mix of sales in Latin America, competitive market conditions, the planned run-out of previous generation cabinets prior to the launch of Raptor across additional markets, and the under-recovery of production variances expenses in the period. Page number nine, the underlying PBT was AUD 23.2 million compared to AUD 41 million in the prior period. Translational foreign currency gains in the current period were AUD 9.6 million compared to losses of AUD 21.5 million last year. These gains are primarily as a result of the strengthening of the US dollar against the Australian dollar compared to the loss recorded in the prior period, which was a result of the devaluation of investments held in Argentina and the strengthening of the Mexican pesos against the US dollar.
Other one-off items outside normal operations, including a net gain of AUD 1.1 million, resulting from restructuring cost of AUD 0.9 million undertaken in the period. A profit of AUD 4.1 million resulting from the reversal of previously established provision with Mexican authorities to reflect actual payments made and non-cash impairment charges of AUD 2.1 million within the Asian Pacific and Latin American region. On page 10, we outlined that the reported EBITDA was AUD 58.9 million for the current period. After considering currency and one-off item, underlying EBITDA was AUD 48.2 million, a reduction of AUD 59 million when compared to last year. This was primarily attributable to factors in Latin America, as I have outlined previously, and the reduced contributions from the digital segment following the termination of the agreement with GAN.
Underlying EBITDA margin were AUD 18.3 million for 2024 compared to 20.7% in 2023, reflecting the lower margin in the second half of the current period, as I have noted. This progress on the initiatives undertaken is expected that EBITDA margin will return to historical levels within calendar year 2025. I will now go through the regional review starting on page number 17 with North America. North America revenue in the current period was AUD 147 million, an increase of 5% in comparison to last year, representing 65% of total international revenue. The A-STAR Raptor cabinet is currently ranked sixth on the Eilers' top index factory upright, with strong performance on the San Fa family of games, including San Fa Rabbits and San Fa Tigers, released in the current period.
New games released of Triple Troves, Reigning Rhino, and Dragon's Delight have initially performed strongly with Triple Troves reported on Eilers' top 25 for new core video products. The Gambler's Gold product, Keno, and poker-based games have continued to positively contribute to the North American segment. The exclusive distribution agreement within Montana was extended with Golden Route Operations acquired by J&J Ventures in October 2024 for an additional 40-month period, for an upfront fee of AUD 6.8 million and an ongoing purchase commitment for products per year throughout the agreement terms. Machines under operations in North America at the reporting date were maintained at 3,015, consistent with prior year, primarily through expansion within Kentucky and Alabama where new placement opportunities occurred in the current period. Machines placed under participation and leased, including connection fee, which generate recurring revenue, contributed 64% of segment revenues.
Historical Horse Racing products continue to perform with 8,898 units connected to HHR's HHR system at 31st of December 2024, following new installations and expansions in Virginia, Alabama, and Wyoming during the current period. Strong average selling price and recurring revenues, along with disciplined cost controls, resulted in a rise in segment profit to AUD 68.2 million versus AUD 65 million in 2023, up 5%. Coming now to Latin America and Europe, revenues of AUD 66.8 million were achieved in Latin America and Europe in 2024 compared to AUD 80 million in 2023. It's noted that the reduced revenue in the period was attributable to lower sales within Latin America, primarily from the challenging economic conditions in Argentina and import restrictions in Mexico in the current period.
These regions have shown positive improvement in the later part of 2024, and combining these new opportunities within Europe, we expect to achieve revenues increasing in 2025 to at least historical levels. Demand continues to grow for the A-STAR range of cabinet with Xtension Link being consistently one of the top-performing products in the region. At December 21st, 2024, a total of 3,856 units were under operations, generating $22.6 million recurring revenue, similar to 2023, with the average yield being maintained at $12 per day. Page 21 outlines the region at Asia-Pacific. As we have previously reported, this segment consolidates Australia, New Zealand, and Asia under one region as a result of previously changed management responsibilities. AGT Asia-Pacific, Australia, New Zealand, and Asia performance was lower in the period as competitive market conditions continued. Revenue was AUD 42.7 million, a decrease on the AUD 48.8 million last year.
The region achieved 1,406 unit sales in the period, with Australia representing 1,308 of total units, a slight increase from the prior period. Average selling prices were AUD 24,700, a slight decline on the prior period due to discounts to achieve run-out of inventory of previous generation models prior to the launch of A-STAR Raptor cabinet in February 2025. Segment profit declined to AUD 2.7 million compared to AUD 3.4 million in last year. The successful launch of the Raptor cabinet within domestic markets has received positive feedback from our customers, similar to other markets where this product has been released. It is expected that revenue increases will be achieved in coming periods as we commercialize a strong portfolio of products developed on the new hardware.
On page 22, we outlined the digital segment, which reports a revenue of AUD 7.6 million compared to AUD 15.6 million in 2023, which included a one-off profit uplift of AUD 1.9 million resulting from the Game Account Network as a game contract amendment. These high-margin online revenues resulted in segment profit of AUD 6.9 million in the current period. Following the termination of the game exclusivity contract in March 2024, the group continues to directly explore further opportunities with global operators, including BetMGM, Caesars, DraftKings, Resorts, and Rush Street to progressively return to historical revenue levels. I will now ask Lynn to outline a summary on the financials.
Thank you, Harald. Turning to page 11, operating costs were carefully controlled in the current period, rising by 1%. Group operating costs in constant currency terms were AUD 139 million, consistent with the PCP.
Operating costs reflected a reduction in variable selling costs on the lower revenue achieved during the period, which assisted to offset the increase in development expenditure and the increase in overall headcount in the second half of calendar year 2024 to ensure that talent retention to support business growth. Research and development expenses increased by 8% compared to the PCP, reflecting the company's continued focus on product development investment to produce competitive products. R&D expenses as a percentage of total revenue were 19% in the current period and increased on the 16% in the PCP. This commitment to investment in R&D is expected to ensure the company's products remain competitive in the industry. On page 12, AGT's global headcount was 542 employees at the reporting date, with 62% within the Americas.
This represented a reduction compared to the same period in 2023, with reductions in Asia-Pacific offsetting additional resources within the Americas. R&D resources remained consistent with the PCP at 172; however, 48% were located within the Americas compared to 42% at the same period in 2023. The global organizational structure provides new product leadership and clear lines of accountability to provide efficiencies and ongoing development of an exciting range of diverse and new product offerings. Management continues to implement measures focusing on technology, development, and culture to improve product performance, lift staff retention rates, and enhance Ainsworth's ability to attract world-class development talent. As Harald has consistently pointed out, it has been a key priority to ensure we maintain a strong balance sheet to protect the company and allow liquidity to pursue planned development initiatives.
On page 14, you will see we've closed the current period with a net cash position of AUD 9.7 million, with undrawn facilities in place for $43.7 million. Initiatives introduced to stabilize supply chain risk and manage working capital resulted in a reduction in inventory holdings of 6% compared to 31st December 2023. The company has AUD 361 million of net assets at the reporting date. On page 15, operating cash flows in the period included payments of AUD 28.5 million made to SET in the current period. Borrowings on the established loan facility to facilitate payments to SET were partially repaid in the period from strong operating cash flows. Net cash held at the reporting date was AUD 9.7 million, a decrease on the AUD 19.4 million reported at 31st December 2023, following the payments to settle all disputes with SET.
To ensure additional liquidity, the previous loan facility established with Western Alliance Bank was amended on 30th December 2024, resulting in an increased facility amount of $50 million, with a new five-year term expiring on 30th December 2029. All other terms remained similar to the previous facility established. In conclusion, we have a strong capital base and are well financed to go forward to execute on strategies established. Thank you, and I will now hand you back to Harald for some concluding remarks.
Thank you, Lynn. In conclusion, Ainsworth enters calendar year 2025 with a solid foundation, following progress in the 2024 calendar year and an expectation of continued improvement in product performance and profitability. Ainsworth's North American business continues to make progress in both Class II and Class III markets. Opportunities are continually being pursued for existing and new Historical Horse Racing markets.
Despite more volatile market conditions in Latin America, the group expects to return to at least historical levels as regulatory constraints are eased in this region. Domestic markets are expected to benefit from the Raptor hardware released, combined with further improvement in game performance following the release of new game titles. We look forward to improvements in Australia where we will continue to leverage our key strengths at Ainsworth's Trust brand and the company's enduring commitment to develop superior game technologies. With a strong balance sheet and commitment to product innovation, Ainsworth is well placed to deliver improved financial performance. As I have previously communicated, for us to ensure continued growth and to sustain our performance, measures have been introduced, and we are starting to see the benefits from these improvements in the output of our R&D investments.
It is expected to lift the competitiveness of our product and provide growth opportunities. The expanded capabilities within R&D in both Sydney and Las Vegas studios, as well as additional R&D studios, for example, in Monterrey, are now operating to provide more creativity and diversity to our current product offerings. Quality initiatives are continually assessed to improve game designs, mathematics, and graphical arts to create a more diverse and targeted range of product offerings to our customers. The infrastructure to achieve our product roadmap is in place, which we expect to translate into improved and sustainable long-term results across all markets. We have been committed to implement measures focusing on technology development and culture to improve product performance, lift staff retention rates, and enhance AGT's ability to attract world-class development talents.
Before I close, I would like to formally thank the Board and my colleagues at Ainsworth for their contributions to the progress made in 2024, and I'm confident we have put in place the necessary actions and are well placed to improve our financial performance over coming periods. Thank you for your time, and now I will hand back to the operator, to Ashley, to open up the lines for questions. Thank you.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your names to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Lachlan Elliott with Macquarie. Please go ahead.
Hi, Harald. Hi, Lynn. Congratulations on the result.
Just had a couple of quick questions if I can. Looks like the business is really turning a corner with volumes, especially in the second half. Just looking at how this relates to the R&D strategy, is AUD 50 million the right number to think about moving forward, or do you expect that to scale with revenues over the next 12, 24, 36 months?
As we are not expecting to increase the headcounts in the game studios. Currently, we are, I think we are well staffed with our five studios, and so I do not expect a change in the cost structure.
The only additional cost that may occur is the additional cost for submissions of games as we expect more products to be delivered in 2025.
Perfect. That makes sense. Okay, great. Thank you very much.
Second question, if I could, with LATAM, with Latin America looking at that business, there's been some structural changes and impact headwinds in Argentina and Mexico. Could we go into a bit more detail on what those actually were? More importantly, where do you think, how do you think this will unwind in 2025? You spoke to potential further to reach historically high revenue levels in your press release, I think. Just curious to see how these impacts unwind in 2025.
Yep. In Argentina, we see currency stabilization. We're able to transfer funds out of the country in the later part of calendar year 2024. Going into 2025, the expectation is that we will be increasing our sales in Argentina, so we're expecting improvement.
Mexico remains to be our largest market in the LATAM, and the expectation is to maintain that market presence as well. However, of course, we have some challenges with the political environment at the moment. Yes. By overall, the games are performing well in these two countries. There are signs of stabilizing and improvement in both of these regions, except on Mexico. Of course, we're just going to see what happens in the political landscape. Yeah. Harald?
Yeah. Basically, we expect so once again, the only question mark we have is the, let's say, the tariff relationship between U.S. and Mexico. This could have an impact, but at the current stage, we are expecting a growth in Mexico because we released our new Raptor Dual-Screen there, and the demand is really high. Argentina has improved. First, you can because it doesn't make sense.
We did not really push sales in 2024 because of the currency and political situation, because it does not make sense to generate revenue and cash, which you cannot transfer to the U.S. This situation has also changed, and Argentina was always a good market for us. With the political change, we are expecting also higher sales in 2025.
Awesome. Yeah. Great. Okay. That really makes sense there. If I could just fit in one more question, if possible. Just noticed as well, you increased your access to the bank facility to $50 million. Given the business's net cash and you are generating in cash generative, could this potential where could we see this spend actually go to? Would this be in further products, or why would you extend this facility?
The facility was up for renewal in February 2026, and we wanted to take a proactive step to ensure that we have those, yeah, we want to ensure we have that flexibility as well in terms of shall we want to invest organically or inorganically as well. In terms of further investment, it is a very competitive market landscape, as you would know, in this industry. We just want to ensure we stay ahead. We have the liquidity to fund future investments.
Brilliant. That's all my questions. Thank you very much, Harald and Lynn, and congratulations on the result.
Thank you.
Thank you.
Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from James Devlin with Henley Wealth Management. Please go ahead.
Yes. Good morning, I guess, guys.
We're calling from the state, and I really just want to say congratulations. I know it was a difficult year in the Latin American market, but looking at page 14, the net shareholder asset value increased to over AUD 360 million, round about AUD 1.08 a share. While the stock is trading at AUD 0.80, I mean, we're selling at a 34% discount to our asset value. It was a difficult year. The company still generated cash. I hope the management and the Board is able to eloquent that story to the world markets just as a statement. My second question, we saw Grover Gaming here in the United States, which is a charitable gaming company similar to HHR. They're in the e-pull tab business. They just got bought by Light & Wonder for 7.7x revenue, doing $135 million in sales.
LMW is going to pay $1 billion for the company, which is 5.5x Ainsworth's entire current market cap. It's a deal banked by Goldman Sachs. Do we have a technology to be in that e-pull tab business, which seems to have outrageous profit margin potential, and we have the engineering capability? I mean, I'll leave that there. There's deals getting printed in this industry that just look very, very juicy. Just was wondering what your comment is, and I had one more question.
As to be honest, I cannot answer your second question because I don't know this company. What kind of technology do they have?
They basically have HHR technology. There's something called a paper pull tab.
Back if you went to a carnival or a church bazaar or fair, you used to get a card, and you would pull five slots on a little card for a dollar, and you were hoping to get basically like the pay line of a slot machine. Cherry, cherry, cherry would pay you $5. Bell, bell, bell would pay you more. Plum, plum, plum would pay you $25. What this company has done is gone out and put thousands of machines in these fraternal pubs and organizations throughout America and basically done a lease with them where they have done that instead of a paper ticket, it is now an electronic gaming opportunity. Light & Wonder just announced they're paying $1.05 billion for that company. They're a gaming content provider, so is Ainsworth.
My point is that company is selling for 5.5x for a liquid cash takeover our entire market cap when we have a dollar five in assets and our business is selling for free in Australia. I'm just wondering, is that an opportunity that we could look at and get involved with? As a marketing strategy,
I cannot answer this question because I don't know this company and I don't know this technology, and we have this not in our strategy. This is yeah. That's basically currently we don't have it in our strategy, and I don't know this company.
f we hang up and you want to google Grover Gaming, Grover Charitable Gaming of North Carolina, they just hit the cash register hard. My second question, we were at the booth at G2E in October.
We were able to meet with Deron for a couple of minutes, and he showed us some of your exciting AI game development tools. We saw a demo at the trade show. His hopes were that it to be deployed at Ainsworth's six game development studios. How quickly does this speed up game creation from cradle to market, and how many more games can Ainsworth be capable of producing on an annual basis as a result?
We will launch the AI game in Latin America in 2025, so that means we are starting in this region, I believe, with four games, with four AI games, basically the games you have seen. This is more or less the kind of this was a kind of test development, yeah, and now we will see how successful they are in the market.
We are slowly implementing AI in Australia and in the so the current AI games were not developed in the US studios. They were developed by a special group of technology people in our company. This group has the task to train and implement AI in our game studios.
Okay. You extended the credit line again. Congratulations on that. What we're looking for is higher ROI growth opportunities, right? That's what you've talked about on numerous calls. We already have a robust systems business in HHR with almost 9,000 games ported on the system. What Ainsworth has been lacking, and I'm sure you're aware of it, is the Class III and Class II systems.
Sorry to interrupt you.
It doesn't make sense because you cannot compete in this sector against IGT and Light & Wonder and Aristocrat because they are occupying more or less the market. That means this is a system business in the U.S. is for us maximum a niche market when we are using an existing system business or system from NOVOMATIC. This is what we did. That's the only system we can use.
Okay. Can I ask it a different way then? Outside of the gaming industry in society, cashless and artificial intelligence data gathering capability, is that the four, right? Like NVIDIA is one of the most market-capped companies in the world. Data collection with AI as a tool. It's in its infancy, and gaming is behind the curve because of the regulation.
There's very little doubt cashless and AI will—there's just too much money at stake to take margin to get extra profitability automating trillions of dollars spent through slot machines, blackjack tables, and the like. In its infancy here in the U.S., if you saw an opportunity to be involved in that, would that be something that you would be interested in?
As our strategy is to concentrate on our core business, and this is the development of Class III. I don't want to disrupt our strategy by going in too many directions. We have our—let's say our core focus is development in Class III, is implementing new technologies like artificial intelligence or new software tools like Unity. This is currently my first priority, let's say, to make the company again competitive against Light & Wonder and Aristocrat.
Okay. Just one more statement.
Again, I'm in the state, so we get to talk to companies about every 90 days. I only get six months with you guys, and that's not your fault. It's just the way it works. You teased the dividend. Has the Board or you guys analyzed an ROI strategy instead of return of capital in a dividend, which I'm sure most people would applaud? With the stock being so depressed, have you measured a stock dividend against a net share repurchase of your stock trading at a 30% discount to net asset value? You could buy the stock back cheaper. You're getting no value for your operating business. Does that make sense to you?
I did not really understand what you mean. You were talking about dividends, and yes, the Board has decided in communicating— Yeah, share buyback.
But the share buyback program, no, that's not currently—we are not considering this.
Okay. All right. Thank you again. Absent the headwind a little bit in Latin America, the balance sheet looks in good stead and looking forward to 2025.
Thank you.
Thank you.
There are no further questions at this time. I will now hand back to Harald Neumann for closing remarks.
Yeah. Thanks once again for your support. 2024 was not easy also because of the political situations in Latin America. We have now a quite strong product pipeline. We have the new Raptor cabinet now launched in Australia and in Latin. We are expecting an increased revenue and profitability for 2025. Yeah, this just as a closing comment, and once again, thanks to all of you, and hope I see you soon.
That does conclude our conference for today. Thank you for participating.
You may now disconnect.