Pollard Banknote Q2 Earnings Call Highlights

Pollard Banknote (TSE:PBL) reported higher revenue, gross profit and adjusted EBITDA for the second quarter of 2026, as stronger instant-ticket volumes, expanding digital operations and charitable gaming growth more than offset lower income from its iLottery joint venture.

Revenue for the three months ended June 30 rose to $154.8 million from $142.7 million a year earlier. Net income increased to $8.7 million, or $0.32 per diluted share, from $8.0 million, or $0.30 per diluted share, in the second quarter of 2025. Adjusted EBITDA rose to $31.1 million from $29.2 million, and was also above the $21.5 million reported in the first quarter.

“All of our major business lines performed well in the second quarter,” Co-CEO Doug Pollard said, citing improved instant-ticket volumes and selling prices, digital expansion and continued strength in charitable gaming.

Instant Tickets Lift Revenue and Margins

Co-CEO John Pollard said higher instant-ticket sales volumes added $3.3 million to revenue compared with the prior-year period, while a higher average selling price added another $0.8 million. The increase in average selling price was primarily tied to customer mix.

Doug Pollard said instant-ticket production volumes returned to historic 2025 levels during the quarter, supplemented by incremental production from the company’s new role as primary supplier to the California Lottery. He said the California transition had “gone extremely well and exceeded our expectations.”

During the analyst question-and-answer session, John Pollard said California’s large volume means the contract carries a lower price than some other accounts, but remains positive for margins. He also said the company has achieved higher-than-expected volumes and average selling prices in California through sales of value-added ticket innovations that are optional under the contract.

The company said its schedule of instant-ticket volume for the remainder of 2026 remains robust. It has also focused on manufacturing efficiency, reporting lower spoilage and process improvements. John Pollard attributed some first-quarter spoilage to the rollout of new products in its Scratch FXtra game family, which required adjustments during initial production runs.

Gross profit rose to $28.0 million, or 18.1% of revenue, from $23.9 million, or 16.7% of revenue, a year earlier. The company attributed the increase to stronger instant-ticket margins, higher charitable eTab sales and greater margin recognition on its Belgium Lottery contract as development work progressed.

CFO Rob Rose said volume growth, higher average selling prices and manufacturing progress all contributed to instant-ticket margin improvement. He characterized efficiency gains as a longer-term effort, while noting that higher volumes provide leverage over fixed costs.

Digital Contracts Progress

Ancillary lottery products and services added $5.3 million in revenue from the prior-year quarter, driven primarily by higher digital sales, including work under contracts with the Belgium and Kansas lotteries, as well as increased distribution-related sales. The increase was partly offset by lower retail-solutions and licensed-product sales.

Doug Pollard highlighted the Colorado Lottery’s stated intent to award Pollard a digital solutions contract following a competitive request-for-proposals process. The contract includes iLottery, the company’s playON loyalty platform and game-content services. He said development and implementation activity is expected to begin in the fall and continue through 2027.

Work on the Belgium Lottery omnichannel gaming contract moved from scoping and planning into early development, allowing for greater revenue recognition in the second quarter than in the first. Rose said revenue will be recognized on a percentage-of-completion basis as Pollard performs work across the contract’s various deliverables, while customer billing will be tied separately to delivery milestones.

Pollard also submitted a bid to continue operating the Kansas Lottery’s iLottery program, whose existing contract expires in fall 2026. Doug Pollard said the company believes it submitted a compelling proposal and that the Kansas Lottery has been pleased with the program’s performance, though he stressed that the public procurement outcome is uncertain.

Rose said the Kansas operation remains in a build-up phase and has not yet reached profitability. He said there is no make-whole payment if Pollard does not retain the contract, describing the initial investment as a risk associated with building its digital iLottery business.

The company’s NeoPollard iLottery joint venture remained a significant contributor to profitability, although Pollard’s share of income from the venture declined to $15.0 million from $17.7 million a year earlier. The decline reflected the expiration of the New Hampshire contract, lower foreign-exchange gains and higher third-party content costs, partially offset by higher eInstant sales in North Carolina and Virginia and greater casino-content sales in Alberta.

Doug Pollard also noted that the company’s 50% interest in the Michigan iLottery contract ended at the close of the second quarter. Separately, John Pollard said higher Michigan iLottery revenue added $0.6 million to second-quarter revenue compared with the prior-year period.

Charitable Gaming Reaches New Minnesota Records

Charitable gaming also contributed to growth. Higher charitable print volumes added $0.7 million in revenue, while higher average selling prices for printed charitable products added $0.2 million. Charitable eTabs added $2.2 million in revenue from the prior-year quarter.

The Minnesota eTab market generated record revenue and contributions, according to Doug Pollard. He said new game content and a higher number of sites have lifted Minnesota revenue above levels seen before regulatory changes in 2025 affected gaming revenue across suppliers. Pollard said it is pursuing additional eTab opportunities through expanded deployments and pilot projects in other markets.

The company is also expanding its internal game-content capabilities while continuing to consider external acquisition opportunities, Doug Pollard said. He described game content as an area of emphasis as iLottery and charitable gaming markets grow.

Costs, Capital Allocation and Outlook

Cost of sales increased to $126.8 million from $118.8 million, reflecting higher instant-ticket volumes and increased Pollard iLottery operations, including resources added for the Belgium development effort. Lower exchange rates on U.S.-dollar-denominated expenses partly offset those increases.

Administration expenses rose to $19.4 million from $17.6 million, due to higher compensation, professional fees and enterprise resource planning implementation expenses. Other expenses increased largely because Pollard paid a $1.8 million transition fee to bring a dedicated outsourced consulting team into direct employment.

During the quarter, the board implemented a normal course issuer bid to repurchase up to approximately 976,000 common shares, representing about 10% of the company’s public float, over the next year.

Doug Pollard said the company expects the second-quarter momentum to continue through the remainder of 2026, supported by demand across its retail, charitable and digital businesses.

About Pollard Banknote (TSE:PBL)

Pollard Banknote Ltd is principally engaged in the manufacturing, development, and sale of lottery and charitable gaming products throughout the world. Its operating segments are Lotteries and charitable gaming and eGaming systems. It provides instant tickets and lottery services including licensed products, distribution, SureTrack lottery management system, retail telephone selling, marketing, iLottery, digital products, Social InstantsTM, retail management services, and instant ticket vending machines.

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