Pollard Banknote TSE: PBL reported lower third-quarter profit and adjusted earnings despite a modest increase in revenue, as manufacturing inefficiencies, a less favorable instant-ticket customer mix and the expiration of its Michigan iLottery contract weighed on results.
Revenue rose to CAD 158.9 million for the three months ended September 30, 2026, from CAD 156.3 million a year earlier. Net income fell to CAD 8.1 million, or CAD 0.30 per diluted share, from CAD 10.3 million, or CAD 0.38 per share. Adjusted EBITDA declined to CAD 28.3 million from CAD 32.3 million.
Co-CEO Doug Pollard said operating results were below expectations, but pointed to contract developments and demand for charitable gaming products as support for the company’s outlook.
Manufacturing Problems Pressure Margins
Gross profit fell to CAD 24.3 million, or 15.3% of sales, from CAD 28.1 million, or 18.0% of sales, a year earlier. Co-CEO John Pollard attributed the decline in part to lower instant-ticket selling prices, production inefficiencies and the loss of CAD 2.1 million in gross profit following the Michigan contract’s expiration in July.
Doug Pollard said production was weighted more heavily toward lower-valued international work than in a typical third quarter. Manufacturing challenges also led to lower-than-expected output, more material spoilage and additional rework.
John Pollard said the company has installed new plant management at its main printing facilities in Winnipeg and Ypsilanti, Michigan. He said the increase in production for California had caused some growing pains, although the company had met delivery dates and the customer was pleased with the product.
Management expects a more favorable instant-ticket mix in the fourth quarter and 2027. John Pollard said early fourth-quarter results showed improving efficiencies, but cautioned that the loss of Michigan’s contribution would remain a drag as other digital revenue grows. He said the broader improvement in digital revenue would take several quarters rather than a single quarter.
Digital Contracts and Virginia Decision
Pollard said the Kansas Lottery had named it the apparent winner of a new five-year iLottery contract starting in late 2026, with a possible two-year extension. Its NeoPollard Interactive joint venture also received a final one-year extension of its North Carolina iLottery contract through June 2029.
The Colorado Lottery issued a notice of intent to award Pollard its digital solution contract, with implementation expected in the later part of 2027. Pollard also launched its playON player engagement solution in Oklahoma in September, and Norway’s Norsk Tipping announced its intent to award Pollard a new instant-ticket contract beginning in December 2026.
Doug Pollard said the company would not bid on Virginia’s next iLottery contract, which is scheduled to begin in 2028. He said Pollard chose to preserve capacity for existing digital implementations and other opportunities, including North Carolina’s contract, which management expects to go to a request for proposals in 2027. Pollard will continue to receive its 50% share of earnings from the current Virginia contract through its joint venture until October 2028.
In Kansas, CFO Rob Rose said the operation remained in a negative position but was gradually improving. He said reaching profitability could take until early 2027, later than previously suggested, as the company works with the lottery to grow its player base.
Charitable Gaming and Cash Flow
Charitable e-gaming revenue rose by CAD 1.5 million from a year earlier, with Minnesota revenue reaching a record. John Pollard said new game content and more sites had lifted Minnesota revenue above levels seen before regulatory changes in 2024.
The company is expanding pull-tab production capacity and is pursuing potential eTab opportunities in other states. John Pollard said a Virginia pilot was progressing well, while a New York market limited to fraternal organizations was expected to open in early 2027. Alaska would require legislative approval. He said each market could be material, although none was expected to be as large as Minnesota.
Rose said working-capital investment had increased partly because of the billing arrangements for the Belgium and California contracts. Belgium development work is recognized before some milestones are billed, while California payments are tied to ticket sales at retail. He expects the California investment to reach a steadier level by year-end and the Belgium investment to begin reversing toward the end of 2027.
John Pollard said Verica Simic would join the company as CFO in the coming days, replacing Rose, who is retiring at the end of 2026 after more than 30 years with Pollard.
About Pollard Banknote (TSE:PBL)
Pollard Banknote is a partner of choice to responsibly drive revenues for good causes both at retail and through digital channels for lotteries and charitable gaming markets worldwide. We empower our customers to maximize success through innovative offerings, strategic marketing, portfolio management, analytics, and end-to-end warehousing and logistics services. We offer an extensive high-performing gaming lineup, including instant tickets, pull-tab tickets and vending machines, the full range of paper and electronic bingo products, and cutting-edge electronic pull-tab gaming solutions.
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