Pollard Banknote (TSE:PBL) reported lower first-quarter revenue and profit, with management attributing the decline primarily to temporary timing and mix issues in its instant ticket business, while pointing to stronger order levels and digital contract activity as reasons for confidence in the remainder of 2026.
Co-Chief Executive Officer Doug Pollard said the quarter was “challenging” and was particularly affected by negative factors in the company’s instant ticket product line. However, he said the issues were temporary and related to the timing of customer orders.
Revenue and profit declined in the first quarter
For the three months ended March 31, 2026, Pollard generated revenue of CAD 141.7 million, down from CAD 146.2 million in the same period a year earlier, Co-Chief Executive Officer John Pollard said.
The company’s lower instant ticket average selling price reduced revenue by CAD 11.7 million compared with the prior year, primarily due to a shift in customer mix and lower proprietary product sales. That was partly offset by a CAD 4.4 million increase from higher instant ticket sales volumes.
John Pollard said gross profit fell to CAD 16.6 million, or 11.7% of sales, from CAD 25.4 million, or 17.4% of sales, a year earlier. He attributed the decline mainly to lower instant ticket sales margins, lower average selling prices and production inefficiencies.
Adjusted EBITDA declined to CAD 21.5 million from CAD 30.6 million in the first quarter of 2025. Net income fell to CAD 3.5 million, or CAD 0.11 per basic and diluted share, from CAD 11.7 million, or CAD 0.43 per basic and diluted share, in the prior-year quarter.
John Pollard said the company also faced higher costs tied to iLottery operations, including adding resources for the Belgium Lottery contract, as well as higher administration expenses related to ERP implementation costs and the acquisition of Pacific Gaming.
Instant ticket weakness tied to timing and mix
Management said instant tickets remain a significant part of Pollard’s business, representing roughly half of total sales. Doug Pollard said a temporary mix change led to a significantly lower overall average selling price in the quarter compared with last year. He also said order timing from a couple of larger customers shifted from late in the first quarter into the second quarter, reducing volumes.
“Particularly through the later part of the first quarter, a number of higher valued Q1 games were shifted into the second quarter,” Doug Pollard said. “The delay of these games, combined with some related production inefficiencies, reduced sales in the quarter and negatively impacted our instant ticket margins.”
In response to a question from Canaccord Genuity analyst Robert Young, John Pollard said the company experienced “unusually large production inefficiencies and spoilage” during the quarter tied partly to new products and production processes. He said those issues had been resolved and “will not reoccur in the next quarter.”
John Pollard said the spoilage affected margins but was much smaller than the impact from lower average selling prices and volumes. He said the lower average selling price reflected a significant mix issue, while California was not a contributor to the weakness.
Pollard said the onboarding of its California primary supply contract is going well. John Pollard said the customer is “very happy” and that California was a positive influence in the quarter, with volumes and average selling prices in line with the company’s expectations.
Management expects improvement in the second quarter
Doug Pollard said confirmed order volumes for the second and third quarters have increased compared with the first quarter of 2026 and with the comparable quarters last year, reflecting added volumes from the California contract. He also said the company’s customer mix of games, including specialty work and game type, has returned to historical 2025 levels, which should generate higher average selling prices than in the first quarter.
Based on the expected recovery in instant tickets, Doug Pollard said Pollard expects consolidated adjusted EBITDA for the second quarter of 2026 to exceed the comparable quarter of 2025.
John Pollard reiterated that point in closing remarks, saying the first-quarter financial results were “very disappointing” but resulted from temporary factors. “Nothing has changed with respect to our business plans and our plans for growth and continued expansion and improvements in profitability,” he said.
Digital contracts and charitable gaming showed growth
Management highlighted progress in Pollard’s digital division, including work on its 12-year, CAD 289 million National Lottery contract in Belgium. Doug Pollard said the company added staff resources in the first quarter for scoping and planning, and that revenue recognition should increase through the second quarter and through 2026 as staff work directly on contract deliverables.
Doug Pollard said the company’s Kansas iLottery operation completed one year of successful operation in the quarter and continues to exceed operational expectations. He said Pollard expects to reduce startup losses in Kansas as 2026 progresses. The Kansas Lottery has issued a new request for proposal for iLottery and loyalty operations, with responses due in early summer, and Pollard said the company expects to submit a “very compelling proposition.”
The company also cited growth in its NeoPollard iLottery joint venture, driven by strong instant and other game-style sales compared with the first quarter of last year. John Pollard said Pollard’s share of income from the joint venture increased to CAD 16.6 million from CAD 16.2 million, helped by strong instant sales in North Carolina and Virginia and higher iGaming sales in Alberta, partly offset by the expiry of a customer contract.
Charitable gaming was another area of strength. John Pollard said higher charitable gaming volumes increased revenue by CAD 2.4 million compared with the prior year, mainly due to the acquisition of Pacific Gaming. Charitable e-gaming, or eTabs, increased sales by CAD 1.8 million, with Minnesota revenue reaching new records following regulatory changes that had hurt the market in 2025.
Board authorizes share buyback plan
Doug Pollard said the company’s board authorized the launch of a normal course issuer bid to purchase up to approximately 976,000 common shares, representing about 10% of the company’s public float, subject to approval by the Toronto Stock Exchange.
He said Pollard is pursuing the buyback because management believes the market price of the shares may not reflect the underlying value of the company’s business and prospects. During the question-and-answer session, Chief Financial Officer Rob Rose said the Pollard family does not intend to tender shares into the buyback.
Doug Pollard closed the call by acknowledging shareholder disappointment in the first-quarter results, while saying management remains confident in the outlook for the rest of 2026 and beyond.
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.
