Despite posting higher quarter-by-quarter total revenues and sales, Pollard Banknote has expressed disappointment in its Q3 operational execution, which has been impacted by the loss of the Michigan Lottery licence.
Total Q3 revenue saw marginal improvement of 2.6% from the previous quarter, sitting at $159m (£118.5m) against $155m in Q2. Combined sales were also up by 2.4%, with $194m against $189m reported in the previous quarter.
However, in its outlook statement, Pollard Banknote said: “…our operating execution has been disappointing, particularly with respect to our printed instant tickets.
“Our total production volumes have been lower than we expected, and our waste and rework have been higher. And our overall mix of orders has been less profitable than normal.”
Adjusted EBITDA between Q2 and Q3 dropped 9% from $31.1m to $28.3m. Gross profit dropped 13.5% year-over-year, from $28.1m in Q3 2025 to $24.3m in Q3 2026. Gross Profit Margin went from 18% in Q3 2025 down to 15.3%.
Income from operations was also down, dropping 16.3% YoY to $15m (Q3 2025: $18m), while net income fell from $10.3m to $8.1m over the same 12 months.
Management explained that reasons behind the drop in gross profit and gross profit margin are lower licensed product sales and higher distribution costs, lower average selling price, inflated production costs, and $2.1m in gross profit erased due to the end of the Michigan iLottery contract in July.
The expiration of the lottery contract also directly contributed to the shrinking of Adjusted EBITDA, whilst representing the majority of the reduction in the income from operations ($2.1m out of $2.9m).
While no clear statement was made on whether the company will pursue a Michigan re-entry, it managed to secure several other key lottery contracts across Q3.
A five-year Kansas Lottery contract is expected to commence in late 2026, a notice of intent to award was published in Colorado, North Carolina’s lottery contract has been extended until June 2029, a milestone launch occurred in Oklahoma.
Pollard has also strengthened its footprint abroad, with Norway’s Norsk Tipping publishing a notice of intent to award until December 2029, and increased investments into Belgium’s Lottery following a successful performance.
The company expects a positive end-of-year and beyond, with a stable instant ticket production schedule and a growing demand for charitable products, in addition to higher revenue driven by Pollard’s digital lottery contracts.
From January 2027 onwards, Pollard’s Chief Financial Officer will be Verica Simic, who steps in to replace outgoing CFO veteran Rob Rose.
John Pollard, Co-Chief Executive, commented: “Although our third quarter operating results were disappointing, our contract wins and extensions over the past number of months validate our ongoing strategic investments in both the digital and retail parts of our business and provide the foundation for continued growth.
“As expected, our Michigan iLottery contract ended at the beginning of the third quarter this year, accounting for a significant portion of the lower results when compared to last year.”
“In addition, manufacturing challenges resulted in lower production volumes than expected, and also caused higher direct material spoilage and greater rework compared to last year and the second quarter of this year. These factors negatively impacted our gross margin during the quarter. We continue to focus considerable resources, including new manufacturing management in our print operations, on mitigating these issues and improving our manufacturing processes going forward.”
