POLLARD BANKNOTE REPORTS 3RD QUARTER FINANCIAL RESULTS

WINNIPEG, MB, Nov. 12, 2025 /CNW/ – Pollard Banknote Limited (TSX: PBL) (“Pollard”) today released its financial results for the three and nine months ended September 30, 2025.

Results and Highlights for the Third Quarter ended September 30, 2025

Third Quarter Results and Highlights

• Revenue reached $156.3 million, up 2.0% from the third quarter of last year, a new quarterly record.
• Combined sales⁽¹⁾ in the quarter, including our share of our NeoPollard Interactive LLC (“NPi”) joint venture sales, reached $187.3 million, up 3.8% from $180.4 million earned in the same quarter last year.
• Adjusted EBITDA⁽¹⁾ achieved $32.0 million, up from $29.2 million in the second quarter of 2025, slightly below the $33.3 million earned in the third quarter of 2024.
• Instant ticket production volumes were similar to the same quarter last year and increased by 18% sequentially from the second quarter of 2025, due to the timing of increased orders.
• During the third quarter Loterie Nationale (“Belgium Lottery”) awarded a 12-year contract to Pollard to provide its gaming platform including a full omni-channel solution supporting both retail and iLottery. This is our second major Catalyst^TM technology solution contract win in just over a year.
• On September 25^th, the California Lottery, the largest seller of instant tickets in the United States, announced the award of their primary instant ticket contract to Pollard.  This 6-year contract, with up to an additional six years of extensions, begins December 1, 2025, and is expected to significantly increase our overall volumes in 2026.
• On September 15^th, our NeoPollard iLottery joint venture announced the award of a two-year extension with the North Carolina Lottery, taking the contract to June 2028, with an additional 1-year extension still available.

“We are pleased with our financial results and significant milestone business achievements during this past quarter,” commented John Pollard, Co-Chief Executive Officer.  “Our operations generated sequentially higher sales and earnings across our major product lines including improved instant ticket volumes, while at the same time seeing great results from our ongoing strategic plan with the award of two very important new long-term major contacts.”

“Instant ticket production volumes increased significantly compared to the second quarter of 2025 and were similar to the third quarter of 2024, reflecting strong levels of orders across our customer portfolio and higher demand for tickets leading up to the holiday season.  High average selling prices were driven by greater sales of our higher value proprietary products including our patented Scratch FX^® process as well as the positive impact of our contract repricing strategy begun a couple of years ago.”

“The award to Pollard of the contract for primary instant ticket supply by the California Lottery, one of the largest instant ticket sellers in the world, is a wonderful achievement and reflects the dedicated focus on innovation and service our team has made and lays the base for higher ticket volumes in 2026. The expected value of this 12-year contract, including extensions, is approximately $375 million.”

“Investments continue to be made in our charitable gaming group, expanding our placements of our new ICON cabinet based eTab machines as well as increasing the number of tablet based eTab sites.”

“We achieved a gross margin of 18% in the third quarter of 2025, lower than the comparative period last year due to the impact of the ongoing start-up loss in our Kansas iLottery operation and lower eTab contributions due to revised regulatory rules in one large jurisdiction.”

“Our Kansas iLottery operation continues to meet expectations as it moves though the start-up phase,” stated Doug Pollard, Co-Chief Executive Officer, “including successfully managing the surge of activity related to the major Powerball^® jackpot run in September.  A number of initiatives are underway now and over the next few quarters to expand gross gaming revenue which will allow us to move to profitability as the operation matures.”

“We are extremely proud that Belgium, a major European lottery, recognized the value of our state-of-the-art Catalyst^TM solution.  This twelve-year contract, with an estimated value of $289 million, provides a complete suite of technologies including key components such as a central gaming system for draw-based games, management of eInstant games, player engagement technology, an instant ticket management system for warehousing and distribution, and a new iLottery platform.  This is our second major Catalyst technology solution contract win in just over a year and our team is already well underway working with the Belgium Lottery. It is important to note that this is not just an iLottery system, but a full omni-channel solution that manages both the traditional retail sales of all Belgium’s lottery products plus their iLottery offerings.”

“During the third quarter we began the implementation of a new ERP system for our lottery business and corporate operations.  This new system will provide timely and comprehensive information to manage our core business and provide the foundation for further corporate integration throughout the Pollard group.”

“Our NPi joint venture iLottery operations, including our Michigan iLottery contract, contributed $17.4 million compared to $14.3 in the comparative period last year.  Higher revenue was earned due to increased eInstant and draw-based games sales, including the positive impact of a large USD$1.8 billion Powerball^® jackpot awarded on September 7th. NPi’s New Hampshire Lottery contract expired on June 30^th. The financial impact is not considered material and is fully reflected in the third quarter results as expected. We were also very pleased our joint venture was awarded a two-year extension with the North Carolina Lottery, taking the contract to June 2028.”

“We continue to monitor the ever-changing environment of tariffs and other protectionist trade measures, and their potential financial and operating impact on Pollard. To date we remain confident that the overall structure of our businesses and processes will ensure no material impact on our organization. With significant manufacturing facilities established in both the U.S. and Canada, and supply chains primarily contained within individual countries, we are able to produce almost all the products we sell to our U.S. customers within the U.S. and produce almost all the products we sell to Canadian customers within Canada. The resilience of the lottery and charitable gaming industries to withstand economic uncertainty provides additional support for our future financial and operational results.”

“The third quarter of 2025 reflected the positive results of our ongoing investments and strategic plans, generating strong financial outcomes and a number of key milestone business accomplishments” concluded John Pollard. “We are thrilled with these accomplishments and the opportunities they provide our organization starting immediately and for the coming years. Winning two major, long-term contracts from leading lotteries is confirmation that our vision of being partner of choice has been recognized and our focus will continue to be helping lotteries and charities generate funds for good causes.”

Use of GAAP and Non-GAAP Financial Measures

The selected financial and operating information has been derived from, and should be read in conjunction with, the unaudited condensed consolidated financial statements of Pollard as at and for the three and nine months ended September 30, 2025. These financial statements have been prepared in accordance with the International Financial Accounting Standards (“IFRS” or “GAAP”).

Reference to “EBITDA” is to earnings before interest, income taxes, depreciation, amortization and purchase accounting amortization. Reference to “Adjusted EBITDA” is to EBITDA before unrealized foreign exchange gains and losses, and certain non-recurring items including ERP implementation costs, severance costs, acquisition costs, contingent consideration fair value adjustments and net insurance proceeds. Adjusted EBITDA is an important metric used by many investors to compare issuers on the basis of the ability to generate cash from operations and management believes that, in addition to net income, Adjusted EBITDA is a useful supplementary measure.

Reference to “Combined sales” is to sales recognized under GAAP plus Pollard’s 50% proportionate share of NeoPollard Interactive LLC’s (“NPi”) sales, its iLottery joint venture operation. Reference to “Combined iLottery sales” is to sales recognized under GAAP for Pollard’s 50% proportionate share of its Michigan Lottery joint iLottery operation plus Pollard’s 50% proportionate share of NPi’s sales, its iLottery joint venture operation.

EBITDA, Adjusted EBITDA, Combined sales and Combined iLottery sales are measures not recognized under GAAP and do not have a standardized meaning prescribed by GAAP.  Therefore, these measures may not be comparable to similar measures presented by other entities. Investors are cautioned that EBITDA, Adjusted EBITDA, Combined sales and Combined iLottery sales should not be construed as alternatives to net income or sales as determined in accordance with GAAP as an indicator of Pollard’s performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows.

Forward-Looking Statements

Certain statements in this report may constitute “forward-looking” statements which involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements.  When used in this document, such statements include such words as “may,” “will,” “expect,” “believe,” “plan” and other similar terminology. These statements reflect management’s current expectations regarding future events and operating performance and speak only as of the date of this document.  There should not be an expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.

POLLARD BANKNOTE LIMITED

Pollard is one of the leading providers of products and solutions to lottery and charitable gaming industries throughout the world. Management believes Pollard is the largest provider of instant tickets based in Canada and the second largest producer of instant tickets in the world. In addition, management believes Pollard is also the second largest bingo paper and pull-tab supplier to the charitable gaming industry in North America and through our internal proprietary iLottery solution and our 50% joint venture, the largest supplier of iLottery solutions to the U.S. lottery market.

On October 16, 2025, Pollard was awarded a contract from the Belgium Lottery to deliver and operate its next-generation gaming platform, Catalyst^TM. As part of this 12-year agreement, valued at approximately $289 million, Pollard will provide its Omnichannel Central Gaming System, Player Account Management, Player Engagement Technology, Game Aggregation Bridge, Instant Ticket Management System and its Integrated Marketing Engagement Platform.  

On July 31, 2024, Pollard acquired 100% of the business of Clarence J. Venne, LLC (“Venne”) for a purchase price of $12.6 million U.S. dollars ($17.4 million) prior to standard working capital adjustments. Venne is one of the leading manufacturers of bingo daubers utilized primarily in the charitable gaming bingo market. The purchase price was funded from Pollard’s credit facility and cash on hand.

On April 1, 2025, Pollard acquired 100% of the equity of Pacific Gaming, LLC and LIF Capital Group, LLC (collectively “Pacific”), for a purchase price of $10.0 million U.S. dollars ($14.4 million) prior to standard working capital adjustments. Pacific is a recognized leader in bingo electronics, handhelds, blowers, point-of-sale systems and bingo management systems. The purchase price was funded from Pollard’s credit facility and cash on hand.

 

Results of Operations – Three months ended September 30, 2025

During the three months ended September 30, 2025, Pollard achieved sales of $156.3 million, compared to $153.2 million in the three months ended September 30, 2024. Factors impacting the $3.1 million sales increase were:

• Higher charitable gaming volumes increased sales by $2.8 million in the third quarter of 2025 as compared to the third quarter of 2024. This was predominately as a result of the acquisitions of Venne and Pacific. In addition, the higher average selling price of charitable printed games further increased sales by $0.6 million. These increases in sales were partially offset by a decrease in charitable eGaming (“eTab or eTabs”) revenue of $1.1 million compared to 2024, primarily due to the impact from regulatory changes in certain jurisdictions.
• Lower instant ticket average selling price in 2025 decreased sales by $2.1 million as compared to 2024, mainly as a result of customer mix and a decrease in proprietary product sales. In addition, a slight decrease in instant ticket sales volume in the third quarter of 2025 further decreased sales by $0.3 million.
• Higher sales of ancillary lottery products and services increased revenue in the third quarter of 2025 by $0.5 million as compared to 2024. This growth was primarily due to increased digital sales, including Pollard’s iLottery sales, and higher distribution related sales. Partially offsetting these increases in ancillary lottery sales was the decreased sales of licensed products.
• Higher Michigan iLottery sales increased revenue in the third quarter of 2025 by $0.5 million as compared to 2024.
• During the three months ended September 30, 2025, Pollard generated approximately 69.0% (2024 – 70.1%) of its revenue in U.S. dollars including a portion of international sales which are priced in U.S. dollars. During the third quarter of 2025, the actual U.S. dollar value was converted to Canadian dollars at $1.372, compared to a rate of $1.362 during the third quarter of 2024. This 0.7% increase in the U.S. dollar value resulted in an approximate increase of $0.8 million in revenue relative to the third quarter of 2024. In addition, during the quarter the value of the Euro strengthened against the Canadian dollar resulting in an approximate increase of $1.4 million in revenue relative to the third quarter of 2024.

Cost of sales was $128.2 million in the third quarter of 2025 compared to $121.8 million in the third quarter of 2024. The increase of $6.4 million in cost of sales was primarily the result of the additional costs associated with increased Pollard iLottery operations, including Kansas start-up related expenditures and related amortization, and higher charitable gaming volumes, primarily a result of the addition of Venne and Pacific. In addition, higher exchange rates on U.S. dollar denominated expenses further increased cost of sales when compared to 2024.

Gross profit decreased to $28.1 million (18.0% of sales) in the third quarter of 2025 from $31.4 million (20.5% of sales) in the third quarter of 2024. This decrease of $3.3 million in gross profit and the decrease in gross profit percentage were primarily as a result of the increase in Pollard iLottery operational costs related to Kansas start-up and lower eTabs sales margin.  Partially offsetting these decreases in gross profit were the increased margin from charitable gaming products, including the impact of the addition of Pacific.

Administration expenses were $19.2 million in the third quarter of 2025 compared to $17.0 million in the third quarter of 2024. The increase of $2.2 million was largely a result of ERP implementation costs and the addition of Pacific administration costs. During the quarter Pollard initiated the implementation phase for its new ERP system for the lottery and corporate operations.

Selling expenses increased to $6.5 million in the third quarter of 2025 from $5.9 million in the third quarter of 2024. The increase of $0.6 million was primarily due to the addition of Venne and Pacific selling expenses. Sequentially the $6.5 million is consistent with the $6.5 million of selling expenses incurred in the second quarter of 2025.

Pollard’s share of income from its iLottery joint venture increased to $15.3 million in the third quarter of 2025 from $13.6 million in the third quarter of 2024. This $1.7 million increase was primarily due to the continued strong eInstants sales growth in North Carolina and Virginia, and increased draw-based game sales, partially offset by the expiry of a customer contract at the beginning of the quarter.

Other income was $0.1 million in the third quarter of 2025 similar to $0.4 million in the third quarter of 2024.

The net foreign exchange gain was $0.2 million in the third quarter of 2025 compared to a net gain of $2.5 million in the third quarter of 2024. The 2025 net foreign exchange gain of $0.2 million consisted of a realized foreign exchange gain which was primarily due to foreign currency denominated accounts receivable being converted into Canadian dollars at favorable foreign exchange rates.

The 2024 net foreign exchange gain of $2.5 million consisted of an unrealized foreign exchange gain of $2.7 million, primarily a result of the decreased Canadian equivalent value of U.S. dollar denominated accounts payable and long-term debt due to the strengthening of the Canadian dollar relative to the U.S. dollar, partially offset by an unrealized loss on U.S. dollar denominated cash and accounts receivable. Partially offsetting the unrealized gain, Pollard experienced a realized foreign exchange loss of $0.2 million which was primarily due to foreign currency denominated accounts receivable being converted into Canadian dollars at unfavorable foreign exchange rates, partially offset by foreign currency denominated accounts payable paid at favorable exchange rates.

Adjusted EBITDA decreased to $32.0 million in the third quarter of 2025 compared to $33.3 million in the third quarter of 2024. The primary reasons for the $1.3 million decrease in Adjusted EBITDA were the decrease in gross profit (net of amortization and depreciation) of $1.4 million, substantially as a result of the increase in Pollard iLottery operational costs related to Kansas start-up and lower eTabs sales margins. Further reducing Adjusted EBTIDA were the increase in administration expenses (net of acquisition and ERP implementation costs) of $1.1 million and the increase in selling expenses of $0.6 million. Partially offsetting these decreases to Adjusted EBITDA were the increase in equity investment income of $1.7 million and the increase in realized foreign exchange gain of $0.2 million.

Interest expense increased to $2.9 million in the third quarter of 2025 from $2.7 million in the third quarter of 2024, primarily as a result of the increase in average long-term debt outstanding as compared to 2024 due to acquisitions and higher investment in non-cash working capital, partially offset by the impact of lower interest rates in the third quarter of 2025.

Amortization and depreciation, including amortization of intangible assets and depreciation of property and equipment, totaled $12.6 million during the third quarter of 2025 which increased from $10.7 million during the third quarter of 2024. The increase of $1.9 million was primarily the result of increased amortization of intangible assets, including our Catalyst^TM gaming platform.

Income tax expense was $4.8 million in the third quarter of 2025, an effective rate of 31.6%, which was higher than our domestic rate of 27.0% due primarily to the effect of withholding taxes, partially offset by lower income tax rates in foreign jurisdictions.

Income tax expense was $4.1 million in the third quarter of 2024, an effective rate of 18.4%, which was lower than our domestic rate of 27.0% due primarily to the effect of lower income tax rates in foreign jurisdictions and the effect of non-taxable amounts.

Net income decreased to $10.3 million in the third quarter of 2025 from $18.2 million in the third quarter of 2024. The primary reasons for the $7.9 million decrease were the decrease in gross profit of $3.3 million, principally as a result of the increase in Pollard iLottery operational costs related to Kansas start-up and lower eTabs sales margins. Further reducing net income were the decrease in net foreign exchange gain of $2.3 million, the increase in administration expenses of $2.2 million, primarily a result of increased ERP implementation costs, the increase in income tax expense of $0.7 million, the increase in selling expenses of $0.6 million, the decrease in other income of $0.3 million and the increase in interest expense of $0.2 million. Partially offsetting these decreases to net income were the increase in equity investment income of $1.7 million.

Net income per share (basic and diluted) decreased to $0.38 and $0.37 per share, respectively, in the third quarter of 2025 from $0.67 and $0.66 per share (basic and diluted) in the third quarter of 2024.

Results of Operations – Nine months ended September 30, 2025

During the nine months ended September 30, 2025, Pollard achieved sales of $445.3 million, compared to $416.8 million in the nine months ended September 30, 2024. Factors impacting the $28.5 million sales increase were:

• The higher instant ticket average selling price in the first nine months of 2025 increased sales by $20.6 million as compared to 2024, primarily due to increased proprietary product sales, the change in customer mix and the impact of repriced contracts. This increase was partially offset by the decrease in instant ticket sales volumes of $16.6 million as compared to 2024.
• Higher sales of ancillary lottery products and services increased revenue by $0.8 million in the first nine months of 2025. This growth was primarily due to increased digital sales, including Pollard’s iLottery sales, and higher distribution related sales. Partially offsetting these increases in ancillary lottery sales was the decrease sales of licensed products.
• Higher charitable gaming volumes increased sales by $13.9 million in the first nine months of 2025 as compared to 2024. This is predominately as a result of the acquisition of Venne and Pacific. In addition, the higher average selling price of charitable printed games further increased sales by $2.0 million. These increases in sales were partially offset by a decrease in charitable eGaming (“eTab or eTabs”) revenue of $4.1 million compared to 2024 primarily due to the impact from regulatory changes in certain jurisdictions.
• Lower Michigan iLottery sales in the first nine months of 2025 decreased revenue by $2.0 million as compared to 2024.
• During the nine months ended September 30, 2025, Pollard generated approximately 69.5% (2024 – 70.8%) of its revenue in U.S. dollars including a portion of international sales which are priced in U.S. dollars. During the first nine months of 2025, the actual U.S. dollar value was converted to Canadian dollars at $1.404, compared to a rate of $1.352 the first nine months of 2024. This 3.8% increase in the U.S. dollar value resulted in an approximate increase of $11.4 million in revenue relative to the first nine months of 2024. In addition, during the first nine months of 2025, the value of the Euro strengthened against the Canadian dollar resulting in an approximate increase of $2.5 million in revenue relative to the first nine months of 2024.

Cost of sales was $367.9 million in the first nine months of 2025 compared to $334.4 million in the first nine months of 2024. The increase of $33.5 million in cost of sales was primarily due to the additional costs associated with increased Pollard iLottery operations, including Kansas start-up related expenditures and related amortization, and higher charitable gaming volumes, primarily a result of the addition of Venne and Pacific. In addition, higher exchange rates on U.S. dollar denominated expenses and increases in certain instant ticket manufacturing overhead costs further increased cost of sales when compared to 2024.

Gross profit decreased to $77.4 million (17.4% of sales) in the nine months ended September 30, 2025, from $82.4 million (19.8% of sales) in the nine months ended September 30, 2024. This decrease of $5.0 million in gross profit and the decrease in gross profit percentage were primarily the result of the increased Pollard iLottery operational costs related to Kansas start-up, the reduction in Michigan iLottery gross profit, lower licensed product margin and lower eTabs sales margins in 2025. Partially offsetting these decreases in gross profit were higher instant ticket sales margins, largely as a result of the higher instant ticket average selling price, and the increased margin from charitable gaming products, including the impact of the additions of Venne and Pacific.

Administration expenses increased to $54.1 million in the first nine months of 2025 from $48.9 million in 2024. The increase of $5.2 million was largely a result of increased compensation and ERP implementation costs, as well as the addition of Venne and Pacific administration costs.

Selling expenses increased to $19.0 million in the first nine months of 2025 from $17.0 million in the first nine months of 2024. This $2.0 million increase was primarily due to the addition of Venne and Pacific selling expenses.

Pollard’s share of income from NPi increased to $49.3 million in the first nine months of 2025 from $39.9 million in 2024. This $9.4 million increase was primarily due to the continued strong eInstants sales growth in North Carolina and Virginia, partially offset by the expiry of a customer contract at the beginning of the third quarter.

Other income was $nil in the first nine months of 2025 compared to $0.7 million in 2024. The 2024 other expenses of $0.7 million was comprised of severance related costs of $1.1 million, partially offset by $0.4 million of other income.

The net foreign exchange loss was $3.1 million in the first nine months of 2025 compared to a net foreign exchange loss of $2.9 million in the first nine months of 2024. The 2025 net foreign exchange loss of $3.1 million resulted from a net unrealized foreign exchange loss of $3.3 million, primarily a result of the decreased Canadian equivalent value on U.S. dollar denominated net intercompany receivables and accounts receivable, partially offset by an unrealized gain of U.S. dollar denominated accounts payable and long-term debt. Partially offsetting the unrealized loss, Pollard experienced a realized foreign exchange gain of $0.2 million which was primarily due to foreign currency denominated accounts receivable being converted into Canadian dollars at favorable foreign exchange rates.

The 2024 net foreign exchange loss of $2.9 million resulted from a net unrealized foreign exchange loss of $2.5 million, primarily due to the increased Canadian equivalent value of U.S. dollar denominated accounts payable and long-term debt due to the weakening of the Canadian dollar relative to the U.S. dollar, partially offset by an unrealized gain on U.S. dollar denominated accounts receivable. In addition, Pollard experienced a realized foreign exchange loss of $0.4 million which was primarily due to foreign currency denominated accounts receivable being converted into Canadian dollars at unfavorable foreign exchange rates and foreign currency denominated accounts payable paid at unfavorable exchange rates.

Adjusted EBITDA increased to $91.8 million in the first nine months of 2025 compared to $89.3 million in the first nine months of 2024. The primary reason for the increase of $2.5 million were the increase in equity investment income of $9.4 million and the increase in realized foreign exchange gain of $0.6 million. Partially offsetting these increases to Adjusted EBITDA were the increase in administration expenses (net of acquisition and ERP implementation costs) of $4.0 million, the increase in selling expenses of $2.0 million and the decrease in gross profit (net of amortization and depreciation) of $1.1 million, primarily as a result of increased Pollard iLottery operational costs related to Kansas start-up, lower licensed product margin and lower eTabs sales margins, partially offset by increased instant ticket and charitable gaming margins. Further decreasing Adjusted EBITDA was the decrease of other income (net of severance costs) of $0.4 million.

Interest expense increased to $8.9 million in the first nine months of 2025 from $7.7 million in the first nine months of 2024, primarily as a result of the increase in average long-term debt outstanding as compared to 2024 due to acquisitions and higher investment in non-cash working capital, partially offset by the impact of lower interest rates in the first nine months in 2025.

Amortization and depreciation, including amortization of intangible assets and depreciation of property and equipment, totaled $36.5 million during the first nine months of 2025 which increased from $32.6 million during the first nine months of 2024. The increase of $3.9 million was primarily the result of increased amortization of intangible assets, including our Catalyst^TM gaming platform.

Income tax expense was $11.6 million in the first nine months of 2025, an effective rate of 27.9%, which was higher than our domestic rate of 27.0% due primarily to the effect of withholding taxes and non-taxable items, partially offset by lower income tax rates in foreign jurisdictions.

Income tax expense was $8.1 million in the first nine months of 2024, an effective rate of 18.1%, which was lower than our domestic rate of 27.0% due primarily to the effect of lower income tax rates in foreign jurisdictions and the effect of non-taxable amounts.

Net income decreased to $30.0 million in the first nine months of 2025 from $37.0 million in the first nine months of 2024. The primary reasons for the decrease of $7.0 million were the increase in administration expenses of $5.2 million, including $1.4 million of ERP implementation costs, the decrease in gross profit of $5.0 million, principally as a result of the increased amortization and depreciation, the increase in income tax expense of $3.5 million, the increase in selling expenses of $2.0 million and the increase in interest expense of $1.2 million. Partially offsetting these decreases to net income were the increase in equity investment income of $9.4 million and the decrease in other expenses of $0.7 million.

Net income per share (basic and diluted) decreased to $1.11 and $1.09 per share, respectively, in the nine months ending September 30, 2025, as compared to $1.37 and $1.35 per share (basic and diluted) in the nine months ending September 30, 2024.

Joint Venture iLottery

Pollard and Neogames US LLP, a subsidiary of Aristocrat Interactive S.a r.l, (“Aristocrat”) together provide iLottery services to certain North American lotteries. In 2013, Pollard was awarded an iLottery contract from the Michigan Lottery. As a result, Pollard entered into a contract with Aristocrat to provide its technology in return for a 50% financial interest in the operation. Under IFRS, Pollard recognizes its 50% share in the Michigan Lottery contract in its consolidated statements of income in sales and cost of sales.

In 2014 Pollard, in conjunction with Aristocrat, established NeoPollard Interactive LLC (“NPi”) to provide iLottery services for certain joint customer contracts, excluding the Michigan Lottery iLottery contract. Under IFRS, Pollard accounts for its investment in its joint venture, NPi, as an equity investment. Under the equity method of accounting, Pollard recognizes its share of the income and expenses of NPi separately as equity investment income.

In the third quarter of 2025, NPi’s sales and net income before income taxes were negatively impacted by the expiry of a customer contract at the start of the quarter. In addition, a net foreign exchange loss further reduced NPi’s income in the quarter. In the second quarter of 2025, NPi’s net income before income taxes was positively impacted by a net foreign exchange gain. Quarterly sales and income before taxes are positively impacted during quarters, including the third quarter of 2025, where substantial draw-based game (Powerball^® and Mega Millions^®) jackpots are awarded. Beginning in the third quarter of 2024, income before income taxes from Michigan iLottery was negatively impacted by lower sales and further negatively impacted by certain one-time higher processing costs in the third quarter of 2024. Throughout 2023 and 2024 and continuing into 2025, NPi’s contracts achieved strong organic growth, adding to sales and income before taxes.

Outlook

Third quarter contract wins in California and Belgium illustrate the overall demand for our lottery products and solutions, and showcase Pollard as the partner of choice. Retail sales of instant tickets in 2025 continue to be slightly higher than 2024, reflecting a positive trend after a period of flat sales in 2024.  Quarterly instant ticket volumes vary based on timing of orders and, consistent with historic trends, our fourth quarter instant ticket volume will be slightly lower than the third quarter.  We remain focused on a number of initiatives to improve our instant ticket margins including improved print efficiencies and the ongoing implementation of our new ERP system.

The new California Lottery primary 12-year contract, including extensions, for instant tickets begins December 1, 2025, and we expect our production volumes to increase in the first quarter of 2026. In addition, our NPi joint venture received a two-year extension from the North Carolina Lottery, taking the contract to June 2028, with an additional one-year extension still available.

In our charitable gaming business we will continue investing in our new ICON kiosks and innovative eTab game content to expand our footprint in existing jurisdictions and preparing for new greenfield opportunities.  In addition, new investments in our manufacturing platform for printed products will help us improve efficiencies of our pull-tab product line and provide additional flexibility in meeting the needs of our charitable customers.

We continue to be in discussions with various jurisdictions regarding iLottery and other technology based opportunities.  As noted previously the sales cycle for these solutions is very long and we remain focused on ensuring the proper resources are committed to this market.  We believe there are near term opportunities in areas such as iLottery game content as well as loyalty programs, in addition to ongoing interest in full iLottery solutions.

Our Kansas iLottery operation continues to meet expectations.  A number of initiatives are underway now, and over the next few quarters, to expand gross gaming revenue which will allow us to move to profitability as the operation matures.

The recent contract award from the Belgium Lottery for a complete gaming system is a transformational step in the validation of our proprietary Catalyst^TM technology solution.  Planning and initial work has already begun, and this new contract will be an important factor in the growth of our business with the positive financial impact beginning in 2026. We continue to invest heavily in our iLottery business, and combined with our recent important Kansas and Belgium contract wins, position us well for the future.

During the third quarter we generated significant positive operating cash flow including a large reduction in our non-cash working capital, allowing us to fund our ongoing investments in additional capital expenditures as well as pay down long-term debt.   We expect to continue to invest in the development of our Catalyst^TM technology, game content and improvements in our manufacturing platforms in the coming quarters, funded by our strong operating cashflows.

We will continue to monitor changes and trends occurring in international trade, tariffs and other protectionist trade policies, and ensure our operating practices are in place to minimize any potential financial impact.

We are extremely pleased with the successes achieved during the third quarter and the first nine months of 2025.  Landmark major contract wins, coupled with stronger financial results reflect the ongoing investments in our business and commitment to our strategic vision. These achievements have laid the groundwork for continued success through 2026 and future years across all of our business lines including both lotteries and charitable gaming.  The momentum gained during the most recent quarters will enable us to continue to generate profitable growth.

SOURCE Pollard Banknote Limited