This article first appeared on GuruFocus .
-
Revenue:$154.8 million in Q2 2026, up from $142.7 million in Q2 2025.
-
Gross Profit:$28.0 million, or 18.1% of sales, compared to $23.9 million (16.7% of sales) in the prior year.
-
Adjusted EBITDA:$31.1 million in Q2 2026, up from $29.2 million in Q2 2025.
-
Net Income:$8.7 million in Q2 2026, compared to $8.0 million in Q2 2025.
-
Net Income Per Share:$0.32 basic and diluted, up from $0.30 in Q2 2025.
-
Instant Ticket Sales:Higher volumes increased revenue by $3.3 million, and higher average selling prices added $0.8 million.
-
Ancillary Lottery Products and Services:Sales increased by $5.3 million, driven by digital sales growth, including iLottery contracts with Belgium and Kansas lotteries.
-
Charitable Gaming:Print volumes increased revenue by $0.7 million, higher average selling prices added $0.2 million, and eTabs generated a $2.2 million revenue increase.
-
Michigan iLottery Revenues:Increased by $0.6 million in Q2 2026 compared to Q2 2025.
-
Cost of Sales:$126.8 million in Q2 2026, up from $118.8 million in Q2 2025.
-
Administration Expenses:$19.4 million in Q2 2026, up from $17.6 million in Q2 2025.
-
Selling Expenses:$6.5 million in Q2 2026, consistent with Q2 2025.
-
Share of Income from iLottery Joint Venture:Decreased to $15.0 million from $17.7 million in Q2 2025.
-
Other Expenses:$1.6 million in Q2 2026, up from $0.1 million in Q2 2025, due to a consultant transfer fee.
-
Foreign Exchange Loss:$0.7 million in Q2 2026, compared to a $3.5 million loss in Q2 2025.
-
Interest Expense:Decreased to $2.4 million from $3.1 million in Q2 2025.
-
Amortization and Depreciation:$13.2 million in Q2 2026, up from $12.3 million in Q2 2025.
-
Income Tax Expense:$3.7 million in Q2 2026, with an effective rate of 30.4%.
Release Date: August 13, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
-
Revenue increased 8.5% year-over-year to $154.8 million, driven by higher instant ticket volumes and digital sales.
-
Gross margin improved to 18.1% from 16.7% in the prior year, reflecting higher volumes, better product mix, and improved manufacturing efficiency.
-
The California Lottery transition exceeded expectations, with volumes and average selling prices above initial projections.
-
Digital business expanded with the Colorado Lottery contract win and progress on the Belgium omnichannel contract, supporting future revenue growth.
-
Charitable gaming, especially ETAB in Minnesota, achieved record revenue and margins, contributing to overall profitability.
Negative Points
-
Equity investment income from the iLottery joint venture decreased by $2.7 million due to contract expiry and higher content costs.
-
Administration expenses rose by $1.8 million due to higher compensation, professional fees, and ERP implementation costs.
-
Other expenses increased by $1.5 million, including a $1.8 million consultant transition fee.
-
The Kansas iLottery contract is still in a build-up phase and not yet profitable, with uncertainty around the upcoming RFP.
-
The Michigan iLottery contract terminated at the end of Q2, reducing future revenue from that joint venture.
Q & A Highlights
Q: Can you explain the revenue recognition model for the Belgium lottery contract, given it is still in the development phase? A: Robert Rose, CFO, explained that the contract involves multiple deliverables and services rolled out over the next couple of years. Revenue is recognized on a percentage-of-completion basis, driven by the amount of work performed. This should result in a relatively smooth revenue stream rather than lumpy results, with billing tied to separate milestones for service delivery.
Q: What drove the improvement in manufacturing efficiencies and lower spoilage in the second quarter? A: John Pollard, Co-CEO, attributed the first-quarter spoilage issues to the launch of new, innovative products (like the ScratchFX family) that were being manufactured for the first time. The second-quarter improvement came from ironing out those initial production issues and a continuous improvement process led by the new EVP of Operations, Jeff Ristair, who has implemented projects to enhance manufacturing processes.
Q: Is the company looking to grow its game content organically or through acquisitions? A: Douglas Pollard, Co-CEO, stated that the company is pursuing both strategies. They are building an internal game studio and adding resources, but given the growing importance of content in iLottery and charitable gaming, they are also actively looking at outside acquisition opportunities to accelerate growth in this key area.
Q: Can you provide more detail on the gross margin improvement, specifically whether it was driven more by volume, ASP, or efficiency gains? A: Robert Rose, CFO, said the improvement was a combination of all three factors, with instant ticket volume being the biggest sequential driver. While efficiency improvements are a longer-term process, the company expects gross margins to continue improving as they absorb start-up costs in iLottery and digital operations and benefit from higher California volumes and a focus on value-added innovations. He noted the 18.1% margin is the highest in a couple of years and sees no reason they can't move toward the low 20% range seen historically.
Q: Are the California Lottery volumes, which are exceeding expectations, accretive to overall margins? A: John Pollard, Co-CEO, clarified that while the California contract has a lower bid price than average, it is still positive for margins due to its scale. The "exceeding expectations" performance is due to both higher-than-expected volumes and success in selling value-added innovations, which has resulted in a higher average selling price than initially projected.
Q: What is the financial impact if the company were to lose the Kansas iLottery contract, and what is your confidence in retaining it? A: Douglas Pollard, Co-CEO, expressed high confidence in retaining the contract, noting the Kansas Lottery is thrilled with the results achieved together. However, he acknowledged it's a public bid process with no certainty. He declined to speculate on the negative financial impact of losing it, stating that the platforms and capabilities developed could potentially be deployed elsewhere.
Q: Is the company still incurring EBITDA losses on the Kansas iLottery contract? A: Robert Rose, CFO, confirmed that Kansas is still in a build-up mode and not yet at a profitable level, though there is good momentum. He reminded that mature iLottery operations, like the NPI joint venture, took years to become profitable, and the company is optimistic about returning to a mature state if they retain the contract.
Q: Is there a termination fee or "make-whole" clause if the company does not win the Kansas RFP? A: Douglas Pollard, Co-CEO, stated there is no such clause. He explained that taking on the Kansas contract with its short-term remaining duration was a calculated risk, which they believed was a good one given the long-term potential for profitability in the digital lottery space.
Q: Can you provide an update on the Virginia Lottery RFP? A: Douglas Pollard, Co-CEO, noted that the RFP is due on September 18th. The current contract runs until the summer of 2028, and the lottery expects to announce a winner in November, though he cautioned that such timelines are not guaranteed.
Q: Regarding the NPI joint venture, is the negative impact from the expiring customer contract now fully lapped? A: Robert Rose, CFO, clarified that the negative impact is from the New Hampshire contract, which ended last year. This means it was in the comparative numbers for the second quarter of 2025 but is not in the current year's figures, so the impact has been fully lapped.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
