Pollard Banknote Limited ($PBL)

Hello, and welcome to the Annual Meeting of Shareholders of Pollard Banknote Limited. Please note that today's meeting is being recorded. It is now my pleasure to turn today's meeting over to Gordon Pollard, the Executive Chair of the Board.

Good morning. I am Gordon Pollard. I'm the Executive Chair of the Board of Directors of Pollard Banknote Limited. On behalf of the Board of Directors, I am pleased to welcome each of you to the Annual Meeting of Shareholders. We have the following matters of business to conduct today: one, the presentation of financial statements; two, the election of 6 directors; and three, the reappointment of KPMG LLP as the corporation's auditors. Immediately following the formal business of this meeting, John Pollard and Doug Pollard, Co-Chief Executive Officers of Pollard Banknote, will provide a report on operations and respond to any questions that you may have. Questions may be posed to our co-CEOs by accessing the Q&A tab on your screen. As this meeting is being held virtually via live audio webcast, voting on all matters will be conducted by electronic ballot. Registered shareholders and duly appointed proxy holders will be asked to vote on each business item after the presentation of all business items. When you are asked to vote, you will receive a message on the virtual interface requesting you to register your votes. You will only have a certain amount of time to cast your vote once the polls are open. As a reminder, only registered shareholders or their proxies are entitled to take part and vote at this meeting. All participants, however, are welcome to pose questions to our co-CEOs at the end of the meeting. On behalf of the Board, I wish to express thanks to those shareholders who have submitted their proxies in advance. To make the best use of our time, certain shareholders have been asked to move and second the proposals, which are called for in the notice of the meeting. Having dealt with those procedural matters, we will now proceed with the formal portion of today's meeting. The meeting will now come to order. And with your approval, I will ask Riva Richard, General Counsel and Corporate Secretary of Pollard Banknote, to act as Secretary of the meeting and Computershare Investor Services through its representatives to act as scrutineers. The notice calling the annual meeting and the accompanying form of proxy and management information circular were mailed to all shareholders on April 17, 2026. This was confirmed by an affidavit from the corporation's transfer agent. I direct that a copy of the notice and the affidavit be kept with the records of the meeting, and therefore, it will not be necessary to read the notice of the meeting. In accordance with applicable law and as described in the management information circular, the directors determined that to be valid, proxies were to be deposited with the transfer agent not later than 11 a.m. Winnipeg time on May 12, 2026. As of that date, the transfer agent recorded proxies representing 78.11% of the voting shares. The shares of those present or represented by proxy and who are entitled to vote at this meeting are, therefore, in excess of quorum requirements. That being so, I now declare that the meeting is regularly called and properly constituted for the transaction of business. As the first item of business on the agenda for today's meeting, I will ask the Secretary to table the audited financial statements of Pollard Banknote Limited, together with the auditor's report thereon and the report to shareholders contained in the annual report previously sent to you. Copies of such documents are available on our corporate website and through SEDAR+. Accordingly, I don't consider it necessary to read the report to the meeting. We now have a few resolutions to present, beginning with the election of directors. The number of directors to be elected at this meeting and to hold office until the next Annual Meeting of Shareholders has been fixed at 6. I declare the meeting open for nominations.

Mr. Chair, I nominate the following persons for election as directors of Pollard Banknote Limited: Dave Brown; Lee Meagher; Carmele Peter; Gordon Pollard; John Pollard; Douglas Pollard, and move that they be elected directors to hold office until the next annual election of directors or until their successors are duly elected or appointed.

Are there any further nominations?

There are no further nominations.

Thank you, Mr. Rose. As there are no further nominations, I will ask Riva Richard to move that nominations be closed.

I move that the nominations be closed.

I second the motion.

Well, that ends that. The next item of business is the reappointment of auditors and the authorization of the directors to fix their remuneration. The Audit Committee of the Board of Directors has approved, subject to shareholder confirmation, the appointment of KPMG LLP as the auditors of the company. I believe Dave Brown has a motion in this regard.

Thank you, Mr. Chairman. I move that the accounting firm of KPMG LLP be appointed auditors of Pollard Banknote Limited to hold office until the next Annual Meeting of Shareholders or until their successors are appointed and that the directors be authorized to fix their remuneration.

I second the motion.

Thank you, Mr. Brown and Ms. Richard. As indicated, voting today will be conducted by electronic ballot. I will now ask that Computershare please open the balloting to registered holders and appointed proxy holders. All registered holders and proxy holders who have properly logged in with their control numbers or access code are asked to please register their votes by selecting for or against next to the name of each director and for or withhold next to the resolution appointing KPMG LLP as the company's auditors. Once the electronic balloting closes, the voting page will disappear, your votes will be automatically submitted and the scrutineers will compile an interim report. [Voting]

While we wait for the results of the votes, I would like to call upon John Pollard and Doug Pollard, Co-Chief Executive Officers of Pollard Banknote, to briefly report on the operations and current activity of the company. Following their presentation, if there are any general questions regarding the presentation or any other questions regarding Pollard Banknote, which you would like to raise, we would be happy to address them for you. Please go ahead.

Okay. Thank you, Mr. Chair. Before we get started, I might just remind you that these -- there are forward-looking statements. Certain statements in this presentation may constitute forward-looking statements, which may involve known and unknown risks, uncertainties and other factors, et cetera, which I would invite you to read as we'll make this available and of course, the use of non-GAAP financial measures. Turning forward, I'd like to present some of the highlights from 2025 and really 2025 had some really exceptional milestones that we've achieved in our ongoing strategic development of our company that we're quite excited about. And I might start by just highlighting the California Lottery primary contract win that began December 1, 2025, initial term of 6 years, option to extend for up to 6 additional years. This is -- it's a really exceptional opportunity for us. It's been onboarding very well and exceeding our expectations, both in terms of volume and ASP. And we're really excited about this aspect of our core business. And closely related to that, too, is what I'd highlight in terms of instant ticket margin recovery was also a very important part of our story from 2025. And that strategy to reprice our instant ticket contracts is now mostly complete, but it was still important through 2025 to see those further improvements in our ticket margins, which John will highlight later. And together, those two things show what I would highlight is our commitment to what I always say is not falling out of love with our core business of being an outstanding provider and partner in the instant ticket category. I'd like to highlight retail innovation because this is part of our ongoing transition to be a partner to help lotteries grow their -- and drive and grow their retail revenue. And part of that involves them being better at retail. And we think that's an opportunity for us to drive some sales for products of ours, things like the easyVEND in-lane solution, point-of-sale material, which is the digital menu board and a grocery store self-service device, which is easySERV. And that provides us with opportunities both to grow revenue for us and also just as importantly, to help lotteries grow their revenue from their core business, which in this time is as important for lotteries as it ever has been. Turning to the digital side. A big part of '25 was the very successful first year of the Kansas iLottery operation for us. This was launched in February 2025. It was the first time using our own Catalyst technology. And it was the fastest in history. That was important. But just as important, it recorded record per capita revenue through year 1, and we did so in a way that was a real partnership with the Kansas Lottery that I'm very proud of our team about and even shows up with players, and you can see that very high ranking within the Apple Store. So I think we're hitting it out of the park on all fronts. But again, our vision, as we've talked about many times, is to be the best partner to help lotteries grow their business. And it's nice to see Kansas iLottery backing that up that we don't just have great technology, we know how to deploy it. And we show here the net gaming revenue per capita for the first 12 months of these operations. New Hampshire and West Virginia are good comparables, both because of the size of their lottery, but also because of the similar product mix of eInstant and draw games at launch. And so the Kansas performance has been exceptional in all those ways, and that's very important to our story from 2025. It's not only Kansas in this digital space. A couple of others I'd highlight. For sure, the Belgium Lottery gaming platform, that contract began in the fourth quarter of 2025 with an announcement that the lottery was awarding us a contract for a full end-to-end solution. And this is really important. It's omnichannel. It's both the retail solution for draw games and support of other retail products and the iLottery direct sale digital channels. So it has a central gaming system for draw games, management of the eInstant games, player engagement technology as well as instant ticket management system for warehousing and distribution. And that's a big contract, 12 years, estimated value of CAD 289 million, although that includes VAT. So we're well into the phase of kicking that off, and it's been going well. It is a complex project, but I'm very proud of how our team is deploying that so far in conjunction with the Belgium National Lottery. Another one that I'd like to highlight is the Oklahoma Lottery loyalty contract win, which commenced on November 24, 2025. That's an initial term of 1 year, but there are 6 1-year renewal options. Important to know the scope of that, that is for the development and launch of a Players Club loyalty platform and the website, but also native mobile applications for iOS and Android and helping the customer with a customer relationship management or CRM system. And there is an option if the lottery was to get approval, there is an option for them to include iLottery as part of our contract. Again, that is also right now in the kickoff phase and is going well in regular contact with the lottery, and they're happy with how that's progressing. That Oklahoma loyalty contract is expanding on our loyalty customer base, which is now up to 6, Vermont, West Virginia, North Carolina, Arizona, Kansas and Oklahoma. So that's a growing part of our business. It's also an important year for our Pollard digital game studio. We're up to 160-plus eInstant games live with several of those lotteries. Remember, Pollard Banknote has been a lottery game content company for many, many years. That's what we do. We provide outstanding instant ticket games. We have a reputation for developing innovative retail concepts. And it's nice and exciting to see us expanding that into the eInstant space with exciting instant games that can help lotteries drive more revenue and of course, the omnichannel overlap of those retail and eInstant combinations. Another part of our business through mkodo, that's a growing part of the business, and they've done a lot of exciting development in GeoLocs. This is our geolocation services, which is a growing part of their business, a nice Software-as-a-Service product that's been growing, one of the leading providers in Ontario, but expanding internationally in Brazil and elsewhere, largely in the gaming front, although the folks there would remind me that geolocation is important for many, many Internet transactions, and that's a big growing market that we're excited to have some opportunities with. Sorry about that. A little reminder on NeoPollard Interactive. We had a couple of important contract extensions in addition to record sales and profits there. So North Carolina extended 2 more 1-year renewal periods. That takes us out to June 30, 2028. They do have one more option at their discretion for an additional year. And Virginia exercised their renewal options, which take that contract out to 2028. So lots going on still in NPI. And then Diamond Game, it's important to highlight this area. There's growing interest overall in tablet-based e-gaming. The biggest market for that has been Minnesota, and that's been nice to see the recovery. There are some regulatory changes in that market that affected all providers, including Diamond Game/Pollard. But that's -- we've been recovering nicely through that recently, which has been exciting to see. And more and more jurisdictions and lotteries are seeing the opportunities for the particularly tablet-based e-gaming, but broader than that as well with some lotteries in addition to other markets like Alaska and elsewhere. So big opportunities there. I'm not sure if there's anything you want to -- any color you want to add to that, John, as far as eTabs before we transition to the financial side.

No, thanks, Doug. I think I'll get right into the financials. So -- we've got the financial highlights slide. It was another strong year for sales growth at Pollard Banknote. As you can see, both we show our combined sales where we show the sales in our joint venture and then our GAAP sales number where we had $596 million in 2025. On the adjusted EBITDA line, I'll talk about that in a little more detail in a couple of slides. It was up, not by as much as we would have liked, and I've got some comments on that coming. And notwithstanding that we did some more acquisitions and invested heavily in our business, you can see our net debt ticked down just a little bit in 2025. And we've still got a very manageable level of debt in our business. Just looking at the combined sales slide, again, it's been a very interesting time the last number of years. We -- this slide is a good reminder of how much we've accomplished in the last number of years with the significant diversification that we've set out to do in our company from what was primarily going back 10 years ago, a Scratch ticket provider to see what we've done with our sales where Scratch tickets are now only about half of our sales, still a very important part, but we've had significant growth in the other areas of our business in charitable and in the digital parts of our business, both from a digital lottery side and a digital eTab side, and we intend on continuing to grow the business in an aggressive way. Flipping to adjusted EBITDA. Again, there was growth there, and we've had -- if you look back at that 10-year history of growth of our sales, our adjusted EBITDA has grown in tandem with that in a very strong way. But 2025 was less growth than we would expect. And again, I'll talk about that in more detail in a minute. If we just look at the sales part of Pollard Bank for 2025, it's nice to see that this chart, of course, has all green bars on it. A couple of sort of comments that I will make, in particular with respect to sales. In the second green bar in the $3.9 million increase from higher sales of ancillary products, including Kansas iLottery, that sales number would have been higher, but some of our ancillary products in the year, we had a little bit of weakness in the year on some of our distribution services and licensed games that held us back a bit there. But that should see a bigger gain coming up in future years, obviously, with our iLottery products with Kansas and Belgium all rolling out. Charitable gaming, continued some nice growth, notwithstanding some of the headwinds we had in the Minnesota market that I'll talk about more in a slide. That was partly through acquisition. But the charitable gaming area of our business just continues to be just a steady performer and growth in the digital side there, too and a highlight of our business. We took on in the last year or so the acquisitions of C.J. Venne, a dauber provider in Pacific Gaming, which is an electronic bingo provider. That's what's partly reflected in that $13.2 million increase in sales. And those acquisitions are performing really nicely and just fitting in seamlessly into our charitable group. There was a higher impact from foreign exchange in the year as well that's highlighted in the $15 million increase there. Moving on to the frankly, more important subject of EBITDA. There's some interesting numbers in this slide. Starting with the first green bar on the left side, our higher gross margin prints and tickets. Notwithstanding the difficulties that we talked about earlier today in Q1, we are pleased with the progress of our instant ticket. That repricing program to recover from the sort of the input cost shock of 2022 and 2023 continued really nicely in 2025. We did achieve higher -- significantly higher gross margins in our instant ticket business. Notwithstanding our temporary problems in Q1, we expect those gross margin increases to continue to show up for us in '26 and beyond. And then the next bar in there, negative $10 million lower gross margins on our ancillary product, our lottery division outside of Scratch tickets. This was a significant drag on our EBITDA. 1 of the 2 reasons that we didn't get the EBITDA growth that one might have expected in 2025 because within that ancillary product, we have our Kansas iLottery that we launched. So obviously, we're thrilled with Kansas iLottery. It's a huge part of our story, a huge successful launch, as Doug says, but it does come with it some start-up losses in the early parts of the product rollout. And those were not insignificant negatives to our EBITDA, even though the product is performing well and above expectation. So there was a negative drag on EBITDA, a good chunk of that $10 million. We don't give separate disclosure, but a good chunk of that $10 million is related to our iLottery start-up rollout, even though it's really successful. And then what was an unexpected disappointing part of 2025, the next bar in the negative $5.4 million from lower gross margins from charitable eTabs was essentially entirely from the Minnesota market, where we've talked about a number of times and other regulatory changes. That definitely hurt us in 2025. But we fought back really well on that score with a combination of improved game content. Of course, we had to essentially restrict our game content and redesign it all and roll out brand-new game content on January 1 and sort of a big bang of 2025 to meet new regulations. But gradually throughout the year and since then into Q1 of 2026, we're figuring out ways to improve our game content to live within the new regulations, but to make it more interesting for our players. We've rolled out some really good enhanced game content that's really helped. We've seen a gradual recovery in those margins as a result of that. In addition to game content, we've really increased the frequency of game launches during the year. We used to only launch a few new games a year, frankly, in that market prior to 2025. We've gradually throughout the year, particularly as we got into the second half of the year, upped our launch frequency to launching a new game every 2 to 3 weeks in that market. That's really helped. And thirdly, we've got a great distribution partner and partners in that market who've been really successful in increasing the number of sites that we're in during the year. So our site count has increased. And the combination of those three things has had a really strong recovery in charitable eTabs. And every quarter essentially got better in the year, and we're pleased to be able to talk about Q1 2026 actually exceeding the levels of 2024 prior to the regulations. So this negative red bar in '25 is going to flip to a positive bar in 2026 as we've recovered that market, really important part of our business. And of course, as Doug noted, we've got lots of other irons in the fire and other exciting opportunities to roll out, particularly the tablet-based part of eTabs in 2026 and early '27 that we're hoping to be able to comment on as we go out through this year. Acquisitions, the C.J. Venne and the Pacific Gaming, again, rolling out seamlessly and had a moderate positive impact on our EBITDA as planned in '25 was great. Our NeoPollard joint venture obviously had another really strong year, as we all know, from results reported during the year, and so it was a great boost to our EBITDA. We did have some higher SG&A expenditures as a result of our growth coming through in the year that reduced EBITDA a little bit, but that's just part of funding the growth of our business, and we had a little impact from foreign exchange. So again, only going from $114 million to $119 million was less than we would have liked, but there's going to be significant improvement coming in on that number, notwithstanding there are some headwinds in Q1 of '26 that we've talked about. But as we get into Q2, Q3 and Q4, the later parts of 2026, you're going to see stronger numbers. Lastly, just on cash flow, a couple of points there. We still ended with -- notwithstanding the heavy investment make in our business ended with positive operating cash flow for 2025. We had a heavier-than-ever period of CapEx with that $58.8 million for CapEx and intangible spend in '25. We are going to see that number start to come down now as we get out of the heavy investment part of our sort of ramp-up in the iLottery space. So our expectation is for a significantly lower number there in 2026 that we'll be reporting on through the quarter. So we should see even stronger net cash flow in 2026. And that is the end of my comments on the financials for the year.

Thank you very much, John and Doug, an excellent presentation. The meeting is now open for questions. As a reminder, questions may be posed to our co-CEOs by accessing the Q&A tab on your screen. I'll wait a minute and see if -- what questions we have to answer. As it appears that there are no further questions, I will now return to the formal business of the meeting. I'm advised by the scrutineers that the ballots and proxies deposited for the meeting have been voted in favor of the resolutions. I hereby confirm that each of the 6 nominees have been elected as directors of the company to serve until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed. The appointment of KPMG LLP as the auditors of the company has been approved, and the Board of Directors of the company has been authorized to fix their remuneration. I direct that the results of the polls be included with the minutes of this meeting and the results of the voting be filed on SEDAR+. That concludes the formal business of the meeting. And as there is no further business to come before the meeting, I ask Riva Richard for a motion to terminate.

I move that the meeting terminate.

I second the motion.

Thank you, Mr. Rose. I now declare the meeting terminated, and thank you for your attendance.

This concludes the meeting. You may now disconnect. Thank you.