Brightstar Lottery PLC (BRSL) Q3 2026 earnings review
Brightstar Lottery equipment sales jump, but it cuts full-year outlook
Brightstar Lottery, which runs government lotteries and supplies ticket machines, met its third-quarter profit goal thanks to equipment shipments, while ticket buying at stores declined. Reported revenue fell 4% to $607 million because of higher non-cash charges for its Italian Lotto license, though sales excluding those license charges rose 4% by our math as machine and instant-ticket shipments more than doubled. Chief executive Vince Sadusky cut the full-year revenue plan by $80 million at the middle of the range, which by our math leaves fourth-quarter reported sales flat against last year.
| Revenue excluding license amortization | +3.5% from a year ago (reported revenue $607M, -4%) |
|---|---|
| Same-store ticket wagers | -3.9% from a year ago in constant currency |
| Adjusted EBITDA | $289M -2% from a year ago (47.5% margin) |
| Full-year revenue outlook | Cut $80M middle of the range: $2.445B |
⚖️ Verdict: 🔴 Bearish
The story got worse because the long-warned risk to the second-half sales plan came true. Management gave up on its target of more than 5% full-year underlying growth, blaming slower store wagers, delayed Italian online launches, and a weaker euro, while everyday scratcher and draw games shrank in both the U.S. and Italy. On the plus side, cost cuts and high-margin equipment sales lifted the Adjusted EBITDA margin to 47.5% and kept the $750 million operating cash flow plan intact.
The question now is whether the drop in store wagers is just a tough comparison against last year's big Powerball jackpots or a wider slowdown in everyday ticket buying and Italian digital rollouts. If it is only jackpot luck and currency, underlying growth should rebound once the Italian license charge stops rising next year; if everyday games stay weak, the company's 2028 targets are at risk. Fourth-quarter instant-ticket wagers and Italian digital sales will settle it.
🐂 Bull Case
Equipment and Software Sales Carried the Quarter
Brightstar runs lotteries for governments and sells them ticket machines, printed instant tickets and software. Finance chief Max Chiara said "Operational growth drivers are contributing at an accelerated pace, reinforcing our medium-term growth outlook." Excluding the accounting charge for its upfront Italian license fee, revenue rose 3.5% from a year ago by our math.
Equipment and instant-ticket sales more than doubled to $60 million from $25 million a year ago. Other service revenue, which comes from software services for new contracts outside the U.S. and Italy, grew 11% to $121 million. Those two lines added $48 million of sales, enough to overcome weaker ticket buying at lottery shops and keep third-quarter revenue at $607 million.
What to watch: fourth-quarter product sales against last year's $57 million result. Because machine deliveries come in lumps, a drop back to normal levels would leave Brightstar leaning on store ticket sales that are currently shrinking.
Cost Cuts and Equipment Mix Lifted Profit Margin
Brightstar tracks Adjusted EBITDA — profit before interest, taxes, depreciation, and upfront license amortization — to measure ongoing operations, along with a cost-cutting program called OPtiMa. Even though reported revenue fell 3.5%, Adjusted EBITDA dipped only 1.7% to $289 million, and the Adjusted EBITDA margin rose 0.8 percentage points to 47.5%.
A richer mix of equipment sales and OPtiMa cost cuts protected that margin. The cost of product sales rose from 4.9% to 7.4% of total revenue because machine shipments more than doubled, but fell from 124% to 75% of product revenue by our math. Meanwhile, Reported EBIT margin excluding one-offs fell 8.0 percentage points to 21.4% because Brightstar absorbed an extra $46 million of Italian Lotto license amortization.
What to watch: full-year OPtiMa savings realized at year-end against the $70 million target for 2026. Hitting that mark is necessary to offset the $50 million management is spending on new growth projects.
🐻 Bear Case
Brightstar Cut Its Full-Year Revenue Plan
"Revenue and profit were in line with our expectations," chief executive Vince Sadusky said. Yet on the same day, Brightstar lowered its full-year revenue forecast by $80 million at the middle of the range and dropped its promise of more than 5% underlying sales growth for the full year.
- Full-year revenue outlook: cut to $2.435–2.455 billion from $2.50–2.55 billion
- Operational growth target: reset to mid-single digits for the second half, down from over 5% for the full year
- Implied fourth-quarter revenue: $667 million at the middle of the range, flat against $668 million a year ago by our math
The company blamed the cut on "updated second half same-store sales expectations, timing of certain Italy B2C expansion efforts, and FX impact". For two quarters the old outlook required a big fourth-quarter jump in store wagers and Italian online games, and this cut confirms those projects and ticket sales are running behind schedule.
What to watch: fourth-quarter revenue excluding license fee amortization, which by our math needs to grow about 4% to hit the new midpoint. A miss against that lowered bar would show that core demand is still weakening heading into 2027.
Jackpot Drop Accompanied a Wider Ticket Slowdown
Same-store sales measure lottery ticket wagers in constant currency at locations Brightstar already served a year ago. Three months ago, the lottery operator expected third-quarter same-store sales to match last year, but instead they fell 3.9%.
Brightstar said wagers fell "primarily due to U.S. multi-state jackpot performance", as big Powerball and Mega Millions games dropped 30.6% against last year's $1.8 billion jackpot run. However, everyday instant scratchers and draw games also shrank 1.0% globally, falling 1.4% in the U.S. and 1.2% in Italy after growing in the first half.
What to watch: fourth-quarter instant ticket and draw same-store sales in the U.S. and Italy. A second straight drop in everyday games would mean the slump reaches beyond bad jackpot luck.
Shareholder Payouts Outrun Cash After Partner Shares
Brightstar pitches itself as a reliable cash payer and returned $204 million through dividends and share buybacks through November 9. However, the U.K.-based group owns 61.5% of its Italian Lotto joint venture while recording 100% of the venture's operating cash flow on its books, so it must pay out the other 38.5% to its minority partners.
Over the first nine months of 2026, operating cash flow excluding the upfront Italian license payment was $574 million, and capital spending took $313 million. Paying $259 million in dividends and capital returns to joint-venture partners left just $2 million of cash by our math, so the $189 million of shareholder payouts in the first three quarters pushed net debt up to $3.84 billion, or 3.30 times yearly Adjusted EBITDA.
What to watch: fourth-quarter cash distributions to minority partners on the cash flow statement. Further payouts at the nine-month pace would keep Brightstar borrowing to fund its quarterly dividend until capital spending falls after 2028.
Risks This Quarter Didn't Answer
Brightstar's earnings release and presentation left three standing risks without updated numbers, even though one of them contributed to the full-year revenue cut.
- Online lottery (iLottery) wager growth: not in the release after slowing from 30% in Q1 to 22% for the first half; the call transcript or filing will show if growth cooled further.
- Italy direct-to-consumer (B2C) digital metrics: Brightstar cited B2C timing delays in its outlook cut and noted the launch of its OTTO offer, but gave no user or revenue numbers.
- Contract rebids and pricing: no update in the release on the upcoming Italy Scratch & Win license renewal or pricing pressure in U.S. state system tenders.
👓 Other Themes
Weaker Euro Assumption and Higher-Rate Refinancing
Brightstar earns over a third of its revenue in Italy, so a weaker euro hurts its U.S. dollar results. The company cut its fourth-quarter euro assumption from $1.17 to $1.12 and said its lower Adjusted EBITDA forecast was "primarily on updated FX". In September, it also issued €500 million of 4.875% notes due 2032 to pay down €342 million of 2.375% notes due 2028 and €155 million of credit lines.
💲 Other KPIs
Contract assets on the balance sheet rose 12.5% from $678 million at the end of 2025, climbing from $707 million in Q1 and $755 million in Q2. This line tracks lottery terminals and central systems Brightstar installs for state and national lotteries during its 2025–2028 contract renewal cycle, which consumes cash now to lock in multi-year service fees.
Diluted shares fell 5.6% from 196 million a year ago and edged down from 187 million in Q1 and 186 million in Q2. The lottery group spent $18 million on buybacks in the third quarter and $77 million through November 9, slowing its repurchase pace after borrowing to pay the final Italian Lotto license installment.
Money owed by customers is down 11.0% from $526 million at the end of December 2025 and roughly even with $466 million in the second quarter. Collecting those bills generated $46 million of operating cash over the first nine months, helping offset $80 million of timing outflows across accounts payable and other liabilities.
🔮 Guidance
Cut. The middle of the range dropped by $80 million, pointing to a 2.6% full-year revenue decline after $175 million of extra Italian Lotto license amortization. By our math, that leaves $667 million for Q4, flat against $668 million a year ago and up about 4.1% excluding license amortization. Management cited weaker second-half store wagers, slower Italy digital rollouts, and a lower euro rate.
Cut. Brightstar lowered the middle of the profit range by $25 million, leaving full-year Adjusted EBITDA up 2.6% from $1.121 billion in 2025. By our math, that implies $289 million for Q4, down 4.9% from $304 million in last year's fourth quarter and an implied margin of 43.3% against 47.5% in Q3. The company attributed the reduction mainly to the lower euro exchange rate assumption.
Unchanged. The plan still calls for $750 million of operating cash flow before the $1.675 billion Italian Lotto license payment, or a $900 million cash outflow including it. Because the business generated $574 million excluding the license fee over the first nine months, the target leaves $176 million for Q4 by our math, signaling that the year remains achievable despite the revenue cut.
Cut. Management trimmed the top end of its capital spending plan by $25 million, shifting some equipment spending between 2026 and 2027. With $313 million spent in the first nine months, the updated target leaves $137 million for the fourth quarter by our math, up from $81 million in Q3 as Brightstar builds out new lottery systems in Missouri, Wisconsin, and Texas.
❓ Key Questions
What caused the Italy B2C expansion delay?
Management blamed the full-year revenue cut partly on the timing of Italy direct-to-consumer digital efforts, even as it touted the launch of its OTTO offer. Investors need to know what slipped and when Brightstar will publish active user and digital revenue numbers.
Why did everyday instant and draw wagers shrink?
Global instant-ticket and draw same-store wagers fell 1.0%, with drops in both the U.S. (-1.4%) and Italy (-1.2%). Because those everyday games are not driven by Powerball jackpots, management should explain whether consumer demand is softening.
What was third-quarter online lottery wager growth?
Brightstar did not include its global iLottery wager growth rate in the third-quarter release after growth slowed from 30% in Q1 to 22% for the first half. Disclosing the third-quarter rate will show whether digital lottery adoption is still cooling.
How big are fourth-quarter minority partner payouts?
Brightstar paid $259 million in dividends and capital returns to its Italian joint-venture partners over the first nine months, consuming nearly all free cash flow before shareholder dividends. Management should clarify how much more will go to partners in Q4.