The Lottery Corporation Limited (ASX:TLC) operates licensed lottery and Keno products across Australia, including Powerball, Oz Lotto, Saturday Lotto, Weekday Windfall, Set for Life and Instant Scratch-Its. FY26 produced an unusually weak sequence of major jackpots, reducing lottery turnover and earnings. Even so, the company maintained its fully franked annual Dividend at 16.5 cents per share, supported by price changes, Keno growth, lower operating expenses and continued cash generation.

FY26 Revenue declines as jackpots weaken

The Lottery Corporation reported statutory group revenue of A$3.5766 billion for FY26, down 2.9%.

On the presentation basis used in its FY26 results release, revenue was A$3.5825 billion, down 2.7%.

EBITDA before significant items was A$736.1 million, representing a decline of 1.8%.

NPAT before significant items fell 6.3% to A$342.5 million.

Statutory NPAT was lower at A$284.6 million after significant items, compared with A$365.5 million in the previous period.

The difference highlights why the underlying and statutory measures need to be considered separately when assessing FY26 performance.

Jackpot outcome described as a once-in-45-years event

The biggest influence on the Lotteries division was the unusually weak sequence of Powerball and Oz Lotto jackpots.

The Lottery Corporation described the combined FY26 result as approximately a one-in-45-years outcome based on its internal probability modelling.

Cumulative major jackpot value offered across Powerball and Oz Lotto fell 20.9% to A$1.853 billion.

There was no Powerball jackpot of A$100 million or more during FY26 and no Oz Lotto jackpot of A$50 million or more.

The company estimated that unfavourable jackpot outcomes reduced turnover by approximately A$700 million relative to its modelled expectations.

That translated into an estimated revenue impact of around A$350 million.

Why jackpots have such a large financial impact

Large jackpots attract both regular players and customers who participate less frequently.

When prizes rise to unusually high levels, casual participation typically increases and produces a significant uplift in ticket sales.

The opposite occurs when jackpot sequences remain comparatively modest.

FY26 demonstrated that effect clearly.

Lottery Demand did not disappear, but the absence of very large prizes meant fewer exceptional periods of customer activity.

This makes jackpot outcomes one of the most variable parts of The Lottery Corporation's annual Earnings profile even though its licences and core operations are long dated.

Lotteries revenue falls 3.3%

The Lotteries division generated revenue of A$3.218 billion in FY26, down 3.3%.

EBITDA declined 3.0% to A$626.6 million.

The weaker jackpot environment was partly offset by product changes and disciplined operating expenditure.

Powerball benefited from a price change implemented during 2026, while the Saturday Lotto changes continued to support revenue.

The company reported healthy retention of those price increases, indicating that participation remained comparatively resilient after ticket prices changed.

Base games also performed more steadily than jackpot products.

Pricing partly offsets the jackpot shortfall

Pricing was one of the main levers available to management during the weaker jackpot year.

The Powerball change achieved price retention of approximately 63%, while Saturday Lotto recorded full retention of its earlier price change.

Price retention measures how much of a ticket-price increase is preserved after accounting for any associated change in participation.

Strong retention means the higher price translates into additional revenue without being fully offset by reduced demand.

This helped cushion FY26 earnings when jackpot-driven volumes were unusually weak.

It also illustrates why game design and pricing remain important alongside the random outcome of prize sequences.

Keno continues to grow

Keno provided a contrasting earnings trend.

Revenue increased 3.0% to A$364.3 million.

Keno EBITDA rose 6.2% to A$109.5 million.

Unlike Powerball and Oz Lotto, Keno does not rely on occasional very large jackpots to drive the same level of customer activity.

The game is played frequently through venues and digital channels, giving it a different revenue pattern from traditional lottery draws.

That distinction helped Keno provide some Diversification during a year when jackpot games faced unusually weak conditions.

Operating expenses fall

Cost control also helped offset some of the pressure on revenue.

Operating expenses before significant items declined A$11.2 million to A$295.9 million.

The reduction reflected measures across discretionary spending, Marketing and organisational costs.

Because lottery operations have a relatively large established infrastructure base, controlling operating expenses can make a meaningful difference when ticket revenue weakens.

The company is also implementing a leaner operating structure intended to support its next phase of digital and product investment.

The challenge will be maintaining cost discipline while continuing to spend on technology, AI, customer experience and product development.

Dividend maintained at 16.5 cents

The Lottery Corporation declared a fully franked final dividend of 8.5 cents per share.

Together with the 8.0-cent interim dividend, total FY26 Ordinary Dividends were maintained at 16.5 cents per share.

The distribution represented approximately 107% of FY26 NPAT before significant items.

A payout above annual earnings is not normally something that can continue indefinitely without support from balance-sheet capacity or improved future earnings.

However, the company entered FY26 expecting jackpot activity to fluctuate from year to year and maintained the distribution based on cash generation and its longer-term assessment of the business.

Dividend policy changes from FY27

The Lottery Corporation has revised its dividend framework from FY27.

The new policy targets distributions equivalent to 80% to 100% of NPATA.

NPATA is net profit after tax before significant items with licence Amortisation after tax added back.

The change is particularly relevant following the extension of the Victorian lottery licence because the associated licence payments will create additional amortisation charges.

Using NPATA therefore provides a payout measure that removes part of the non-cash accounting impact of the longer licence.

Future dividends will still depend on actual earnings, cash generation and board approval.

Victorian licence extended to 2068

One of the most significant developments of 2026 was the extension of The Lottery Corporation's Victorian Public Lottery Licence.

The licence will now run to 30 June 2068.

The 40-year extension begins after the current licence period and materially lengthens the duration of the group's Australian licence portfolio.

The company will pay A$1.145 billion for the extension.

The arrangement includes a A$250 million payment made in July 2026 and a further A$895 million payment due in October 2026.

The licence extension removes a major renewal event that would otherwise have occurred much sooner and gives the company long-term certainty over one of its key markets.

Licence payments increase funding requirements

The A$1.145 billion Victorian licence cost represents a major Capital commitment.

Funding the payments changes the group's balance-sheet position even though the licence itself extends over several decades.

At the end of FY26, The Lottery Corporation had net Debt of approximately A$2.26 billion.

Management has maintained an investment-grade Capital Structure and continues to assess Leverage in the context of predictable licence-backed cash flows.

The financial benefit of the Victorian extension will need to be considered over a long time horizon because the upfront payment secures operating rights extending into 2068.

Digital remains central to the strategy

The Lottery Corporation is continuing to increase its focus on digital participation.

Digital channels allow customers to purchase tickets directly, manage registrations and receive more personalised communications.

A higher digital mix can also improve the company's understanding of customer activity compared with anonymous retail purchases.

Management's strategy is to develop a more digitally led entertainment platform while maintaining the large retail network that remains an important distribution channel.

The objective is not necessarily to replace physical retail.

Instead, the company is seeking to connect digital and retail channels more closely so customers can move between them.

AI and personalisation form part of the next phase

Technology Investment is increasingly focused on customer data, digital engagement and artificial intelligence.

The company intends to use these capabilities to personalise communications, improve game discovery and make digital interactions more relevant.

The financial benefit will depend on whether these tools improve participation, retention or customer acquisition.

Responsible-play controls also remain important as digital engagement increases because registered channels provide more information about customer behaviour.

The balance between personalisation, customer growth and responsible gambling requirements will remain part of the operating model.

FY27 product changes provide another lever

The company plans further product initiatives during FY27.

These include changes across parts of the game portfolio as management seeks to maintain customer interest beyond jackpot-driven activity.

Base games, Keno and product innovation are particularly important when major jackpot outcomes are weak.

Game changes can support revenue through price, prize structure or increased participation.

However, they still depend on customer response.

FY26 demonstrated that product and pricing initiatives can partly offset weak jackpot outcomes but cannot completely eliminate their impact.

FY27 costs remain controlled

The Lottery Corporation expects FY27 operating expenses of approximately A$305 million to A$315 million.

Capital expenditure is expected to remain significant as the company continues investing in technology, digital platforms, terminals and product development.

These investments need to be balanced against licence payments and Shareholder distributions.

The operating model therefore enters FY27 with several competing uses of cash even though the underlying lottery Business continues to generate substantial earnings.

What could shape FY27 performance?

Jackpot outcomes will remain the largest unpredictable variable.

A return to a more typical distribution of large Powerball and Oz Lotto prizes could increase turnover relative to FY26, but jackpot outcomes are inherently random and cannot be treated as a forecast.

Pricing and product changes provide factors management can influence directly.

Keno growth, digital participation and cost discipline can also help reduce dependence on jackpot games.

The Victorian licence extension substantially increases long-term operating certainty but brings major near-term payments and additional licence amortisation.

FY27 will therefore combine several moving parts: a revised dividend policy, large licence payments, product changes and an uncertain jackpot environment.

FY26 ultimately showed that The Lottery Corporation could maintain its dividend through an unusually weak jackpot year because pricing, Keno, cost control and cash generation provided offsets. The next financial year will show how those operating levers perform under the new capital and dividend framework.