Pollard Banknote Reports 2nd Quarter Financial Results
Results and Highlights for the Second Quarter ended
- Second quarter revenue reached a record of
$137.8 million , up$7.0 million from the second quarter of 2023. - Combined sales(1) in the quarter, including our share of our
NeoPollard Interactive LLC ("NPi") joint venture sales, reached$166.0 million , another quarterly record, up 11.2% from$149.3 million in the same quarter of 2023. - Income from operations was
$19.9 million , compared to$9.9 million in the second quarter of 2023. - Gross margin achieved 21.0% in the second quarter, significantly higher than the 15.9% generated in the same quarter in 2023.
- Adjusted EBITDA(1) reached a record quarterly amount of
$32.3 million ,$10.2 million or 46.2% higher than the$22.1 million attained in the second quarter of 2023. - Our instant ticket business profitability improved significantly during the second quarter, generating meaningful gross margin improvements. Higher average selling prices were achieved as a result of greater impact of our repriced customer contracts and a superior mix of high-value proprietary work.
- Our joint venture iLottery operations achieved combined income before income taxes of
$16.2 million .
(1) |
See Non-GAAP measures for explanation |
"We are extremely pleased with the performance of our instant ticket business during the second quarter, with significantly improved gross margins reflecting the impact of our focused efforts on repricing our contracts," remarked
"Despite the increased positive impact of higher average selling prices in the second quarter, we have not yet recognized the benefits of all of our repriced contracts in our recorded revenue. New prices in a number of contracts will not be reflected in our revenue numbers until the end of 2024. After repricing a majority of our existing contracts, there still remains contracts to be repriced, as their current end dates have not yet come due."
"Higher sales and production volumes relative to our first quarter of 2024 also contributed to the improved margin, and the mix of product included higher value items relative to the previous quarter. This improved mix is expected to continue in the third quarter, which historically includes higher value specialty work for the holiday season."
"Our iLottery joint venture generated
"We continue to receive significant interest and positive feedback in our own proprietary omni-channel iLottery platform and game content. We are confident our ongoing significant investment and innovation in our solution will result in our continuing growth in iLottery."
"We are also excited to launch our Pollard iLottery game content with a major North American lottery in the third quarter and are in active discussions to provide game content to both North American and international lotteries in 2025."
"Our charitable gaming group, which includes both our printed pull-tabs and bingo paper products, and our eGaming systems, experienced continued solid demand which also contributed to our strong financial results. Our volumes of printed charitable gaming products increased compared to the first quarter of 2024 and we believe this trend will continue."
"Acquisitions are an important component of our strategic plan and this was evident in the second quarter with the purchase of electronic bingo gaming content supporting our eGaming systems," noted
"We are extremely proud of the work performed by our team to grow our business and generate these excellent financial results," concluded
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 six months ended
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 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
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 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
HIGHLIGHTS |
Three months ended
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Three months ended
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Sales |
$ 137.8 million |
$ 130.8 million |
Gross profit |
$ 29.0 million |
$ 20.8 million |
Gross profit % of sales |
21.0 % |
15.9 % |
Administration expenses |
$ 16.5 million |
$ 14.5 million |
Selling expenses |
$ 5.7 million |
$ 5.1 million |
NPi equity investment income |
($ 14.1 million) |
($ 8.8 million) |
Unrealized foreign exchange (gain) loss |
$ 3.0 million |
($ 1.7 million) |
Net income |
$ 11.9 million |
$ 7.5 million |
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Net income per share – basic |
$ 0.44 |
$ 0.28 |
Net income per share – diluted |
$ 0.43 |
$ 0.27 |
Adjusted EBITDA |
$ 32.3 million |
$ 22.1 million |
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Six months ended
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Six months ended
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Sales |
$ 263.6 million |
$ 255.8 million |
Gross profit |
$ 50.5 million |
$ 38.5 million |
Gross profit % of sales |
19.2 % |
15.1 % |
Administration expenses |
$ 31.9 million |
$ 27.9 million |
Selling expenses |
$ 11.2 million |
$ 9.8 million |
NPi equity investment income |
($ 26.4 million) |
($ 16.9 million) |
Unrealized foreign exchange (gain) loss |
$ 5.3 million |
($ 1.9 million) |
Net income |
$ 18.8 million |
$ 12.4 million |
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Net income per share – basic |
$ 0.70 |
$ 0.46 |
Net income per share – diluted |
$ 0.69 |
$ 0.45 |
Adjusted EBITDA |
$ 56.0 million |
$ 40.7 million |
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(1) |
Certain comparative figures have been reclassified to conform to the presentation adopted in the current period. |
SELECTED FINANCIAL INFORMATION |
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(millions of dollars) |
Three months |
Three months |
Six months |
Six months |
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(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
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Sales |
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Cost of sales |
108.8 |
110.0 |
213.1 |
217.3 |
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Gross profit |
29.0 |
20.8 |
50.5 |
38.5 |
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Administration expenses |
16.5 |
14.5 |
31.9 |
27.9 |
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Selling expenses |
5.7 |
5.1 |
11.2 |
9.8 |
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Equity investment income |
(14.1) |
(8.8) |
(26.4) |
(16.9) |
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Other expenses |
1.0 |
0.1 |
0.6 |
0.3 |
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Income from operations |
19.9 |
9.9 |
33.2 |
17.4 |
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Foreign exchange (gain) loss |
2.8 |
(1.7) |
5.4 |
(2.0) |
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Interest expense |
2.5 |
2.8 |
4.9 |
5.5 |
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Income before income taxes |
14.6 |
8.8 |
22.9 |
13.9 |
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Income taxes |
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Current |
7.8 |
7.6 |
14.7 |
10.5 |
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Deferred reduction |
(5.1) |
(6.3) |
(10.6) |
(9.0) |
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2.7 |
1.3 |
4.1 |
1.5 |
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Net income |
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Adjustments: In |
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Amortization and depreciation |
11.1 |
11.9 |
21.8 |
22.5 |
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Interest |
2.5 |
2.8 |
4.9 |
5.5 |
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Income taxes |
2.7 |
1.3 |
4.1 |
1.5 |
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EBITDA |
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Unrealized foreign exchange (gain) loss |
3.0 |
(1.7) |
5.3 |
(1.9) |
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Contingent consideration fair value adjustment |
0.0 |
0.3 |
0.0 |
0.7 |
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Severance costs |
1.1 |
0.0 |
1.1 |
0.0 |
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Adjusted EBITDA |
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(1) |
Certain comparative figures have been reclassified to conform to the presentation adopted in the current period. |
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2024 |
2023 |
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Total Assets |
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Total Non-Current Liabilities |
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Results of Operations – Three months ended
During the three months ended
- The higher instant ticket average selling price in the second quarter of 2024 increased sales by
$5.6 million as compared to 2023, primarily as a result of the change in customer mix, increased proprietary products and the impact of repriced contracts. This increase was offset by the decrease in instant ticket sales volumes of$5.4 million as compared to 2023, mainly as a result of the timing of customer orders and Pollard declining certain lower margin work. - Higher sales of ancillary lottery products and services increased revenue in the second quarter of 2024 by
$4.2 million as compared to 2023. This growth was largely due to increased sales of digital and loyalty products, distribution services and retail merchandising products. - eGaming systems revenue further increased sales by
$1.8 million in 2024, largely due to a higher number of eGaming machines placed at bars, bingo halls and fraternal organizations as compared to 2023. - Higher charitable gaming volumes increased sales by
$0.9 million in 2024, which was partially offset by a decrease in average selling price of charitable games which reduced sales by$0.3 million . - During the three months ended
June 30, 2024 , Pollard generated approximately 70.9% (2023 – 72.2%) of its revenue inU.S. dollars including a portion of international sales which are priced inU.S. dollars. During the second quarter of 2024, the actualU.S. dollar value was converted to Canadian dollars at$1.358 , the same rate,$1.358 , as the second quarter of 2023. Also during the quarter, the value of the Euro weakened against the Canadian dollar resulting in an approximate decrease of$0.1 million in revenue relative to the second quarter of 2023.
Cost of sales was
Gross profit increased to
Administration expenses were
Selling expenses increased to
Pollard's share of income from its 50% owned iLottery joint venture, NPi, increased to
Other expenses were
The net foreign exchange loss was
The 2023 net foreign exchange gain of
Adjusted EBITDA increased to
Interest expense decreased to
Amortization and depreciation, including amortization of intangible assets and depreciation of property and equipment, totaled
Income tax expense was
Income tax expense was
Net income was
Net income per share (basic and diluted) increased to
Results of Operations – Six months ended
During the six months ended
- The higher instant ticket average selling price in the first six months of 2024 increased sales by
$13.8 million as compared to 2023, primarily as a result of the change in customer mix and the impact of repriced contracts. This increase was offset by the decrease in instant ticket sales volumes of$18.8 million as compared to 2023, mainly as a result of the timing of customer orders and Pollard declining certain lower margin work. - Higher sales of ancillary lottery products and services increased revenue by
$10.9 million in the first six months of 2024 as compared to 2023. This growth was largely due to increased sales of digital and loyalty products, retail merchandising products, distribution services and licensed products. - Higher eGaming systems revenue increased sales by
$3.1 million due primarily to a higher number of eGaming machines placed at bars, bingo halls and fraternal organizations as compared to 2023. - The lower average selling price of charitable games in the first six months of 2024 slightly decreased sales by
$0.3 million as compared to 2023. - During the six months ended
June 30, 2024 , Pollard generated approximately 71.3% (2023 – 74.0%) of its revenue inU.S. dollars including a portion of international sales which are priced inU.S. dollars. During the first six months of 2024, the actualU.S. dollar value was converted to Canadian dollars at$1.346 , compared to a rate of$1.354 the first six months of 2023. This 0.6% decrease in theU.S. dollar value resulted in an approximate decrease of$1.1 million in revenue relative to the first six months of 2023. In addition, during the first six months of 2024, the value of the Euro strengthened against the Canadian dollar resulting in an approximate increase of$0.1 million in revenue relative to the first six months of 2023.
Cost of sales was
Gross profit increased to
Administration expenses increased to
Selling expenses increased to
Pollard's share of income from NPi increased to
Other expenses were
The net foreign exchange loss was
The 2023 net foreign exchange gain of
Adjusted EBITDA increased to
Interest expense decreased to
Amortization and depreciation, including amortization of intangible assets and depreciation of property and equipment, totaled
Income tax expense was
Income tax expense was
Net income increased to
Net income per share (basic and diluted) increased to
iLottery
Pollard and its iLottery partner,
In 2014 Pollard, in conjunction with Neogames, established
SELECT iLOTTERY RELATED FINANCIAL INFORMATION |
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Q1 |
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Q3 |
Q2 |
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Q3 |
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2024 |
2024 |
2023 |
2023 |
2023 |
2023 |
2022 |
2022 |
2022 |
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Sales – Pollard's share |
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$ 6.8 |
$ 7.1 |
$ 7.0 |
$ 7.2 |
$ 6.5 |
$ 7.3 |
$ 7.9 |
$ 6.5 |
$ 6.2 |
NPi |
$ 28.2 |
25.5 |
21.8 |
21.5 |
18.5 |
18.5 |
17.7 |
13.7 |
12.4 |
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Combined iLottery sales |
$ 35.0 |
$ 32.6 |
$ 28.8 |
$ 28.7 |
$ 25.0 |
$ 25.8 |
$ 25.6 |
$ 20.2 |
$ 18.6 |
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Income before income taxes – Pollard's share (1) |
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$ 2.1 |
$ 2.7 |
$ 2.5 |
$ 2.8 |
$ 1.8 |
$ 2.9 |
$ 2.9 |
$ 2.2 |
$ 2.4 |
NPi |
$ 14.1 |
12.2 |
11.0 |
11.1 |
8.8 |
8.2 |
8.3 |
5.7 |
4.7 |
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Combined income before |
$ 16.2 |
$ 14.9 |
$ 13.5 |
$ 13.9 |
$ 10.6 |
$ 11.1 |
$ 11.2 |
$ 7.9 |
$ 7.1 |
Throughout 2022, 2023 and the first half of 2024, NPi's contracts achieved strong organic growth, adding to sales and income before taxes. In addition, quarterly sales and income before taxes are positively impacted during quarters where substantial draw-based game (
(1) |
Certain comparative figures have been reclassified to conform to the presentation adopted in the current period. |
Outlook
Our second quarter results set records in a number of our key financial performance indicators and is confirmation of the success of our strategy, particularly with the noteworthy improved margins in our instant ticket business. We expect these trends to continue going forward. Continuing strong demand in the charitable gaming market is expected to generate growth in printed product volumes as well as eGaming revenue. We remain extremely confident for the remaining outlook for 2024 and future years as our focused strategy to partner with lotteries and charities throughout the world provides the foundation for ongoing success.
Market demand for all our products and solutions remains strong across our entire portfolio. Instant tickets are the largest contributor to lottery sales and demand for this product remains high. The translation of this demand into revenue for Pollard depends on a number of factors, including timing of orders, inventory management by lotteries and shipping implications that can vary from quarter to quarter.
The ongoing impact on our revenue from our contract repricing strategy will continue to increase throughout the remainder of 2024 and 2025, resulting in further improved gross margins.
Demand for our ancillary solutions such as our proprietary PlayOn® loyalty platform, an important component in the success of iLottery, and our retail merchandising solutions remains strong.
Demand in the charitable gaming market remains high, and this is expected to translate into greater volumes of printed products (pull-tab tickets and bingo paper) as well as higher numbers of machines and gross gaming revenue from our eGaming systems. On
Our joint venture iLottery results reflected strong interest and demand for this form of lottery gaming. Large jackpot runs in the draw-based games such as
We continue to receive significant interest and positive feedback in our own proprietary omni-channel iLottery platform and game content. We are confident our ongoing significant investment and innovation in our solution will result in our continuing growth in iLottery.
During 2024 we have closed two acquisitions expanding our products offerings in the charitable market and we continue to review a number of similar strategic opportunities. In addition, increasing our expertise in the digital area, particularly around gaming content across all of our platforms and eGaming opportunities, continues to be an important focus.
Cash flows remain very robust and provide us a steady flow of capital to continue our investments in critical acquisitions and internal capital projects such as our iLottery platform and game content portfolio. Our debt facility has significant available unused capacity and combined with our operating cash flows ensures our focus on innovation and growth have the necessary resources.
Our strategy is to be the partner of choice for lotteries and charities in helping grow funds for their good causes. We are confident this strategy will continue to be successful in all our offerings including instant tickets and ancillary services, charitable products and eGaming solutions, and iLottery.
SOURCE