Slide 1: 2018 Annual General Meeting
2018 Annual General Meeting 1
Slide 2: Forward-Looking Statements; Use of Non-GAAP Financial Measures
FORWARD-LOOKING STATEMENTS Certain statements in this presentation 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, perfor
Slide 3: Today's Agenda
Today’s Agenda • Financial Highlights • Company Vision and Strategy • State of the Industry • 2017 Business Highlights • Financial Update – 2017 and Q1 2018 • Expectations for 2018 3
Slide 4: Financial Highlights
Financial Highlights ($ Millions) 2017 2016 2015 2014 2013 SALES $285.7 $246.4 $221.0 $194.5 $184.9 NET INCOME $16.8 $12.3 $7.5 $8.7 $5.4 ADJUSTED EBITDA $44.0 $29.7 $26.8 $25.6 $21.8 NET SENIOR DEBT $79.0 $63.4 $65.7 $62.9 $65.6 Source: Pollard Banknote financial statements and MD&A 4
Slide 5: Company Vision and Strategy
COMPANY VISION AND STRATEGY 5
Slide 6: Company Vision
Company Vision “We will be the partner of choice in the lottery market by offering digital and retail games and solutions that attract and engage players.” “We are targeting to double our 2016 revenue over 3 – 5 years” 6
Slide 7: Strategic Success
Strategic Success STRATEGY 2017/2018 RESULTS $25 million investment in new press complete. Adds 35% to net capacity. Expand capacity Producing significantly higher volumes and improved cost structure. Won Kansas loyalty contract, Missouri Diamond Game contract, a number of Win new contracts contract
Slide 8: State of the Industry
banknote limited INDUSTRY
Slide 9: World Wide Instant Sales Growth
World Wide Instant Sales Growth $90,000 $85,729 $80,000 Instant Sales (Millions) $70,000 50% $57,059 Instant $60,000 Sales Growth $50,000 $40,000 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 Source: La Fleur’s World Lottery Almanac 9
Slide 10: 2017 Business Highlights
banknote limited HIGHLIGHTS
Slide 11: Key Wins in 2017
Key Wins Key Wins in 2017 Key Wins 11
Slide 12: 100% Client Retention
Key Wins Key Wins in 2017 100% Client Retention 12
Slide 13: CY2017: Our Clients Outperform
CY2017: Our Clients Grew Their Sales CY2017: Our Clients Outperform 6.8% 4.5% AVERAGE US PRIMARY AVERAGE 13
Slide 14: aon
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Slide 15: Ypsilanti – Recommissioning our Original Press
Ypsilanti – Recommissioning our Original Press 15
Slide 16: Michigan iLottery Sales
Michigan iLottery Sales $780 SALES $611 $105 SALES $395 $81 NET SALES NET $147 $48 NET SALES $19 MILLIONS NET FY2015 FY2016 FY2017 EST-FY2018 16
Slide 17: Michigan Retail Sales Growth
Michigan Retail Sales Growth 11% 12% 16% U.S. FY16 FY17 Average = FY15 5% 17
Slide 18: iLottery Customers
iLottery Customers ni | NEOPOLLARD MICHIGAN —S LOTTERY POLLARD banknote limited
Slide 19: Other Digital Initiatives
OtherDigital Other DigitalInitiatives Initiatives ™ 19
Slide 20: Charitable Games
Charitable Games • Approximately 17% of our current revenue • Overall industry is steady but showing some signs of renewed growth • Our business generates solid profits/cashflow • Diamond Game (INNOVA) products also address charitable game sector • February 2018 purchase of International Gamco, Inc.
Slide 21: Acquisition Strategy
Acquisition Strategy • Key component of our overall strategy for profitable growth • Dedicated senior resources are focused on our acquisition strategy • Areas of interest include ancillary products, digital, iLottery, internet gaming, charitable games and other services to the lottery market • Two
Slide 22: Diamond Game (INNOVA) Purchase
DIAMOND GAME (INNOVA) PURCHASE 22
Slide 23: A Pollard Banknote Company
: A POLLARD BANKNOTE COMPANY MOLottery on MICHIGAN LOTO LOTTERY
Slide 24: Diamond Game Highlights
Diamond Game Highlights Unique product offering of gaming machines that are targeted to the lottery and charitable gaming industry Customers of Diamond Game are the same customers of Pollard Banknote Results since our acquisition have met our high expectations Former public company costs hav
Slide 25: Financial Update: 2017 Annual Results
FINANCIAL UPDATE 2017 Annual Results 25
Slide 26: 2017 Highlights
2017 Highlights ($M) 2017 2016 Sales $285.7 $246.4 Gross Margin $65.7 $49.2 Gross Margin % 23.0% 20.0% SGA (incl. acquisition and severance costs) $38.0 $28.9 Income from Operations $24.0 $20.3 Adjusted EBITDA $44.0 $29.7 Net Income $16.8 $12.2 26
Slide 27: 2017 Highlights
2017 Highlights • Production volumes up about 15% vs 2016, sale volumes up about 9% due to timing of shipments • Gross margin % increased 300 points versus 2016 • Increased sales of our innovative proprietary products including Scratch FX • Achievement of significant manufacturing efficiencies with
Slide 28: Fiscal 2017 Sales
Fiscal 2017 Sales ($M) $3.0 $10.3 $300.0 $6.6 $285.6 $8.0 $280.0 $17.3 $260.0 $246.4 $240.0 $220.0 $200.0 2016 Higher Higher Higher Diamond Impact of 2017 Sales AVG Selling Ancillary Game stronger Volumes Price Product Acquisition CDN $ Sales 28
Slide 29: 2017 Adjusted EBITDA
2017 Adjusted EBITDA ($M) $55.0 $4.0 $2.7 $3.0 $6.0 $50.0 $44.0 $45.0 $10.0 $40.0 $35.0 $29.7 $30.0 $25.0 2016 Higher Sales Higher AVG Acquisition of Higher SG+A Impact of 2017 Volumes Selling Price Diamond Expenditures Stronger CDN Game $ 29
Slide 30: Fiscal Sales
Fiscal Sales ($M) $300 $286 Foreign Exchange Rate Adjusted $242 $250 $223 $211 $214 $199 $202 $202 $200 $186 $190 $182 $186 $190 $169 $165 $157 $150 $126 $108 $100 $50 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Annual sales adjusted to 2017 average
Slide 31: Adjusted EBITDA
($M) Adjusted EBITDA $50.0 $44.0 $45.0 $40.0 $35.0 $29.7 $30.0 $25.8 $26.8 $25.0 $20.2 $21.8 $17.3 $17.8 $20.0 $15.0 $10.0 $5.0 $0.0 2010 2011 2012 2013 2014 2015 2016 2017 31
Slide 32: Strong Cashflow
Strong Cashflow ($M) 2017 2016 Cash Flow before CAPEX & W/C $31.2 $28.6 Investment in Working Capital ($2.9) ($16.9) Net Cash Flow before CAPEX $28.3 $11.7 CAPEX ($7.0) ($5.0) Net Cash Flow (b4 dividend, debt repayment & INNOVA acq.) $21.3 $6.7 (source: 2017 PBL Statement of Cash Flow) 32
Slide 33: Financial Update: First Quarter Results
FINANCIAL UPDATE 2017 First Quarter Results 33
Slide 34: Q1 2018 Highlights
Q1 2018 Highlights ($M) Q1 2018 Q1 2017 Sales $80.3 $57.4 Gross Margin $19.4 $11.4 Gross Margin % 24.1% 19.9% SG + A $10.8 $7.3 Income from Operations $8.6 $3.8 Adjusted EBITDA $13.0 $6.3 Net Income $4.5 $1.8 34
Slide 35: Q1 2018 Sales
Q1 2018 Sales ($M) $4.3 $2.4 $80.3 $85.0 $6.3 $13.4 $1.3 $80.0 $75.0 $70.0 $57.4 $65.0 $60.0 $55.0 $50.0 $45.0 $40.0 Q1 2017 Higher Higher Diamond Gamco Impact of Q1 2018 sales ancillary Game acquisition stronger volume product revenue CDN$ sales 35
Slide 36: Q1 2018 Adjusted EBITDA
Q1 2018 Adjusted EBITDA $0.5 $1.4 ($M) $2.9 $13.0 $14.0 $4.7 $12.0 $10.0 $6.3 $8.0 $6.0 $4.0 $2.0 Q1 2017 Higher sales Acquisitions Other Higher SGA Q1 2018 volume & ancillary products 36
Slide 37: Strong Cashflow
Strong Cashflow ($M) Q1 2018 Q1 2017 Cash Flow before CAPEX & W/C $10.6 $3.3 Drawdown of Working Capital $9.5 $9.2 Net Cash Flow before CAPEX $20.1 $12.5 CAPEX incl. intangibles ($5.1) ($1.5) Net Cash Flow (b4 dividend, debt repayment & acquisitions) $15.0 $11.0 (source: 2018 Q1 PBL Statement of Cas
Slide 38: Q1 Highlights
Q1 Highlights • Very successful share equity raise of approximately $35 million • New quarterly record for production volume • Strong level of orders and sales volume from our existing customer base • Good mix of proprietary specialty products like Scratch FX • Completed the Feb 1 acquisition of Int
Slide 39: International Gamco Purchase
INTERNATIONAL GAMCO PURCHASE 39
Slide 40: International Gamco overview
• Leading manufacturer of pull-tab tickets • Over 30 years of successful growth • 180 employees • $21.6 million purchase price 40
Slide 41: Combined Market Share
Combined Market Share 28% 15% MARKET SHARE: BINGO PAPER MARKET SHARE: TABS Per Management estimates Combined Market Share 41
Slide 42: Gamco Highlights
Gamco Highlights Combines very well with our existing charitable games operation American Games Acquisition well received throughout the marketplace Strong pull tab catalogue including a number of unique, proprietary games with long running market success E-gaming machine division Oasis inte
Slide 43: Expectations for 2018
EXPECTATIONS FOR 2018 43
Slide 44: Looking Forward
Looking Forward Looking Forward Increased Increased Capacity Opportunities to Sell Decreased Costs New Sales Channel Partner of Choice Innovation New Businesses 44
Slide 45: Value of $100 Investment in PBL Shares
Value of $100 Investment in PBL Shares $420 Value of $100 investment $370 $320 $270 $220 $170 $120 $70 $20 Pollard Banknote S&P/TSX Composite Index 45
Slide 46: Pollard Banknote Limited
PBL POLLARD banknote limited ..it's why you choose us.
Slide 47: Thank you for your time and your attention today
Thank you for your time and your attention today FOR MORE INFORMATION CONTACT: Doug Pollard John Pollard Co-Chief Executive Officer Co-Chief Executive Officer Telephone: (204) 474-2323 Telephone: (204) 474-2323 E-mail: dpollard@pbl.ca E-mail: jpollard@pbl.ca Rob Rose Chief Financial Officer Telephon