Pollard Banknote Limited · TSX:PBL
Pollard Banknote — Shareholder Meeting (May 2021)
67 slides from Pollard Banknote's shareholder meeting presentation, May 18, 2021
Slide 1: 2021 Annual General Meeting
POLLARD banknote limited 2021 ANNUAL GENERAL MEETING
Slide 2: Forward-Looking Statements
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 1. Financial Highlights 2. Impact of COVID-19 3. Company Vision and Strategy 4. 2020 Results by Division 5. Acquisitions 6. Financial Update: 2020 Annual Results 7. Financial Update: 2021 First Quarter Results
Slide 4: Financial Highlights
Financial Highlights ($ Millions) 2020 2019 2018 2017 2016 SALES $414.1 $397.8 $331.9 $285.7 $246.4 NET INCOME $33.3 $22.0 $14.9 $16.8 $12.3 ADJUSTED $80.6 $60.2 $48.8 $44.0 $29.7 EBITDA NET DEBT $129.2 $119.8 $104.6 $79.0 $63.4 Adjusted EBITDA prior to 2019 does not include the impact of IFRS16 Sou
Slide 5: Financial Highlights
Financial Highlights • Throughout most of 2020 and Q1 2021, strong growth in retail sales of Instant tickets throughout most lotteries. • Beginning in the second quarter of 2020 iLottery revenues increased significantly with these higher levels continuing through 2021. • New contract with the Provin
Slide 6: COVID-19 Impact
COVID-19 IMPACT POLLARD banknote limited
Slide 7: COVID-19 Impact
COVID-19 Impact • COVID-19 continues to have a significant impact on all organizations and Pollard is no exception. • Our focus at all times has been on the safety and health of our Pollard employees. • Throughout the pandemic we have implemented rigorous protocols and procedures including: • Extens
Slide 8: COVID-19 Impact
COVID-19 Impact • We continue to monitor all aspects of the pandemic and utilize all of the above protocols while COVID-19 remains a concern. • This has allowed us to keep all of our facilities open and functioning throughout the pandemic to serve our customers. • Covid-19 has had negative impacts o
Slide 9: COVID-19 Impact
COVID-19 Impact • Our lottery operations, particularly iLottery sales, have performed strongly in the COVID-19 environment, reflecting the significant resilience and underlying demand for our lottery products and solutions. • Pollard has utilized certain government assistance programs to support our
Slide 10: Vision & Strategy
VISION & STRATEGY We will be the partner of choice in the lottery & charitable gaming market by offering retail and digital games and solutions that attract and engage players.
Slide 11: Outstanding Games. Retail Excellence. Digital Innovation.
Outstanding Games. Retail Excellence. Digital Innovation. POLLARD banknote limited
Slide 12: 2020 Results by Division
2020 RESULTS BY DIVISION POLLARD banknote limited
Slide 13: Retail Lottery
RETAIL LOTTERY POLLARD banknote limited
Slide 14: 10 Year Instant Ticket Sales Growth
10 Year Instant Ticket Sales Growth $110,000 4.7% $102,358 CAGR $100,000 $90,000 Worldwide Instant Sales ($ US Millions) $80,000 $64,975 $70,000 $62,090 6.3% $60,000 CAGR $50,000 North America $40,000 $33,845 $30,000 $20,000 CY2010 CY2011 CY2012 CY2013 CY2014 CY2015 CY2016 CY2017 CY2018 CY2019 CY202
Slide 15: Pollard Instant Ticket Sales
Pollard Instant Ticket Sales $300 $268 $255 $250 $227 $223 $200 $200 $187 8.5% $162 CAGR Millions $155 $150 $140 $100 $50 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020
Slide 16: Leading Print Innovation
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Slide 17: Retail
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Slide 18: In-Lane Instant Sales
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Slide 19: Retail Lottery
Retail Lottery • Retail consumer demand for instant tickets has been strong throughout 2020 and 2021. • Starting during mid-second quarter, sales at retail for instant tickets throughout the US grew on average in the 15-20% year over year rate and has continued at this high growth rate consistently
Slide 20: iLottery
iLOTTERY POLLARD banknote limited
Slide 21: iLottery Portfolio
iLottery Portfolio Michigan 1 New Hampshire North Carolina Virginia 2 Alberta 3 1. Michigan contract extended to 2026 2. Virginia e-instants live July 1 2020 3. Alberta live September 20 2020
Slide 22: NPi Customer Growth in Net Gaming Revenue
NPi Customer Growth in Net Gaming Revenue ($ US M) $450.0 $400.0 $381 $350.0 +142% $300.0 $250.0 $200.0 $157 $150.0 $100.0 $50.0 $- 2019 2020
Slide 23: Annual Michigan iLottery Net Gaming Revenue
Annual Michigan iLottery Net Gaming Revenue iLottery ($ US M) $300 $250 ILOTTERY NET GAMING REVENUE $200 $150 $100 $50 $0 2015 2016 2017 2018 2019 2020
Slide 24: Annual Michigan iLottery NGR & Retail Sales
Annual Michigan iLottery NGR & Retail Sales iLottery Retail ($ US M) $300 $2,500 $250 $2,000 ILOTTERY NET GAMING REVENUE $200 RETAIL SALES $1,500 $150 $1,000 $100 $500 $50 $0 $0 2015 2016 2017 2018 2019 2020
Slide 25: iLottery Sales as a Percent of Total Lottery Sales FY20
iLottery Sales as a Percent of Total Lottery Sales FY20 Michigan Lottery New Hampshire Lottery Virginia Lottery North Carolina Lottery 1% 22% 24% 44% iLottery Sales Total Lottery Sales iLottery Sales Total Lottery Sales iLottery Sales Total Lottery Sales iLottery - DBG Only Total Lottery Sales Total
Slide 26: 2020 iLottery Operations
2020 iLottery Operations 2020 2019 Revenue - PBL Share Michigan iLottery $33.5 $16.4 NeoPollard JV $12.6 $2.5 Combined Revenue $46.1 $18.9 Income before Profit Share & Income Taxes – PBL Share Michigan iLottery $18.5 $7.4 NeoPollard JV $1.6 (4.0) Combined Income $20.1 $3.4
Slide 27: 2021 Q1 iLottery Operations
2021 Q1 iLottery Operations Q1 Q1 2021 2020 Revenue - PBL Share Michigan iLottery $8.4 $5.1 NeoPollard JV $9.9 $1.2 Combined Revenue $18.3 $6.3 Income before Profit Share & Income Taxes – PBL Share Michigan iLottery $4.0 $2.1 NeoPollard JV $4.0 (0.5) Combined Income $8.0 $1.6
Slide 28: NPi U.S. Market Share
NPi U.S. Market Share NH MI VA NC
Slide 29: Estimated Per Capita iLottery Net Gaming Revenue FY20
Estimated Per Capita iLottery Net Gaming ($US) $25.00 Revenue FY20 $22.97 $20.00 $15.00 $12.77 $9.26 $10.00 $7.11 $5.00 $3.02 COMPETITOR COMPETITOR $0.00 Kentucky Pennsylvania New Hampshire Virginia* Michigan *Virginia estimate is projected FY21 net gaming revenue
Slide 30: OLLARD
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Slide 31: iLottery Regulatory Status (U.S.)
iLottery Regulatory Status (U.S.) • In 2011 the US Department of Justice (“DOJ”) issued an opinion that the Wire Act only applied to sports betting, which opened the door for US state lotteries to begin selling via the internet. • In January 2019, the DOJ issued a new opinion reversing the 2011 view
Slide 32: Charitable Gaming
CHARITABLE GAMING POLLARD banknote limited
Slide 33: Charitable Gaming
Charitable Gaming ION & AMERICAN . _ GAMES International Gamco, Inc. A POLLARD BANKNOTE COMPANY A POLLARD BANKNGTE COMPANY pAD JOKES wm gerer POLLARD banknote limited
Slide 34: Growth of Charitable Gaming Market
Growth of Charitable Gaming Market $3,000,000,000 $13,500,000 $2,500,000,000 Minnesota State Gross Receipts - $US $11,500,000 Total AG/IG Minnesota Sales $2,000,000,000 $9,500,000 $1,500,000,000 $1,000,000,000 $7,500,000 $500,000,000 $5,500,000 MN State Gross Receipts AG/IG Sales in Minnesota $0 $-
Slide 35: Charitable Gaming & Diamond Game Sales Trend 2018-2020
Charitable Gaming & Diamond Game Sales Trend 2018-2020 $100.0 $90.0 $80.0 $70.0 (Millions $ CAD) $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $- 2018 2019 2020
Slide 36: Charitable Gaming Update
Charitable Gaming Update • Historically Charitable Gaming represents approximately 20% of our consolidated revenue. • In 2020, our revenue was negatively impacted by the COVID-19 pandemic. • During retail shutdowns in 2020, our sales of charitable products (pull-tabs, bingo paper) were reduced signi
Slide 37: Diamond Game
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Slide 38: Diamond Game Update
Diamond Game Update • Significant negative impact of COVID-19 on Diamond Game business. Similar to Charitable Gaming, when jurisdictions shut down retail establishments (bars, bingo halls), Diamond Game machines are also shut down. • When retail sites reopened, consumer demand came back strongly and
Slide 39: Acquisitions
ACQUISITIONS POLLARD banknote limited
Slide 40: Next Generation Lotteries
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Slide 41: Next Generation Lotteries (NGL)
Next Generation Lotteries (NGL) • NGL is a leading provider of retail lottery management and iLottery solutions. • The acquisition closed on January 14th 2021 with an approximate purchase price of $57 million CAD. • Acquisition price was funded by $43 million cash, $7 million in Pollard common share
Slide 42: Compliant Gaming
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Slide 43: Compliant Gaming
Compliant Gaming • Compliant Gaming is a leading provider of electronic pull-tab (e-tab) gaming systems and products to the charitable gaming market. • High margin business fits seamlessly with both our Diamond Game electronic gaming systems and our charitable gaming operations. • Main market of Min
Slide 44: Minnesota E-Tab Market
Minnesota E-Tab Market Minnesota E-Tab Sales (all suppliers) $800,000,000 $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 $- FY15 FY16 FY17 FY18 FY19 FY20
Slide 45: mkodo delivers world-class apps & digital products
mkodo delivers world-class apps & digital products in the betting, gaming and lottery sectors.
Slide 46: mkodo Update
mkodo Update • Acquired on February 1, 2020, integration of mkodo into the Pollard group of companies has gone very well. • Mkodo continues to provide unique digital product offering via expertise in mobile interfaces and apps, a critical touchpoint for the development of successful iLottery operati
Slide 47: Acquisition Strategy
Acquisition Strategy • Key component of our overall strategy for profitable growth and broadening our product offering to our customers. • Dedicated senior resources are focused on our acquisition strategy. • Areas of interest include: ancillary lottery products; digital and iLottery; charitable gam
Slide 48: Capital Strategy
Capital Strategy • Sufficient available capital to support our strategy. • 2-years remain on a 3-year committed senior debt facility, approximately $250 million including accordion feature. • Completed a successful share equity raise of $34.5 million before expenses in March of 2021. • Currently ove
Slide 49: Financial Update: 2020 Annual Results
FINANCIAL UPDATE: 2020 ANNUAL RESULTS
Slide 50: 2020 Highlights
2020 Highlights ($M) 2020 2019 Combined Sales (1) $426.9 $400.3 Sales $414.3 $397.8 Gross Margin $91.1 $91.1 SG + A $54.9 $56.5 NPi JV Income (Loss) $1.6 ($3.9) Other Income $12.4 $2.0 Income from Operations $50.0 $32.6 Adjusted EBITDA $80.6 $60.2 Net Income $33.3 $22.0 (1) Combined sales includes P
Slide 51: Fiscal Sales
($M) Fiscal Sales $450 Foreign Exchange Rate Adjusted $398 $414 $400 $337 $350 $290 $300 $246 $250 $227 $206 $206 $215$218 $203 $190$194$186 $190 $194 $200 $173$168 $160 $150 $129 $111 $100 $50 $0 Annual sales adjusted to 2020 average rate of $1.34 CDN per USD
Slide 52: Adjusted EBITDA
Adjusted EBITDA * ($M) $80.6 $80.0 $70.0 $60.2 $60.0 $48.4 $50.0 $44.0 $40.0 $26.8 $29.7 $25.8 $30.0 $20.2 $21.8 $17.8 $20.0 $17.3 $10.0 $0.0 *Adjusted EBITDA prior to 2019 not including impact of IFRS 16
Slide 53: Strong Cashflow
Strong Cashflow ($M) 2020 2019 Cash Flow before CAPEX & W/C $70.6 $51.8 Change in Working Capital ($11.0) ($22.5) Net Cash Flow before CAPEX $59.6 $29.3 CAPEX ($18.9) ($25.8) Net Cash Flow (b4 dividend, debt repayment & acquisitions)* $40.7 $3.5 *Source: 2020 PBL Statement of Cash Flow
Slide 54: Fiscal 2020 Sales
Fiscal 2020 Sales ($M) $450.0 $11.0 $23.0 $430.0 $10.0 $17.1 $1.3 $414.1 $410.0 $397.8 $390.0 $370.0 $350.0 2019 Higher iLottery Higher Sales of Higher Avg Selling Lower Charitable Impact of Weaker 2020 (Michigan) Ancillary Lottery Price - Instant Tickets Games Volumes Dollar Products
Slide 55: 2020 Adjusted EBITDA
($M) 2020 Adjusted EBITDA $100.0 $8.4 $6.8 $90.0 $2.6 $0.5 $80.6 $80.0 $16.7 $70.0 $60.2 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 2019 Higher iLottery Lower SG+A CEWS Lower Charitable Other 2020 Revenue Expenditures Games/Diamond Game Revenue
Slide 56: 2020 Highlights
2020 Highlights • Record revenue of $414 million despite negative headwinds of COVID-19 on charitable gaming and Diamond Game revenue. • Strong average selling price due to record sales of proprietary specialty products including record sales of Scratch FX, pouched tickets and laminated playbooks. •
Slide 57: Financial Update: 2021 First Quarter Results
FINANCIAL UPDATE: 2021 FIRST QUARTER RESULTS
Slide 58: Q1 2021 Highlights
Q1 2021 Highlights ($M) Q1 2021 Q1 2020 Combined sales (1) $122.1 $103.5 Sales $112.2 $102.3 Gross Margin $24.5 $21.7 SG + A $15.6 $14.9 NPi JV Income (Loss) $4.0 ($0.5) Income from Operations $12.3 $7.7 Adjusted EBITDA $23.3 $16.1 Net Income (Loss) $7.5 ($1.3) (1) Combined sales includes Pollard's
Slide 59: Q1 2021 Sales
($M) Q1 2021 Sales $120.0 $2.7 $3.6 $115.0 $1.1 $2.7 $112.2 $110.0 $3.0 $8.5 $105.0 $102.3 $100.0 $95.0 Q1 2020 Higher average Higher instant Higher Michigan Higher charitable Lower ancillary Impact of foreign Q1 2021 selling prices ticket volumes iLottery sales and DG volumes product sales exchange
Slide 60: Q1 2021 Adjusted EBITDA
Q1 2021 Adjusted EBITDA ($M) $1.4 $2.1 $2.7 $25.0 $1.6 $6.4 $23.3 $20.0 $16.1 $15.0 $10.0 $5.0 $0.0 Q1 2020 Higher combined Higher ASP - instant Greater other income Increased Impact of foreign Q1 2021 iLottery EBITDA tickets administration expenses exchange & other
Slide 61: Strong Q1 Cashflow
Strong Q1 Cashflow ($M) 2021 2020 Cash Flow before CAPEX & W/C $10.1 $14.5 Change in Working Capital $11.6 $12.9 Net Cash Flow before CAPEX $21.7 $27.4 CAPEX ($6.8) ($5.1) Net Cash Flow (b4 dividend, debt repayment & $14.9 $22.3 acquisitions)* *Source: 2021 PBL Statement of Cash Flow
Slide 62: Q1 Highlights
Q1 Highlights • Sales of Instant tickets at retail for North American lotteries continue to be strong. • iLottery sales benefitted from significant jackpot run in the US in Q1 and strong organic growth in new contracts Virginia and Alberta. • Generated significant positive cashflow, maintaining low
Slide 63: Value of $100 investment
Value of $100 investment $1,220 5 $1,020 / $820 $620 T S / $420 [ $220 $20 7 2 > v 2 » cy ) > Ba RS AS ss a ae AY wy s AY ~~ A AY A By SEE EE EE EE EEE EE EE EF SE Pollard Banknote —*=S&P/TSX Composite Index POLLARD banknote limited
Slide 64: Outstanding Games. Retail Excellence. Digital Innovation.
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Slide 65: 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 Telepho
Slide 66: Appendix
APPENDIX POLLARD banknote limited
Slide 67: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Net income $33.3 $22.0 $14.9 $16.8 $12.3 $7.5 $8.7 $5.4 $6.5 $3.1 $1.8 Adjustments: Amortization & depreciation $31.5 $27.1 $18.0 $13.1 $10.6 $8.4 $7.9 $8.6 $7.8 $8.4 $8.6 Interest $4.8 $6.4 $4.2 $3.9 $3.6 $2.9 $2.