Pollard Banknote Limited · TSX:PBL
Pollard Banknote — Investor Presentation (April 2019)
53 slides from Pollard Banknote's investor presentation, April 2019
Slide 1: April 2019 Investor Update
banknote limited * April 2019 Investor Update
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 • Company Vision and Strategy • State of the Industry • Lottery Instant Tickets • iLottery and Digital • Acquisitions • Financial Update • 2019 Outlook 3
Slide 4: Company Vision and Strategy
COMPANY VISION AND STRATEGY 4
Slide 5: Company Vision
Company Vision We will be the partner of choice in the lottery market by offering retail and digital games and solutions that attract and engage players. 5
Slide 6: Pollard Group Update
Pollard Group Update • #1 producer in Canada, #2 producer in USA and the world Instant • Robust and expanding industry supporting a strong contract portfolio tickets • Leader in innovation both in print and non-print • Continued investment in CAPEX and increased capacity • #1 iLottery provider in th
Slide 7: Facilities & Companies
Facilities & Companies Barrhead, AB Winnipeg, MB Sault Ste. Marie, ON Lansing, MI Ypsilanti, MI Adair, IA Council Bluffs, IA Chatsworth, CA Omaha, NE 7
Slide 8: Capitalization & Financial Summary
Capitalization & Financial Summary Capitalization Financial Summary (C$ millions, except per share) (C$ Millions) 2014 2015 2016 2017 2018 Share Price (April 9, 2019) $22.28 F.D. Common Shares Outstanding 25.6 SALES $194.5 $221.0 $246.4 $285.7 $331.9 Market Capitalization $570.9 Cash & Equivalents (
Slide 9: Strategic Success
Strategic Success STRATEGY 2018/2019 RESULTS Restarted our existing legacy press in Ypsilanti to add capacity and flexibility for our scheduling. Expand capacity Currently adding ancillary equipment to upgrade and expand additional capacity of this press line even further. Won instant ticket contrac
Slide 10: State of the Industry
banknote limited INDUSTRY
Slide 11: Robust Lottery Industry
Robust Lottery Industry • Approximately 200 lotteries operate in the world. • Couple of remaining non-lottery American states looking at implementing lotteries. • Two main products: Instant Win Scratch tickets and Draw Based Games (649, Powerball, etc.). • Instant ticket revenue has grown dramatical
Slide 12: North American Instant Sales Growth
North American Instant Sales Growth $55,000 $51,303 $50,000 60% Instant Sales (US$ Millions) $45,000 $40,000 Instant Sales Growth $35,000 $32,052 $30,000 $25,000 $20,000 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 Source: La Fleur’s World Lottery Almanac 12
Slide 13: Charitable Gaming Market
Charitable Gaming Market • Industry has historically consisted of mainly pull-tab tickets and bingo paper. • Steady consumer demand over the past few years. • Some key jurisdictions showed retail growth last year including Minnesota. • Opportunity is seen in digital/electronic charitable gaming such
Slide 14: Lottery Instant Tickets
banknote limited INSTANT TICKETS
Slide 15: Pollard Primary Contract Retail Growth
Pollard Primary Contract Retail Growth CY2017 vs. CY2018: Our Clients Grew Their Sales Faster 14% 14% 13% 9% 8% 8% 6% NA PRIMARY AVERAGE AVERAGE Source: public disclosure, individual lottery reports 15
Slide 16: Pollard Growing Volumes
Pollard Growing Volumes Annual instant tickets produced (millions of ESS) 14,000 13,000 12,000 11,000 10,000 9,000 8,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: company reports 16
Slide 17: Leading Print Innovation
Leading Print Innovation Family of Jumbo Pop ‘n Play Games ClearPlay Mini-Playbook ScratchFXtra 17
Slide 18: Manufacturing Strength
Manufacturing Strength 2018/2019 Commitment to improved Ypsilanti efficiencies and greater capacity Enhanced finishing equipment - Winnipeg Expanding Original Press - Ypsilanti New Internal Plate Room - Ypsilanti 18
Slide 19: iLottery and Digital
banknote limited DIGITAL
Slide 20: iLottery & Digital Update
iLottery & Digital Update • 8 US lotteries currently operating iLottery and one start up in process. • NeoPollard (JV between Pollard and NeoGames) operates 4 of the above 9, clear market leader. • Increased opportunities including ongoing RFP’s for Alberta and Pennsylvania. • Additional interest ex
Slide 21: iLottery Sales
iLottery Sales $780 SALES $611 $105 SALES $395 $81 NET SALES NET $147 $48 NET SALES $19 MILLIONS NE T FY2015 FY2016 FY2017 EST-FY2018 21
Slide 22: Digital Innovation
Digital Innovation The Space Between” PLAYON xpressGAMES scanACTIiv’ optiFORCE’ sureTRACK’ 2.0 POLLARD banknote limited
Slide 23: Digital Key Wins
Digital Key Wins 2.0 Arizona Connecticut North Carolina 23
Slide 24: iLottery Portfolio
iLottery Portfolio Michigan Virginia New Hampshire North Carolina 24
Slide 25: iLottery Regulatory Status
iLottery Regulatory Status • In 2011 the US Department of Justice (“DOJ”) issued an interpretation indicating the Wire Act only applied to sports betting. • Previously the belief was the Wire Act precluded all forms of internet gambling in the US. • Based on the 2011 interpretation, many lotteries b
Slide 26: Acquisitions
banknote limited ACQUISITIONS
Slide 27: Expanding Product Portfolio
Expanding Product Portfolio 27
Slide 28: NexPlay, Diamond Game’s new Self-Service Terminal
NexPlay™, Diamond Game’s new Self-Service Terminal (SST) offers customizable features including: Draw and Keno game Instant ticket sales with sales result display Animated ticket Robust responsible gaming checking options 28
Slide 29: Diamond Game
DiamondGame A POLLARD BANKNOTE COMPANY POLLARD banknote limited
Slide 30: Highlights Update
Highlights Update • Working seamlessly with the Oasis (International Gamco) team to provide a unified approach to the charitable gaming machine market. • New jurisdiction opened in the fall of 2018: North Dakota. Currently about 250 machines in place with an expectation to increase as the market dev
Slide 31: Gamco and Related Companies
Inc. COMPANY MCO, Ol A POLLARD BANKNOTE ( Ga International SS GAMES A POLLARD BANKNOTE AMERICAN OMPANY
Slide 32: Highlights Update
Highlights Update • Acquired February 1, 2018. • Combined with our existing American Games operation, integration going very well. • Market has reacted very positively to the business combination, now strong #2 manufacturer. • Operation generates in excess of $55 million in revenue (17% of our 2018
Slide 33: Schafer Systems
if Schafer iJ Systems UY HOUD UMiSH oA POLLARD banknote limited
Slide 34: Retail Transformation
Retail Transformation Before After 34
Slide 35: Highlights Update
Highlights Update • Acquired November 1, 2018. • Industry leader in instant ticket retail merchandising, currently working with 42 of the 44 lotteries in the USA. • Long history of providing innovative retail merchandising specializing exclusively in the lottery space. • Early integration has been v
Slide 36: Strategic Benefits
Strategic Benefits Expands Pollard’s portfolio of expertise, particularly at the retail level of I engagement for the lotteries, increasing our portfolio of unique and industry leading products and services Significant synergies to combine retail dispensing with specialized II instant tickets as a b
Slide 37: 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 lottery products; digital and iLottery; charitable gaming and other services to the lottery market. • Three
Slide 38: Capital Strategy
Capital Strategy • Sufficient available capital to support our strategy. • 3-year committed senior debt facility, approximately $200 million including accordion feature. • Close to $70 million available liquidity at December 31, 2018 (excluding accordion). • Successful $35 million equity raise Febru
Slide 39: Financial Update
FINANCIAL UPDATE 2018 Highlights 39
Slide 40: 2018 Highlights
2018 HIGHLIGHTS ($M) 2018 2017 Sales $331.9 $285.7 Gross Margin $75.7 $65.7 Gross Margin % 22.8% 23.0% SG + A $45.4 $38.0 Income from Operations $29.7 $27.0 Adjusted EBITDA $48.8 $44.0 Net Income $14.9 $16.8 40
Slide 41: Fiscal Sales
Fiscal Sales ($M) $350 $332 Foreign Exchange Rate Adjusted $286 $300 $242 $250 $223 $211 $214 $199 $202 $202 $200 $186 $190 $182 $186 $190 $169 $165 $157 $150 $126 $108 $100 $50 $0 Annual sales adjusted to 2018 average rate of $1.30 CDN per USD 41
Slide 42: Adjusted EBITDA
($M) Adjusted EBITDA $48.4 $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 $0.0 See definition of Adjusted EBITDA on slide 2 and reconciliation to Net Income in the Appendix 42
Slide 43: Strong Cashflow
Strong CASHFLOW ($M) 2018 2017 Cash Flow before CAPEX & W/C $35.7 $30.2 Change in Working Capital 4.0 ($2.9) Net Cash Flow before CAPEX $39.7 $28.3 CAPEX ($15.1) ($6.9) Net Cash Flow (b4 dividend, debt repayment & acquisitions) $24.6 $21.4 (source: 2018 PBL Statement of Cash Flow) 43
Slide 44: 2018 Highlights
2018 Highlights • Record annual revenue. • Strong average selling price due to continued success of value added premium product mix. • Full year impact of Diamond Game exceeding expectations. • Acquisition and integration of Gamco and Schafer. • Strong positive free cash flow prior to W/C investment
Slide 45: Q4 Results
Q4 Results • Fourth quarter results were lower than the first three quarters of 2018. Adjusted EBITDA was $7.5 million compared to an average of $13 million during the first three quarters. • Temporary reduction in orders reduced our production volumes and the related sales volume by approximately 1
Slide 46: 2019 Outlook
banknote limited OUTLOOK
Slide 47: Looking Forward
Looking Forward Looking Forward Increased Increasing Capacity Opportunities to Sell Decreased Costs Robust Industry Partner of Choice Continued M&A Opportunities Innovation 47
Slide 48: Value of $100 Investment in PBL Shares
Value of $100 Investment in PBL Shares $420 $370 $320 $270 $220 $170 $120 $70 $20 Pollard Banknote S&P/TSX Composite Index 48
Slide 49: 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
Slide 50: PBL
PBL POLLARD banknote l/imited
Slide 51: Appendices
banknote limited APPENDICES
Slide 52: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation 2018 2017 2016 2015 2014 2013 2012 2011 2010 Net income $14.9 $16.8 $12.3 $7.5 $8.7 $5.4 $6.5 $3.1 $1.8 Adjustments: Amortization & depreciation $18.0 $13.1 $10.6 $8.4 $7.9 $8.6 $7.8 $8.4 $8.6 Interest $4.2 $3.9 $3.6 $2.9 $2.9 $3.4 $3.4 $4.4 $5.2 Income taxes $5.9 $7.2
Slide 53: IFRS 16 New Lease Standard
IFRS 16 New Lease Standard • New standard to be implemented from January 1, 2019. • Majority of leases will now be set up as an asset and offsetting liability on the Statement of Financial Position. • Charge to the Statement of Income will be split between depreciation and interest versus historic r
Pollard Banknote — Investor Presentation (April 2019) on 6ix