Slide 1: 2017 Q3 Investor Update
banknote limited = 2017 Q3 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 • Business Highlights • INNOVA Gaming Group Inc. • Financial Update 3
Slide 4: Capitalization & Financial Summary
Capitalization & Financial Summary Capitalization Financial Summary (C$ millions, except per share) TTM (C$ Millions) 2013 2014 2015 2016 Sept Share Price (Nov. 10, 2017) $15.50 2017 F.D. Common Shares Outstanding 23.6 Market Capitalization $364.9 SALES $184.9 $194.5 $221.0 $246.4 $272.0 Cash & Equi
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.” 6
Slide 7: Strategic Success
Strategic Success STRATEGY 2017 RESULTS $25 million investment in new press complete. Adds 35% to net capacity. Expand capacity Producing higher volumes with cost structure improving Won Kansas loyalty contract, Missouri Diamond Game contract, a number of Win new contracts contracts available to bid
Slide 8: State of the Industry
banknote limited INDUSTRY
Slide 9: Robust Industry
Robust Industry • Approximately 200 lotteries operate in the world • Two main products: Instant Win Scratch tickets and Draw Based Games (649, Powerball, etc.) • Instant ticket revenue have grown dramatically over the past decade, now generating 55% of lottery revenue • Draw based games have remaine
Slide 10: Market Overview
Market Overview Instant Sales as % of Total Lottery Sales U.S. Lotteries 65% 60% 55% 46% 62% 50% 45% 40% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Fiscal Year 10
Slide 11: Business Highlights
banknote limited HIGHLIGHTS
Slide 12: Pollard Primary Contract Growth
Pollard Primary Contract Growth Two of the FASTEST Growing lotteries in the US use Pollard as their Primary supplier!! Average annual Retail sales growth Note: based on FY 2017 instant ticket sales growth versus 2016 In the US 2015 - 2017 12
Slide 13: Improved manufacturing efficiencies
Improved manufacturing efficiencies 13
Slide 14: Sales by business line (millions)
Note: not to scale $611 $395 iLottery Sales SALES SALES $81 $48 NET $147 NET SALES $19 MILLIONS NET FY2015 FY2016 FY2017 14
Slide 15: Charitable Games
Charitable Games • Approximately 11% of our revenue • Overall industry is steady but showing some signs of small growth • Our business generates solid profits/cashflow • Diamond Game (INNOVA) products also address charitable game sector • Opportunity for industry consolidation 15
Slide 16: Acquisition Strategy
Acquisition Strategy • Key component of our overall strategy for profitable growth • Dedicated senior resources are focused on our acquisition strategy • Areas of interest include ancillary products, digital, charitable games and other services to the lottery market • INNOVA acquisition closed Augus
Slide 17: Diamond Game (INNOVA)
banknote limited Diamond Game
Slide 18: Strategic Benefits
Strategic Benefits Unique assets that have a strong strategic fit with Pollard’s expanding I product portfolio for both lotteries and charities Opportunity to grow partnerships with lotteries seeking to expand II their products and services Identifiable cost synergies relating to public company cost
Slide 19: Product Portfolio
PRODUCT PORTFOLIO The LT-3 ITVM: There’s so much more to earn.
Slide 20: Where is Diamond Game?
WHERE IS DIAMOND GAME? 20
Slide 21: NexPlay Self-Service Terminal
NexPlay™, Diamond Game’s new Self-Service Terminal (SST) offers customizable features including: Draw and Keno game Instant ticket sales with sales result display Animated ticket Robust responsible gaming checking options 21
Slide 22: Status Update
Status Update • 100% ownership completed September 18, 2017 • Smooth integration well under way in all areas including marketing, manufacturing and administration • Excellent industry reaction and feedback received at recent annual lottery conference (NASPL) • Specific cost reduction strategies alre
Slide 23: Financial Update: 2017 Nine Month Highlights
FINANCIAL UPDATE 2017 Nine Month Highlights 23
Slide 24: Fiscal Sales
Fiscal Sales ($M) $300 Foreign Exchange Rate Adjusted $272 $246 $250 $227 $215 $218 $203 $206 $206 $200 $189 $193 $185 $189 $193 $172 $168 $160 $150 $128 $110 $100 $50 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 TTM Sept 30, 2017 Annual sales adjusted to
Slide 25: Adjusted EBITDA
($M) Adjusted EBITDA $40.1 $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 TTM Sept Note: TTM Sept 2017 includes $1.1 million 2017 EBITDA from Diamond Game 25
Slide 26: Strong Cashflow
Strong CASHFLOW ($M) 2017 9 months 2016 9 months Cash Flow before CAPEX & W/C $21.8 $16.9 Investment in Working Capital ($1.5) ($10.9) Net Cash Flow before CAPEX $20.3 $6.0 CAPEX ($7.8) ($4.3) Net Cash Flow (b4 dividend, debt repayment & INNOVA acq.) $12.3 $1.4 (source: 2017 Sept PBL Statement of Ca
Slide 27: Financial Update: 2017 Third Quarter Results
FINANCIAL UPDATE 2017 Third Quarter Results 27
Slide 28: Q3 2017 Highlights
Q3 2017 HIGHLIGHTS ($M) Q3 2017 Q3 2016 Sales $70.7 $62.7 Gross Margin $18.2 $12.6 Gross Margin % 25.7% 20.1% SG + A $11.8 $7.6 Income from Operations $6.7 $4.9 Adjusted EBITDA $11.6 $7.8 Net Income $4.6 $2.8 28
Slide 29: Q3 2017 Sales
Q3 2017 Sales ($M) $3.8 $1.2 $1.2 $70.7 $75.0 $1.7 $4.9 $70.0 $62.7 $65.0 $60.0 $55.0 $50.0 Q3 2016 Higher Higher Diamond Lower Impact of Q3 2017 average ancillary Game ticket stronger sales price product volume CDN $ sales 29
Slide 30: Q3 2017 Adjusted EBITDA
Q3 2017 Adjusted EBITDA ($M) $1.0 $1.4 $14.0 $1.1 $13.0 $11.6 $3.1 $12.0 $11.0 $10.0 $9.0 $7.8 $8.0 $7.0 $6.0 $5.0 Q3 2016 Higher Diamond Greater Impact of Q3 2017 average Game ancillary stronger CDN selling price product sales $ 30
Slide 31: Q3 Highlights
Q3 Highlights • Second highest production volume on record (next to Q2 2017) • High average selling price due to value added premium product mix • Manufacturing press efficiencies incrementally improving throughout the quarter • Integration of Diamond Game (INNOVA) well underway, positive contributi
Slide 32: Value of $100 Investment in PBL Shares
Value of $100 Investment in PBL Shares $280 Value of $100 investment $260 $240 $220 $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 Pollard Banknote S&P/TSX Composite Index 32
Slide 33: 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 34: Pollard Banknote
PBL POLLARD banknote l/imited