Pollard Banknote Limited · TSX:PBL
Pollard Banknote — Investor Presentation (November 2015)
25 slides from Pollard Banknote's investor presentation, Nov 17, 2015
Slide 1: Investor Presentation
INVESTOR PRESENTATION November 17, 2015
Slide 2: Forward-Looking Statements; Use of Non-GAAP Financial Measures
2 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, perf
Slide 3: Today's Agenda
3 Today’s Agenda • Overview • Business of Pollard • State of the Industry • Competitors • Growth Strategies • Financial Update – 9 months 2015 • Expectations for 2016
Slide 4: Pollard Banknote Overview
4 Pollard Banknote Overview Company Overview Product Overview • Founded in 1907 • 2nd largest instant ticket provider in the world • 100% focus on the Lottery market for • Over 12 billion tickets produced annually the last 25 years • Growing presence in iLottery • Publicly traded for 10 years • Lead
Slide 5: Financial Overview
5 Financial Overview ($Millions) 2014 2013 2012 2011 2010 SALES $194.5 $184.9 $162.4 $172.0 $163.4 INCOME BEFORE INCOME TAXES $12.5 $9.4 $8.8 $4.8 $3.5 NET INCOME $8.7 $5.4 $6.5 $3.1 $1.8 ADJUSTED EBITDA $25.6 $21.8 $20.2 $17.8 $17.3
Slide 6: Our Primary Product: Instant Win Scratch Lottery Tickets
6 Our Primary Product: Instant Win Scratch Lottery Tickets • 90% of our revenue • Diversified product mix and client mix • Over 12 billion standard tickets produced per year (2” by 4”) • Almost 30 years of experience in producing instant win lottery tickets
Slide 7: Our Primary Product: Instant Win Scratch Lottery Tickets
Our Primary Product: 7 Instant Win Scratch Lottery Tickets • Most business awarded through formal RFP • Contracts are 3-5 years in length with usually 1-3 years in renewals • Contracts can be exclusive, primary (supplier produces the majority) or secondary (less than majority) • We currently serve a
Slide 8: Largest Lotteries by Retail Sales of Instant Tickets (2014)
Largest Lotteries by Retail 8 Sales of Instant Tickets (2014) Rank Lottery Country Total Sales Pollard (US$MM) Customer 1 Lottomatica S.p.A. Italy 11.429 2 La Française des Jeux France 7,043 * 3 U.K. National Lottery U.K. 3,866 4 New York Lottery United States 3,744 * 5 California Lottery United Sta
Slide 9: iLottery
iLottery 9 Starting in 2012 individual U.S. state So far only a handful have started and to lotteries were allowed to sell lottery date sales have been mixed, very low in products over the Internet most jurisdictions EXCEPT Michigan Pollard has formed a joint venture with a technological provider to
Slide 10: Charitable Games
10 Charitable Games • Approximately 10% of our revenue • Overall industry is steady or shrinking slightly • Our business generates solid profits • Increasing market share in both pull tabs and bingo paper • Opportunity for industry consolidation
Slide 11: Robust Industry
11 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 rema
Slide 12: Worldwide Instant Sales 2009-2014
12 Worldwide Instant Sales 2009 – 2014 Annual Retail Sales $90.0 $85.0 $83.1B $80.0 U.S. $ Billions $75.0 31% $70.0 growth $63.5B from $65.0 2009 to $60.0 2014 $55.0 $50.0 2009 2010 2011 2012 2013 2014 Annual Sales Source: La Fleur’s World Lottery Almanac Preliminary 2015 results indicate similar gr
Slide 13: Barriers to Entry
13 Barriers to Entry • Extremely difficult to produce, technological know how is very hard to learn • Lotteries are very risk adverse and have no interest in trying a new supplier • Most RFP’s require extensive, long term experience • Lotteries’ business based on credibility, not willing to risk tha
Slide 14: Few Competitors
14 Few Competitors Currently only 2 other companies compete MARKET SHARE with Pollard in this space, a market situation Sci Games Pollard Gtech that has been in place for over the last 5 years 8% 20 years ago there were 10-12 producers, but 22% economies of scale, technical proficiency and risk adve
Slide 15: Few Competitors
15 Few Competitors Scientific Games Gtech (IGT) • Invented instant tickets 1974 • Dominant supplier of draw based • Market leader terminals and systems • Historically large M & A focus • Small instant ticket provider, to offer • Recently bought the #2 & #3 slot full suite of products machine manufac
Slide 16: Pollard Growth Strategies
16 Pollard Growth Strategies • Grow revenue and market share • Grow capacity to deliver instant tickets • Expand offerings in mobile and interactive • Increase commitment to innovation • Extend product offerings in customer’s value chain • Increase our presence through additional strategic alliances
Slide 17: Expanded Capacity
17 Expanded Capacity • Purchased new Tresu 22 station inline press • Installed in Ypsilanti, Michigan • Went live September 2015 • Relocate existing Ypsilanti press line to Winnipeg (2016) • Investment of approximately C$25MM in total • Corporate net capacity increase of 35%
Slide 18: Adjusted EBITDA
18 Adjusted EBITDA ($M) $30.0 $25.8 $25.0 $21.8 $20.2 $20.0 $17.3 $17.8 $15.0 $10.0 $5.0 $0.0 2010 2011 2012 2013 2014
Slide 19: 9 Months 2015 Highlights
19 9 Months 2015 HIGHLIGHTS ($M) 9 months 2015 9 months 2014 Sales $163.8 $151.3 Gross Margin $32.7 $31.3 Gross Margin % 20.0% 20.7% SG + A $18.9 $17.5 Income from Operations $14.2 $14.0 Adjusted EBITDA $20.5 $20.0 Net Income $6.2 $6.7
Slide 20: 9 Month 2015 Sales
20 New 9 month 2015 Sales Nine Month Record ($M) $180.0 $2.8 $13.2 $2.8 $0.6 $163.8 $170.0 $5.5 $160.0 $151.3 $150.0 $140.0 $130.0 $120.0 9 month Higher Impact of Lower Lower Lower AVG 9 month 2014 Volume Weaker Ancillary Charitable Price 2015 CAD $ Sales Gaming Sales
Slide 21: 9 Month 2015 Adjusted EBITDA
21 9 month 2015 Adjusted EBITDA ($M) $3.2 $1.4 $25.0 $2.8 $24.0 $23.0 $1.5 $22.0 $20.5 $21.0 $20.0 $20.0 $19.0 $18.0 $17.0 $16.0 $15.0 9 month 2014 Higher Impact of Higher SG+A Lower AVG 9 month 2015 Volume Weaker Price CAD $
Slide 22: Capital Structure and Strong Governance
Capital Structure 22 • Approximately 73% owned by Pollard family, fully committed and supportive of the business • Pollard family open to reduced % of ownership based on using additional treasury shares as currency for acquisitions or financings • Committed to a dividend policy to generate return fo
Slide 23: Looking Ahead
23 Looking Ahead Industry outlook remains very strong Contract portfolio and production capacity in place to efficiently produce higher volumes New press installed and in production of live tickets Michigan iLottery operation continuing to grow • Weak Canadian dollar increases our cash flow
Slide 24: Investment Thesis
24 Investment Thesis Revenue is >$200 recurring in million in nature Revenue Government Growing Contract EBITDA Base Leading Lottery Expanding Large Barriers Experienced Supplier Market to Entry Management • Leader in instant • Strong instant • Complex • Management has ticket market ticket growth te
Slide 25: Thank you for your time and your attention today
25 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 Telep
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