Pollard Banknote Limited · TSX:PBL
Pollard Banknote — Shareholder Meeting (2019)
56 slides from Pollard Banknote's shareholder meeting presentation, 2019
Slide 1: 2019 Annual General Meeting
2019 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 • 2018 Business Highlights • Acquisitions • Financial Update – 2018 and Q1 2019 • Expectations for 2019 3
Slide 4: Financial Highlights
Financial Highlights ($ Millions) 2018 2017 2016 2015 2014 SALES $331.9 $285.7 $246.4 $221.0 $194.5 NET INCOME $14.9 $16.8 $12.3 $7.5 $8.7 ADJUSTED EBITDA $48.8 $44.0 $29.7 $26.8 $25.6 NET DEBT $104.6 $79.0 $63.4 $65.7 $62.9 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 and charitable gaming market by offering retail and digital games and solutions that attract and engage players. 6
Slide 7: Facilities & Companies
Facilities & Companies Barrhead, AB Winnipeg, MB Sault Ste. Marie, ON Lansing, MI Ypsilanti, MI Macclesfield UK Adair, IA Council Bluffs, IA Chatsworth, CA Omaha, NE 7
Slide 8: State of the Industry
banknote limited INDUSTRY
Slide 9: 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 9
Slide 10: 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 11: 2018 Business Highlights
banknote limited HIGHLIGHTS
Slide 12: Key Wins in 2018
Key Wins Key Wins in 2018 Key Wins 12
Slide 13: 100% Client Retention
Key Wins Key Wins in 2018 100% Client Retention 13
Slide 14: 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 14
Slide 15: Leading Print Innovation
Leading Print Innovation Family of Jumbo Pop ‘n Play Games ClearPlay Mini-Playbook ScratchFXtra 15
Slide 16: 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 16
Slide 17: Monthly Per Capita iLottery Sales
Monthly Per Capita 2018 iLottery Sales $7.00 80% MARKET SHARE $1.68 $1.30 $0.3 $0.52 7 4 months of sales for New Hampshire 8 months of sales for Pennsylvania 17
Slide 18: iLottery Portfolio
iLottery Portfolio Michigan Virginia New Hampshire North Carolina 18
Slide 19: Digital Innovation
Digital Innovation PLAYON xpressGAMES scanACTIiv’ optiFORCE’ sureTRACK’ 2.0 POLLARD banknote limited
Slide 20: Digital Key Wins
Digital Key Wins 2.0 iLottery Arizona Connecticut North Carolina 20
Slide 21: 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 22: 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 products also address charitable game sector • February 2018 purchase of International Gamco, Inc. signific
Slide 23: Acquisitions
banknote limited ACQUISITIONS
Slide 24: A Schafer Systems Company
A Schafer = rw) Systems “BUY HOLIDAY’ -CAMES HERE, set ne POLLARD banknote limited
Slide 25: Retail Transformation
Retail Transformation Before After 25
Slide 26: Highlights Update
Highlights Update • Schafer Systems 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 integr
Slide 27: Fastrak Retail
Fastrak RETAIL POLLARD banknote limited
Slide 28: Fastrak Retail (UK) Limited
Fastrak Retail (UK) Limited • On May 1, 2019, we acquired 100% of Fastrak Retail (UK) Limited. • Fastrak is a leading provider of lottery ticket dispensers, lottery play points and other retail merchandising products. • Based near Manchester, England, Fastrak was founded in 2000 and has approximatel
Slide 29: Expanding Product Portfolio
Expanding Product Portfolio 29
Slide 30: DiamondGame
DiamondGame A POLLARD BANKNOTE COMPANY POLLARD banknote limited
Slide 31: International Gamco and American Games
Inc. COMPANY MCO, Ol A POLLARD BANKNOTE ( Ga International SS GAMES A POLLARD BANKNOTE AMERICAN OMPANY
Slide 32: Highlights Update
Highlights Update • International Gamco 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 reven
Slide 33: 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. • Four
Slide 34: 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 $35 million equity raise Febru
Slide 35: Financial Update: 2018 Annual Results
FINANCIAL UPDATE 2018 Annual Results 35
Slide 36: 2018 Highlights
2018 HIGHLIGHTS ($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 $16.8 36
Slide 37: Fiscal Sales
Fiscal Sales ($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 $1.30 CDN per USD 37
Slide 38: Adjusted EBITDA
($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 $0.0 See definition of Adjusted EBITDA on slide 2 and reconciliation to Net Income in the Appendix 38
Slide 39: Strong Cashflow
Strong CASHFLOW ($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 $21.4 (source: 2018 PBL Statement of Cash Flow) 39
Slide 40: 2018 Highlights
2018 Highlights • Record annual revenue. • Strong average selling price due to continued success of value added premium product mix. • Full year impact of Diamond Game exceeding expectations. • Acquisition and integration of Gamco and Schafer. • Strong positive free cash flow prior to W/C investment
Slide 41: Fiscal 2018 Sales
Fiscal 2018 Sales ($M) $15.5 $1.3 $1.8 $331.9 $340.0 $330.0 $26.7 $1.0 $320.0 $310.0 $285.6 $300.0 $290.0 $280.0 $270.0 $260.0 $250.0 2017 Higher Higher Avg Full Year of Higher Higher Avg 2018 Charitable Selling Diamond Instant Selling Games Price - Game Ticket Price - Volume Charitable volumes Inst
Slide 42: 2018 Adjusted EBITDA
2018 Adjusted EBITDA ($M) $9.8 $2.0 $55.0 $3.0 $53.0 $48.4 $51.0 $49.0 $47.0 $44.0 $45.0 $43.0 $41.0 $39.0 $37.0 $35.0 2017 Impact of Higher SG+A Lower Instant Ticket 2018 acquisitions Expenditures Gross Profit 42
Slide 43: Financial Update: 2019 First Quarter Results
FINANCIAL UPDATE 2019 First Quarter Results 43
Slide 44: Q1 2019 Highlights
Q1 2019 Highlights ($M) Q1 2019 Q1 2018 Sales $97.6 $80.3 Gross Margin $22.9 $19.4 Gross Margin % 23.5% 24.1% SG + A $12.2 $10.8 Income from Operations $10.5 $8.6 Adjusted EBITDA* $15.1 $13.0 Net Income $8.0 $4.5 *Adjusted EBITDA calculated excluding IFRS 16 impact in 2019 44
Slide 45: Q1 2019 Sales
($M) Q1 2019 Sales $105.0 $3.8 $0.6 $97.5 $3.0 $2.3 $100.0 $3.7 $95.0 $8.2 $90.0 $85.0 $80.3 $80.0 $75.0 $70.0 Q1 2018 Higher ASP Higher Higher Lower Impact of Other Q1 2019 Instant Ancillary Charitable Instant Weaker Tickets Sales Gaming Ticket CDN $ (Schafer Sales Volumes Systems) 45
Slide 46: Q1 2019 Adjusted EBITDA
Q1 2019 Adjusted EBITDA ($M) $22.0 $20.0 $4.4 $1.9 $18.0 $0.4 $15.1 $16.0 $13.0 $14.0 $12.0 $10.0 $8.0 Q1 2018 Higher avg sales Higher SGA Other Q1 2019 price & ancillary Note: Adjusted EBITDA excludes impact of IFRS 16 sales 46
Slide 47: Strong Q1 Cashflow
Strong Q1 Cashflow Cash flow before CAPEX and W/C changes ($M) $16.0 $14.0 $14.2 $12.0 $10.0 $10.6 $8.0 $6.0 $4.0 $2.0 $0.0 Q1 2019 Q1 2018 47
Slide 48: Q1 Highlights
Q1 Highlights • Return of orders and sales volume for instant tickets closer to levels experienced in the first three quarters of 2018. • Strong mix of proprietary specialty products including Scratch FX, laminated and pouched products. • 33% increase in Dividend in March. • First full quarter of Sc
Slide 49: Expectations for 2019
EXPECTATIONS FOR 2019 49
Slide 50: Looking Forward
Looking Forward Looking Forward Increased Increasing Capacity Opportunities to Sell Decreased Costs Robust Industry Partner of Choice Continued M&A Opportunities Innovation 50
Slide 51: 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 51
Slide 52: PBL: It's why you choose us
PBL POLLARD banknote limited ..it's why you choose us.
Slide 53: 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 54: Appendices
banknote limited APPENDICES
Slide 55: 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 56: IFRS 16 New Lease Standard
IFRS 16 New Lease Standard • New standard implemented from January 1, 2019. • Majority of leases now set up as an asset and offsetting liability on the Statement of Financial Position. • Charge to the Statement of Income is split between depreciation and interest versus historic rent expense. • Unde