Results and Highlights for the First Quarter ended
- First quarter revenue reached
$125.7 million , up slightly from the first quarter of last year. - Combined sales(1) in the quarter, including our share of our
NeoPollard Interactive LLC ("NPi") joint venture sales, reached$151.2 million , up 5.4% from$143.6 million in 2023. - Income from operations was
$13.4 million , compared to$7.6 million in the first quarter of 2023. - Adjusted EBITDA(1) reached
$23.7 million , a record for the first quarter, increasing$5.1 million from$18.6 million attained in the first quarter of 2023. - Our iLottery operations achieved combined income before income taxes of
$14.9 million , a new quarterly record and 34.6% higher than the first quarter of 2023. - Instant ticket margins continued to recover during the first quarter, reflecting the increasing impact of repriced customer contracts on our average selling prices.
(1) | See Non-GAAP measures for explanation |
"We are very satisfied with the financial results of our first quarter of 2024, significantly exceeding all of our critical metrics from the comparative quarter of 2023," remarked
"One of our core businesses is the production and sale of instant tickets and our strategy of repricing our contracts continues to be successful, helping to lay the foundation for increasing margins as our new contract terms come into effect. We have repriced the majority of our contracts and we expect to see growing positive impacts on our financial results through the end of 2024 and into 2025. We also experienced some small cost reductions on our key inputs for instant ticket production and are hopeful this trend will continue."
"Of particular note is the success of our iLottery joint venture, which continues to be the market leader in
"Our charitable gaming group, which includes both our printed pull-tabs and bingo paper products, and our eGaming systems, experienced continued strong demand. eGaming revenue grew, reflecting the increasing engagement with consumers in social settings such as restaurants and taverns. Our volumes of printed charitable gaming products were still somewhat constrained during the quarter as we work on increasing capacity to meet demand, and we believe we will see improved results going forward."
"These strong first quarter results are particularly satisfying given the beginning of the year historically has seen lower revenue following the busier second half of the calendar year. Quarterly financial results can vary depending on the timing of orders, and our first quarter did experience some lower than anticipated volumes in our instant ticket production and sales. However, our scheduled production volumes of instant tickets over the next two quarters are noticeably higher than the first quarter."
"We continue to be very excited about the investments we are making in our Pollard iLottery platform and our expanding game studio," commented
"Our first quarter reflects the results of our focused strategy on being the partner of choice to the lottery and charitable gaming markets," concluded
Use of GAAP and Non-GAAP Financial Measures
The selected financial and operating information has been derived from, and should be read in conjunction with, the unaudited condensed consolidated financial statements of Pollard as at and for the three months ended
Reference to "EBITDA" is to earnings before interest, income taxes, depreciation, amortization and purchase accounting amortization. Reference to "Adjusted EBITDA" is to EBITDA before unrealized foreign exchange gains and losses, and certain non-recurring items including acquisition costs, contingent consideration fair value adjustments and net insurance proceeds. Adjusted EBITDA is an important metric used by many investors to compare issuers on the basis of the ability to generate cash from operations and management believes that, in addition to net income, Adjusted EBITDA is a useful supplementary measure.
Reference to "Combined sales" is to sales recognized under GAAP plus Pollard's 50% proportionate share of
EBITDA, Adjusted EBITDA, Combined sales and Combined iLottery sales are measures not recognized under GAAP and do not have a standardized meaning prescribed by GAAP. Therefore, these measures may not be comparable to similar measures presented by other entities. Investors are cautioned that EBITDA, Adjusted EBITDA, Combined sales and Combined iLottery sales should not be construed as alternatives to net income or sales as determined in accordance with GAAP as an indicator of Pollard's performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows.
Forward-Looking Statements
Certain statements in this report 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, performance or achievements expressed or implied by such forward looking statements. When used in this document, such statements include such words as "may," "will," "expect," "believe," "plan" and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this document. There should not be an expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.
Pollard is one of the leading providers of products and solutions to lottery and charitable gaming industries throughout the world. Management believes Pollard is the largest provider of instant tickets based in
HIGHLIGHTS | Three months ended | Three months ended |
Sales | $ 125.7 million | $ 125.1 million |
Gross profit | $ 21.5 million | $ 17.7 million |
Gross profit % of sales | 17.1 % | 14.1 % |
Administration expenses | $ 15.3 million | $ 13.4 million |
Selling expenses | $ 5.4 million | $ 4.7 million |
NPi equity investment income | ($ 12.2 million) | ($ 8.2 million) |
Unrealized foreign exchange (gain) loss | $ 2.2 million | ($ 0.2 million) |
Net income | $ 6.9 million | $ 4.8 million |
Net income per share – basic | $ 0.26 | $ 0.18 |
Net income per share – diluted | $ 0.25 | $ 0.18 |
Adjusted EBITDA | $ 23.7 million | $ 18.6 million |
(1) Certain comparative figures have been reclassified to conform to the presentation adopted in the current period. |
Results of Operations – Three months ended
SELECTED FINANCIAL INFORMATION
(millions of dollars) | Three months (unaudited) | Three months (unaudited) | ||||||
Sales | ||||||||
Cost of sales | 104.2 | 107.4 | ||||||
Gross profit | 21.5 | 17.7 | ||||||
Administration expenses | 15.3 | 13.4 | ||||||
Selling expenses | 5.4 | 4.7 | ||||||
Equity investment income | (12.2) | (8.2) | ||||||
Other (income) expenses | (0.4) | 0.2 | ||||||
Income from operations | 13.4 | 7.6 | ||||||
Foreign exchange (gain) loss | 2.7 | (0.2) | ||||||
Interest expense | 2.4 | 2.7 | ||||||
Income before income taxes | 8.3 | 5.1 | ||||||
Income taxes: | ||||||||
Current | 6.9 | 3.0 | ||||||
Deferred reduction | (5.5) | (2.7) | ||||||
1.4 | 0.3 | |||||||
Net income | ||||||||
Adjustments: | ||||||||
Amortization and depreciation | 10.8 | 10.6 | ||||||
Interest | 2.4 | 2.7 | ||||||
Income taxes | 1.4 | 0.3 | ||||||
EBITDA | ||||||||
Unrealized foreign exchange (gain) loss | 2.2 | (0.2) | ||||||
Contingent consideration fair value adjustment | 0.0 | 0.4 | ||||||
Adjusted EBITDA | ||||||||
(1) Certain comparative figures have been reclassified to conform to the presentation adopted in the current period. | ||||||||
2024 | 2023 | |||||||
Total Assets | ||||||||
Total Non-Current Liabilities |
Results of Operations – Three months ended
During the three months ended
- Higher sales of ancillary lottery products and services increased revenue in the first quarter of 2024 by
$6.5 million as compared to 2023. This growth was largely due to increased sales of retail merchandising products, licensed products, and digital and loyalty products. - eGaming systems revenue further increased sales by
$1.3 million in 2024, largely due to a higher number of eGaming machines placed at bars, bingo halls and fraternal organizations as compared to 2023. - The higher instant ticket average selling price in the first quarter of 2024 increased sales by
$7.6 million as compared to 2023, primarily as a result of the change in customer mix and the impact of repriced contracts. However, this increase was offset by the decrease in instant ticket sales volumes of$12.9 million as compared to 2023, mainly as a result of the timing of customer orders and Pollard declining certain lower margin work. - Lower charitable gaming volumes, which were largely due to certain production inefficiencies, decreased sales by
$1.0 million in 2024. - During the three months ended
March 31, 2024 , Pollard generated approximately 71.7% (2023 – 75.9%) of its revenue inU.S. dollars including a portion of international sales which are priced inU.S. dollars. During the first quarter of 2024, the actualU.S. dollar value was converted to Canadian dollars at$1.339 , compared to a rate of$1.350 during the first quarter of 2023. This 0.8% decrease in theU.S. dollar value resulted in an approximate decrease of$0.7 million in revenue relative to the first quarter of 2023. In addition, during the quarter the value of the Euro strengthened against the Canadian dollar resulting in an approximate increase of$0.1 million in revenue relative to the first quarter of 2023.
Cost of sales was
Gross profit was
Administration expenses were
Selling expenses were
Pollard's share of income from NPi increased to
The 2024 net foreign exchange loss of
The 2023 net foreign exchange gain of
Adjusted EBITDA increased to
Interest expense decreased to
Amortization and depreciation totaled
Income tax expense was
Income tax expense was
Net income was
Net income per share (basic and diluted) increased to
iLottery
Pollard and its iLottery partner,
In 2014 Pollard, in conjunction with NeoGames, established
SELECT iLOTTERY RELATED FINANCIAL INFORMATION | |||||||||||||||||
(millions of dollars) | |||||||||||||||||
Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||
2024 | 2023 | 2023 | 2023 | 2023 | 2022 | 2022 | 2022 | 2022 | |||||||||
Sales – Pollard's share | |||||||||||||||||
| |||||||||||||||||
NPi | 21.8 | 21.5 | 18.5 | 18.5 | 17.7 | 13.7 | 12.4 | 11.3 | |||||||||
Combined iLottery sales | |||||||||||||||||
Income before income taxes – Pollard's share(1) | |||||||||||||||||
| |||||||||||||||||
NPi | 11.0 | 11.1 | 8.8 | 8.2 | 8.3 | 5.7 | 4.7 | 3.6 | |||||||||
Combined income before income taxes – Pollard's share |
Throughout 2022, 2023 and the first quarter of 2024, NPi's contracts achieved strong organic growth, adding to sales and income before taxes. In addition, quarterly sales and income before taxes are positively impacted during quarters where substantial draw-based game (
(1) | Certain comparative figures have been reclassified to conform to the presentation adopted in the current period. |
Outlook
The market continues to demonstrate strong underlying consumer demand for a variety of instant-win scratch ticket products. The translation of this demand into revenue for Pollard depends on a number of factors, including timing of orders, inventory management by lotteries and shipping implications that can vary from quarter to quarter.
While our overall volume of instant tickets for 2024 is expected to be similar to 2023, we anticipate higher volumes in the second and third quarters of 2024 relative to the first quarter of 2024. Demand for our ancillary solutions such as our proprietary PlayOnTM loyalty platform, an important component in the success of iLottery, remains strong. Our pioneering in-lane retail dispensing system easyVENDTM is now live in retail environments, demonstrating the importance of Pollard's commitment to innovation in the Lottery industry.
The results of our repricing strategy continue to be reflected in both our instant ticket revenues and gross margins. Quarterly results will vary based on mix and timing; however, with the majority of our work repriced we will continue to see the growing positive impact on our selling prices throughout 2024 as the new pricing terms take effect. In addition, we are hopeful that further decreases to the costs of our main inputs including paper, ink, packaging and freight will occur in the coming quarters as supply and demand factors revert to more historic levels.
Demand in the charitable gaming market remains strong, with particular interest growing in eGaming systems and other digital gaming solutions. These opportunities can take many forms depending on the jurisdiction, ranging from handheld devices to kiosks and dedicated gaming machines. These products can be placed in a variety of retail and social spaces to augment the traditional paper-based pull-tabs and bingo paper.
Our iLottery results reached record levels in the first quarter, and the long-term expectation is for continued growth in existing and greenfield jurisdictions in
Interest in Pollard's proprietary omni-channel iLottery platform continues to grow, as opportunities for discussions and demonstrations with lotteries are ongoing. We are also in the process of integrating a number of our eInstant games from our game studio for release later this year. At the same time our 50% owned joint venture, NeoPollard Interactive, continues to be the market leader in
Future acquisitions remain a focus and we continue to review a number of strategic opportunities. Expanding our charitable gaming offerings including our distribution networks, product portfolio and eGaming solutions provide significant growth opportunities. Increasing our expertise in the digital area, particularly around gaming content across all of our platforms, continues to be a focus of our acquisition strategy and will play an important role moving forward.
The nature of our business yields a very high conversion of earnings into positive cash flow as evidenced in our first quarter results. This allows for a conservative capital structure which supports our ongoing significant investments in productive assets such as our iLottery platform, new products and growth CAPEX. Our debt levels remain very conservative, enabling us to maintain significant available resources to pursue our strategic objectives.
Our first quarter results reflect the success of our ongoing strategy of expanding offerings focused on the lottery and charitable gaming markets. Our instant ticket business is responding positively to both our repricing strategy and improved cost initiatives, and this trend is expected to continue. We are very confident in our outlook for 2024 and beyond as strong demand exists throughout these markets for all of our products and solutions, underpinning important growth opportunities as lotteries and charities look for innovative ways to raise funds for good causes.
SOURCE
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