WINNIPEG, MB, May 13, 2021 /CNW/ - Pollard Banknote
Limited (TSX: PBL) ("Pollard") today released its
financial results for the three months ended March 31, 2021, reporting strong quarterly
results.
Results and Highlights for the First Quarter ended
March 31, 2021
- Sales reached $112.2 million,
highest sales achieved in any 1st quarter and up 10%
from $102.2 million achieved in the
1st quarter last year. Combined sales, including our
share of our NPi joint venture's sales, attained $122.1 million, up 18% from $103.5 million in 2020
- Achieved net income of $7.5
million, an increase of $8.8
million from the net loss in the 1st quarter 2020
and generated Adjusted EBITDA of $23.3
million reflecting the positive revenue and margin trends
from 2020, up 45% from the same period last year
- Core instant ticket business remained strong, driven by
continued higher sales of instant tickets at retail generating
higher volume orders and a positive average selling price ("ASP")
for Pollard
- Sales from our share of the combined iLottery operations for Q1
increased to $18.3 million from
$6.3 million in Q1 2020. Combined
iLottery margin improved from $1.6
million last year to $8.0
million in Q1 2021
- Charitable gaming and Diamond Game revenue continued to be
negatively impacted by COVID-19 related retail closures at the
beginning the quarter, however during the quarter, most retail
outlets had opened and consumer demand was very robust
- Recorded $1.9 million in CEWS in
the first quarter
- Incurred a $2.5 million one-time
expense to settle litigation related to a patent dispute
- Completed the acquisition of Next Generation Lotteries SA
- Raised approximately $34.5
million, before expenses, in a successful bought deal
offering of common shares
"Our first quarter generated very positive results from all of
our business lines despite the ongoing head winds generated from
COVID-19," stated John Pollard,
Co-Chief Executive Officer, "and our success is due to the
dedication and hard work of our more than 2,100 employees
world-wide."
"In our first quarter of 2021 we attained revenue of
$112.2 million, pretax income of
$10.7 million and Adjusted EBITDA of
$23.3 million, all records for the
first quarter of the year."
"Our core instant ticket business remained very robust, as
lotteries throughout the United
States continue to generate record revenue growth when
compared to the same time periods pre-COVID-19. This trend
started back in the second quarter of 2020 and has continued right
through to the current timeframe."
"iLottery continued its growth attaining a combined level of
revenue, between all of our iLottery operations, of $18.3 million, almost three times the combined
revenue of the same period last year. Revenue growth was
particularly robust in our newer contracts with Alberta and Virginia."
"Charitable gaming and Diamond Game business units showed strong
underlying results despite negative impacts of COVID-19 related
shutdowns. As discussed last quarter, a number of key
jurisdictions had closed retail operations such as bars,
restaurants and fraternals in the fall of 2020 and did not reopen
them until mid-first quarter. Our charitable gaming and
Diamond Game revenue for the period of closures was very low,
however, after reopening, we saw very strong consumer demand return
and began generating record revenue in these segments, with this
robust demand continuing into the second quarter."
"Our partnership with our customers remains a critical factor in
our success," stated Doug Pollard,
Co-Chief Executive Officer, "which has been highlighted this
quarter with a number of important contract awards. Two of
our longstanding instant ticket customers, the Michigan Lottery and
Loto Quebec, both extended their instant ticket supply contracts
with us during the first quarter. The Idaho Lottery recently
announced Pollard as their new primary supplier of instant lottery
tickets, awarding us a two-year contract with up to an additional
six years of renewals. In addition to supplying tickets to
Idaho for many years as a
secondary supplier, our charitable gaming business has been
successfully providing them paper and electronic pull-tab products
for many years."
"And one of our key long-time partners, the Ontario Lottery,
announced in early April the award of a ten-year contract
extension, plus a five-year renewal option, to Pollard as primary
supplier of their instant tickets. This extension starts in
July of 2022 and will result in Pollard providing the majority of
their instant tickets through at least 2032. The Ontario
Lottery has generated significant growth in their instant ticket
sales over the last number of years and we are thrilled to play an
important part in their success to date and look forward to
continuing to do so for many years to come."
"During the quarter we closed a very successful share offering
raising approximately $34.5 million
before expenses, an offering that was oversubscribed and provides
us with both additional capital to invest in our vision as well as
help increase our public share float, a long-term objective of
Pollard. Acquisitions will continue to play an important role
in our business plan, and despite recently closing two deals,
totaling approximately $80 million,
we have significant resources available to pursue future
opportunities."
"During the quarter we closed the strategic acquisition of Next
Generation Lotteries, a supplier of retail and iLottery platforms
and games, and integration is underway. Right at the end of
2020 we completed the acquisition of Compliant Gaming, a provider
of electronic pull-tabs. Compliant's integration with our
teams at Diamond Game and our charitable gaming staff is going
extremely well and despite some early impact from COVID-19 related
shutdowns, the financial results in the first quarter exceeded our
expectations."
"Our first quarter of 2021 continued to see many of the same
successes we experienced in 2020," concluded John Pollard, "and we are extremely proud of our
entire team that has achieved such great results while dealing with
the challenging issues of COVID-19. The lottery and
charitable gaming market continues to be very strong and our
financial results reflect the resilience of our product offerings
and the confirmation of our strategy."
Use of Non-GAAP Financial Measures
Reference to "Adjusted EBITDA" is to earnings before interest,
income taxes, depreciation and amortization, purchase accounting
amortization, unrealized foreign exchange gains and losses,
and certain non-recurring items including severance costs,
acquisition costs, litigation settlement and contingent
consideration fair value adjustments. 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 NeoPollard Interactive
LLC's ("NPi") sales, its iLottery joint venture operation.
Adjusted EBITDA and Combined sales are measures not recognized
under GAAP and do not have a standardized meaning prescribed by
GAAP. Therefore, this measure may not be comparable to
similar measures presented by other entities. Investors are
cautioned that Adjusted EBITDA should not be construed as an
alternative to net income 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. Combined sales should not be construed as an
alternative to sales determined in accordance with GAAP.
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 BANKNOTE LIMITED
Pollard is one of the leading providers of products and services
to lottery and charitable gaming industries throughout the
world. Management believes Pollard is the largest provider of
instant tickets based in Canada
and the second largest producer of instant tickets in the world. In
addition, management believes Pollard is also the second largest
bingo paper and pull-tab supplier to the charitable gaming industry
in North America and through its
50% joint venture, the largest supplier of iLottery solutions to
the U.S. lottery market.
On December 30, 2020, Pollard
signed and closed a definitive agreement to purchase 100% of the
equity of Compliant Gaming, LLC ("Compliant") for a purchase price
of $19.0 million U.S. dollars
($24.3 million) prior to standard
working capital adjustments and potential future earn-out payments
based on certain EBITDA targets. Compliant is a leading provider of
electronic pull-tab gaming systems and products to the charitable
gaming market.
On January 14, 2021, Pollard
completed the acquisition of Next Generation Lotteries AS ("NGL").
On December 31, 2020, Pollard signed
a definitive agreement to acquire 100% of the equity of NGL for a
purchase price of €36.0 million ($56.5
million), prior to standard working capital adjustments and
certain deferred cash considerations, of which €32.0 million
($50.2 million) was paid at the time
of closing and the remaining €4.0 million ($6.3 million) will be paid upon the achievement
of certain gross margin targets in 2021. The purchase price was
funded from existing Pollard cash resources and availability under
our existing senior credit facilities for approximately €27.4
million ($43.0 million) and the
issuance of treasury shares of Pollard for approximately €4.6
million ($7.2 million).
On February 9, 2021, Pollard
announced that it had entered into an agreement with a syndicate of
underwriters to purchase, on a bought deal basis, 812,000 common
shares of Pollard at a price of $36.95 per share. Pollard also granted the
underwriters an over-allotment option exercisable at any time up to
30 days following the closing of the offering, to purchase up to an
additional 121,800 common shares. The offering, including the full
over-allotment, closed on March 2,
2021. The total gross proceeds, prior to any commissions and
offering expenses, from the sale of 933,800 common shares was
approximately $34.5 million. Pollard
used the net proceeds to repay indebtedness under Pollard's credit
facility incurred in the recent acquisitions of Compliant and
NGL.
The selected financial and operating information has been
derived from, and should be read in conjunction with, the condensed
consolidated unaudited interim financial statements of Pollard as
at and for the three months ended March 31,
2021. These financial statements have been prepared in
accordance with the International Financial Accounting Standards
("IFRS" or "GAAP").
HIGHLIGHTS
|
Three months
ended
March 31,
2021
|
Three months
ended
March 31,
2020
|
|
|
|
Sales
|
$
|
112.2
million
|
$
|
102.2
million
|
Gross
profit
|
$
|
24.5
million
|
$
|
21.7
million
|
Gross profit %
of sales
|
21.8%
|
21.2%
|
|
|
|
Administration
expenses
|
$
|
12.0
million
|
$
|
10.2
million
|
Selling
expenses
|
$
|
3.6 million
|
$
|
3.8
million
|
|
|
|
(Gain) loss on NPi
equity investment
|
($
|
4.0
million)
|
$
|
0.5
million
|
Other expenses
(income)
|
$
|
0.6
million
|
($
|
0.5
million)
|
Unrealized foreign
exchange (gain) loss
|
($
|
0.9
million)
|
$
|
6.2
million
|
|
|
|
Net income
(loss)
|
$
|
7.5
million
|
($
|
1.3
million)
|
|
|
|
Net income (loss)
(basic and diluted) per share
|
$
|
0.28
|
($
|
0.05)
|
|
|
|
Adjusted
EBITDA:
|
|
|
|
|
|
Lotteries
and charitable gaming
|
$
|
19.8
million
|
$
|
14.0
million
|
Diamond Game
|
|
3.5
million
|
2.1 million
|
|
|
|
Total adjusted
EBITDA
|
$
|
23.3
million
|
$
|
16.1
million
|
SELECTED FINANCIAL
INFORMATION
|
(millions of
dollars)
|
Three month
ended
|
Three months
ended
|
|
|
March 31,
2021
|
March 31,
2020
|
|
|
(unaudited)
|
(unaudited)
|
Sales
|
$112.2
|
$102.2
|
Cost of
sales
|
87.7
|
80.5
|
Gross
profit
|
24.5
|
21.7
|
|
|
|
Administration
expenses
|
12.0
|
10.2
|
Selling
expenses
|
3.6
|
3.8
|
(Gain) loss on NPi
equity investment
|
(4.0)
|
0.5
|
Other expenses
(income)
|
0.6
|
(0.5)
|
Income from
operations
|
12.3
|
7.7
|
|
|
|
|
Foreign exchange
loss
|
0.5
|
6.1
|
Interest
expense
|
1.1
|
1.6
|
Income before income
taxes
|
10.7
|
0.0
|
|
|
|
Income
taxes:
|
|
|
Current
|
4.3
|
2.2
|
Future
reduction
|
(1.1)
|
(0.9)
|
|
3.2
|
1.3
|
Net income
(loss)
|
$7.5
|
($1.3)
|
Adjustments:
In
|
|
|
Amortization and
depreciation
|
9.4
|
7.6
|
Interest
|
1.1
|
1.6
|
Unrealized foreign
exchange (gain) loss
|
(0.9)
|
6.2
|
Acquisition
costs
|
0.5
|
0.7
|
Litigation
settlement
|
2.5
|
0.0
|
Income
taxes
|
3.2
|
1.3
|
|
|
|
Adjusted
EBITDA
|
$23.3
|
$16.1
|
|
|
|
|
|
March 31,
|
December
31,
|
|
|
2021
|
2020
|
|
|
|
|
Total
Assets
|
$464.7
|
$404.6
|
Total Non-Current
Liabilities
|
$186.5
|
$191.3
|
|
|
|
|
Results of Operations – Three months ended March 31, 2021
During the three months ended March 31,
2021, Pollard achieved sales of $112.2 million, compared to $102.2 million in the three months ended
March 31, 2020. Factors
impacting the $10.0 million sales
increase were:
- A higher instant ticket average selling price, due primarily to
a positive customer sales mix, in the first quarter of 2021
compared to the first quarter of 2020 increased sales by
$6.0 million. In addition, an
increase in instant ticket volumes in 2021 increased sales by
$1.1 million. Higher sales from
Michigan iLottery also increased
revenue in the first quarter of 2021 by $3.6
million as compared to 2020. Partially offsetting these
increases were lower ancillary lottery products and services sales
which decreased revenue by $2.6
million in 2021. Lower license product sales and a decrease
in retail merchandising product sales in the first quarter of 2021
reduced sales of ancillary lottery products, partially offset by
the addition of NGL and increased sales of digital and loyalty
products.
- In the beginning of the first quarter of 2021 a number of
jurisdictions had closed the retail establishments where our
charitable gaming products are sold and Diamond Game egaming
machines are placed due to COVID-19. However, most of these
jurisdictions reopened by the end of the quarter and Pollard's
sales of pull-tab tickets reached record highs in March, generating
higher charitable gaming sales of $2.3
million. Diamond Game revenue increased $1.9 million as compared to 2020 primarily due to
the acquisition of Compliant.
- During the three months ended March 31,
2021, Pollard generated approximately 70.1% (2020 – 68.5%)
of its revenue in U.S. dollars including a portion of international
sales which are priced in U.S. dollars. During the first quarter of
2021, the actual U.S. dollar value was converted to Canadian
dollars at $1.273, compared to a rate
of $1.317 during the first quarter of
2020. This 3.3% decrease in the U.S. dollar value resulted in an
approximate decrease of $2.7 million
in revenue relative to the first quarter of 2020. In addition,
during the quarter the value of the Canadian dollar weakened
against the Euro resulting in an approximate increase of
$0.4 million in revenue relative to
the first quarter of 2020.
Cost of sales was $87.7 million in
the first quarter of 2021 compared to $80.5
million in the first quarter of 2020. The increase of
$7.2 million in cost of sales was
primarily a result of the addition of Compliant and NGL, and a full
quarter of mkodo's operations in 2021. In addition, higher
Michigan iLottery sales and
increased charitable game sales volumes further increased cost of
sales. These increases were partially offset by the reduction of
costs related to license product sales.
Gross profit was $24.5 million
(21.8% of sales) in the first quarter of 2021 compared to
$21.7 million (21.2% of sales) in the
first quarter of 2020. This increase of $2.8 million in gross profit was primarily a
result of the increase in Michigan
iLottery sales, the addition of Compliant and the higher instant
ticket average selling price. These increases were partially offset
by reduced license product sales. The gross margin percentage in
the first quarter of 2021 was higher than 2020 primarily as a
result of increased Michigan
iLottery sales, the addition of Compliant and the higher instant
ticket average selling price. These increases were partially offset
by lower license product sales and NGL having a negative impact on
our overall margin percentage.
Administration expenses increased to $12.0 million in the first quarter of 2021 from
$10.2 million in the first quarter of
2020. The increase of $1.8
million was primarily a result of the addition of NGL and
Compliant, in addition to increased compensation to support
Pollard's growth strategies, as well as higher incentive payments.
Partially offsetting these increases were a reduction in travel
related costs in 2021 due to COVID-19 and lower acquisition
costs.
Selling expenses decreased to $3.6
million in the first quarter of 2021 from $3.8 million in the first quarter of 2020. The
decrease was primarily due to the reduction in travel related costs
due to COVID-19.
Pollard's share of income from its 50% owned iLottery joint
venture, NeoPollard Interactive LLC ("NPi"), increased to
$4.0 million in the first quarter of
2021 from a loss of $0.5 in the first
quarter of 2020. This $4.5 million
increase was primarily due to the increase in revenue in 2021.
Contracts held by NPi experienced significant organic growth, in
addition to the added sales increase from the Virginia Lottery
operation which added e-Instants on July 1,
2020. As well, NPi's contract with Alberta Gaming, Liquor
& Cannabis ("AGLC"), went live with a limited product launch on
September 30, 2020. Additionally, the
substantial jackpots for POWERBALL® and Mega
Millions® which were won in the latter half of
January 2021, further added to the
increase in sales in the first quarter of 2021 as compared to
2020.
Other expenses increased to $0.6
million in the first quarter of 2021 compared to other
income of $0.5 million in the first
quarter of 2020. This change in other expenses of $1.1 million was due to Pollard entering into an
agreement for a one-time payment of $2.5
million to settle all aspects of certain litigation
regarding a patent dispute relating to our instant ticket
production. The settlement payment was incurred to eliminate
substantial future legal costs and will resolve all issues relating
to the patent and the future business operations of Pollard. In
addition, the $0.5 million reduction
in the EBITDA support agreement, which expired on June 30, 2020, added to the change in other
expenses. These increases in other expenses were partially offset
by the $1.9 million of Canada emergency wage subsidy ("CEWS")
recognized in the first quarter of 2021.
The net foreign exchange loss was $0.5
million in the first quarter of 2021 compared to a net loss
of $6.1 million in the first quarter
of 2020. The 2021 net foreign exchange loss consisted of a
realized foreign exchange loss of $1.4
million, as a result of foreign currency denominated
accounts receivable collected being converted into Canadian dollars
at unfavorable foreign exchanges rates. The realized foreign
exchange loss was partially offset by the unrealized foreign
exchange gain of $0.9 million,
primarily a result of the decreased Canadian equivalent value of
U.S. dollar denominated accounts payable and long-term debt due to
the strengthening of the Canadian dollar relative to the U.S.
dollar.
The 2020 net loss was a result of the Canadian dollar weakening
significantly relative to the U.S. dollar in the month of March,
which generated a large unrealized foreign exchange loss of
$6.2 million due to the large balance
of U.S. dollar denominated accounts payable and long-term debt
incurred with the acquisitions of U.S. based businesses over the
prior few years.
Adjusted EBITDA increased to $23.3
million in the first quarter of 2021 compared to
$16.1 million in the first quarter of
2020. The primary reasons for the $7.2
million increase in Adjusted EBITDA were the increase in our
share of income from our joint venture, NPi, of $4.5 million and the increase in gross profit of
$4.6 million (net of amortization and
depreciation). Higher Michigan iLottery revenues, the addition of
Compliant and higher instant ticket average selling price
contributed to the increase in gross profit, which were partially
offset by the reduction in license product sales. In addition, the
change in other expenses (net of litigation settlement) further
increased Adjusted EBITDA by $1.4
million. These increases were partially offset by the
increase in administration expenses (net of acquisition costs) of
$2.0 million and the higher realized
foreign exchange loss of $1.5
million.
Interest expense decreased to $1.1
million in the first quarter of 2021 from $1.6 million in the first quarter of 2020
primarily as a result of lower interest rates in 2021.
Amortization and depreciation, including depreciation of
property and equipment and the amortization of intangible assets,
totaled $9.4 million during the first
quarter of 2021 which increased from $7.6
million during the first quarter of 2020. The increase of
$1.8 million was primarily as a
result of the addition of Compliant and NGL, including the
amortization and depreciation relating to the identifiable assets
acquired, including intangible assets and property, plant and
equipment.
Income tax expense was $3.2
million in the first quarter of 2021, an effective rate of
30.4%, which was higher than our domestic rate of 27.0% due
primarily to the tax effect of unrecognized non-capital losses not
being recorded and non-deductible expenses. Partially offsetting
these increases in effective rate were the lower federal income tax
rates in the United States.
Income tax expense was $1.3
million in the first quarter of 2020, which was higher than
the recovery expected based on Pollard's domestic rate of 27.0%.
This increased expense was due primarily to the impact of foreign
exchange and certain non-tax-deductible expenses.
Net income was $7.5 million in the
first quarter of 2021 compared to net loss of $1.3 million in the first quarter of 2020.
The primary reasons for the increase in net income of $8.8 million were the increased gross profit
generated from Michigan iLottery
of $1.9 million and the increased
contribution from our share of NPi joint venture of $4.5 million. In addition, the decrease in the
foreign exchange loss of $5.6 million
and the decrease in interest expense of $0.5
million further contributed to the increase in net income.
The increase in gross profit of $0.9
million, net of Michigan
iLottery, also increased net income in the quarter. These increases
were partially offset by an increase in administration expenses of
$1.9 million, the increase in other
expenses of $1.1 million and the
increase in income taxes of $1.9
million.
Net income (loss) per share (basic and diluted) increased to
$0.28 per share in the first quarter
of 2021 from ($0.05) per share in the
first quarter of 2020.
iLottery
Pollard and its iLottery partner, Neogames S.A. ("Neogames"),
provide iLottery services to the North American Lottery market. In
2013, Pollard was awarded an iLottery contract from the Michigan
Lottery. As a result, Pollard entered into a contract with Neogames
to provide its technology in return for a 50% financial interest in
the operation. Under IFRS, Pollard recognizes its 50% share in the
Michigan Lottery contract in its consolidated statements of income
in revenue and cost of sales.
In 2014 Pollard, in conjunction with Neogames, established
NeoPollard Interactive LLC ("NPi"). All iLottery related customer
contracts, excluding the Michigan Lottery iLottery contract, have
been awarded to NPi. Under IFRS, Pollard accounts for its
investment in its joint venture, NPi, as an equity investment.
Under the equity method of accounting, Pollard recognizes its share
of the income and expenses of NPi separately as (gain) loss on
equity investment.
SELECT iLOTTERY RELATED
FINANCIAL INFORMATION
|
(millions of
dollars)
|
|
|
|
|
|
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
|
2021
|
2020
|
2020
|
2020
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales – Pollard's share
|
|
|
|
|
|
|
Michigan
iLottery
|
$8.4
|
$8.6
|
$9.5
|
$10.3
|
$5.1
|
NPi
|
9.9
|
6.1
|
3.1
|
2.2
|
1.2
|
|
|
|
|
|
|
Combined
sales
|
$18.3
|
$14.7
|
$12.6
|
$12.5
|
$6.3
|
|
|
|
|
|
|
Income (loss) before profit share and income taxes –
Pollard's share
|
|
|
|
|
|
|
Michigan
iLottery
|
$4.0
|
$4.5
|
$5.4
|
$6.5
|
$2.1
|
NPi
|
4.0
|
1.6
|
0.8
|
(0.3)
|
(0.5)
|
|
|
|
|
|
|
Combined income
before profit share
|
|
|
|
|
|
and income taxes –
Pollard's share
|
$8.0
|
$6.1
|
$6.2
|
$6.2
|
$1.6
|
Beginning in the second quarter of 2020, with the onset of
COVID-19, revenues from Pollard's contract with the Michigan
Lottery increased substantially. Contracts held by NPi also
experienced significant organic growth, in addition to the sales
increase from the Virginia Lottery operation which added e-Instants
on July 1, 2020. As well, NPi's
contract with Alberta Gaming, Liquor & Cannabis ("AGLC"), went
live with a limited product launch on September 30, 2020. The substantial
jackpots for POWERBALL® and Mega
Millions® awarded in the latter half of
January 2021 further increased sales
in the fourth quarter of 2020 and the first quarter of
2021.
Outlook
The retail sales of instant tickets in the United States continue to set record
levels for many lotteries and we see no indications of this trend
changing in the near future. Many of the state lotteries are
seeing retail sales growth, compared to pre-COVID periods, growing
in the 20-30% range or higher. We are not seeing this strong
growth outside the United States,
where other countries are dealing with different challenges during
the pandemic. As noted previously, increases in retail sales
do not necessarily translate to the same volume growth for instant
ticket manufacturers like Pollard, as factors like higher price
points generate increased retail sales without fully proportionate
increases in volumes of tickets. However, we are seeing
increases in order volumes from many of our U.S. customers. In
addition, we expect the trend of increased sales of premium and
proprietary products related to higher price point instant tickets
to continue, helping to increase our average selling price and
related margins.
iLottery sales continue to grow overall. More mature markets
like Michigan are returning to
sales levels experienced prior to the large jackpot activity in
late Q4 2020 and early Q1 2021, notwithstanding the significant
increase in competition from online casinos and sports betting in
Michigan. We continue to see
strong organic growth from newer iLottery markets such as
Virginia and Alberta. The lottery industry shows
significant interest in iLottery and we are focused on maintaining
our leading market position when new opportunities arise. Although
we expect new states to adopt iLottery, we are taking a long-term
approach, considering the lottery industry's slower, cautious
approach to adopting new sales channels.
COVID-19 continues to be a significant factor despite the
expanding vaccine efforts around the world. In our financial
results we continue to see our charitable gaming and Diamond Game
business impacted negatively when jurisdictions impose shutdowns,
and other retail restrictions, which in turn reduces our
sales. Should these restrictions continue, or even expand in
other jurisdictions, our revenue and profitability will continue to
be impacted negatively.
Despite some of these negative impacts on our charitable gaming
and Diamond Game business units, we continue to be very positive
about the underlying strength of these markets. When the
retail environment is open, as is mostly the case now, the consumer
demand for pull-tabs and related products is extremely
strong. Diamond Game operations is experiencing the same
phenomenon, very high consumer demand where the product offering is
available. This provides us with great confidence going
forward that the underlying charitable gaming and Diamond Game
markets are very resilient.
Our focus remains on the safety and health of our Pollard team
members during this pandemic and making our work processes as
efficient as possible in conjunction with ongoing COVID-19 safety
standards. We have implemented state of the art policies and
procedures to maximize the safety of our environment including
social distancing, remote working from home, wearing of masks,
electronic contact tracing, daily health monitoring and elimination
of all non-essential visitors from our locations, as well as
encouraging everyone to get a vaccine.
The outlook for our markets remains very positive, with strong
underlying consumer demand for both our lottery and charitable
gaming products prevalent through most of our customers.
iLottery is an exciting growth opportunity for both lotteries that
have introduced this product offering, through organic growth and
increased penetration, and the remaining lotteries who have yet to
enter this distribution channel. Lotteries and charities are
focusing on expanding ways to reach their customers and generate
more proceeds to distribute to good causes, and Pollard's breadth
of products and solution offerings have been developed to assist
these organizations in achieving their goals.
SOURCE Pollard Banknote Limited