Lottery products and services provider Pollard Banknote has published its financial results for the three months ended June 30, 2020, reporting strong net income and record adjusted EBITDA.
Outlining the headline figures, Co-CEO John Pollard (pictured) said that despite negative impacts from COVID-19 during Q2 the firm was able to achieve “exceptional financial results”.
“Our pre-tax income was $12.4m, adjusted EBITDA attained a record $19.8m, and revenue still achieved a robust $91.5m notwithstanding significantly lower charitable gaming and Diamond Game revenue due to the pandemic,” he told investors.
Pollard explained that the start of the pandemic, from mid-March to mid-April, saw the overall lottery market experience a reduction of approximately 15-20% in retail sales of instant tickets. “Subsequent to this period however, the lottery market underwent significant growth in retail sales of instant tickets which has continued to date,” he said.
In addition, ilottery sales began to increase significantly from the start of the pandemic as consumers increased their online purchases of lottery products, with overall ilottery revenue approximately doubling during the second quarter compared to the second quarter of 2019.
And while the firm’s charitable gaming revenue was initially severely impacted, during the latter part of the quarter this market was returning to pre-COVID-19 levels, as jurisdictions began to reopen.
“After reduced retail sales experienced in the early part of the pandemic, instant ticket sales at retail have rebounded significantly, setting records in many lottery jurisdictions,” said Pollard. “During the four weeks starting mid-March lotteries generally experienced a 15-20% reduction in retail sales of instant tickets. Since the beginning of May retail sales have grown by approximately 20-25% when compared to the same periods last year.”
“These higher retail sales had not yet translated into additional orders for Pollard in Q2, as our production schedule is usually about two to three months ahead of lotteries releasing the game onto the market. In fact, Pollard’s instant ticket volumes were slightly lower than the second quarter last year, based on the early pandemic situation and timing of orders among our clients.
“Offsetting this slightly lower volume were higher average selling prices due to the mix of work sold. However, if the robust sales growth of instant tickets at retail continues, this will have a positive impact on our volumes and revenue in the upcoming quarters.”
Turning his attention to the charitable gaming business, Pollard conceded that this had been severely impacted beginning in mid-March, as most retail outlets selling these products and services were shut down.
“Revenue was reduced to close to zero through the end of April,”he explained. “Beginning in May, as jurisdictions slowly reopened, our revenue began to return and continued to recover throughout June, as bars, legions and bingo halls began to reopen. For the quarter, our total revenue of both these businesses reached $7.6m, only about 32% of the level achieved in the same period last year.”
“On a positive note, in jurisdictions that have reopened we are seeing similar or higher individual sales data, suggesting previous consumer behavior surrounding the purchase of these products is returning. Continuing through July, additional jurisdictions have reopened to the point that our charitable gaming revenue has now nearly returned fully to pre-COVID levels. We caution, however, that potential future closures could have a negative impact on our revenue if jurisdictions return to retail shutdown scenarios.”
Doug Pollard, Co-CEO, commented: “The pandemic had a beneficial impact on our ilottery operations as consumers turned to this distribution method to purchase lottery products in levels never experienced before. Our ilottery revenue approximately doubled in the second quarter compared to the same period last year, and with a high proportion of fixed costs, our margin grew significantly. All of the ilottery jurisdictions in our joint venture operation experienced substantial revenue growth during the pandemic and this growth has been sustained to date.”
“As we go forward into the third quarter, we continue to see strong retail sales for our instant tickets and ilottery products. However, in these uncertain times it is unknown if these sale levels will continue as alternative forms of entertainment and gaming, such as land-based casinos, reopen.
“With respect to charitable gaming and egaming, we are currently seeing a number of jurisdictions contemplate reversing their reopening of their economies and potentially mandating closures of retail outlets that sell our pull-tabs and bingo paper, and operate our revenue sharing egaming machines. Increased restrictions in these businesses would have a negative impact on our charitable gaming and egaming revenue and cash flow.”
