Pollard Banknote Limited has released its financial results for the three months and year ended December 31, 2020, reporting record revenue, net income and adjusted EBITDA.
For Q4 2020, the company’s revenue reached $103.7m, the highest amount it has ever achieved in any Q4 period. It is also up by 4% from the same period last year (2019: $100.0m).
Its net income came in at $12.2m, an increase of 165% from the previous year (2019: $4.6m) while its adjusted EBITDA of $20.3m reflects the positive revenue and margin trends and is up 43% on last year (2019: $14.2m).
Pollard Banknote noted that its core instant ticket business ‘remained strong, driven by positive average selling price (ASP)’ and that sales from its combined ilottery operations increased to $14.7m, up from the $5.6m achieved in 2019.
However, lotteries/charitable gaming and Diamond Game revenue, while robust at the beginning of the quarter, was negatively impacted by retail closures brought on by COVID-19 in later stages.
Co-CEO John Pollard commented: “We are extremely proud of our Pollard team, and their efforts and successes during 2020. We not only maintained a safe and healthy workplace in the face of COVID-19, but Pollard was able to attain records in a number of key financial metrics including revenue, net income and adjusted EBITDA among others. For the first time in our history, revenue exceeded $400m, reaching $414.1m for the year.”
“Our business has traditionally been able to translate adjusted EBITDA into cash flow and 2020 continued this trend, with almost $70.6m generated from operations before our investments in working capital, CAPEX and acquisitions. Indeed, our net debt only increased slightly year over year despite two acquisitions during the year, effectively financing a large portion of these investments with internally generated funds.”
“Our fourth quarter continued the strong results generated in the first nine months of 2020, with robust revenue in both lottery and ilottery operations more than offsetting some negative results in charitable gaming and Diamond Game due to COVID-19 related retail shutdowns in certain key jurisdictions starting mid-quarter.”
He continued: “After an initial drop at the onset of COVID-19 in mid-March, retail lottery sales rebounded quickly and have maintained this strong level of sales throughout all of 2020. The majority of North American lotteries have seen double-digit retail sales growth versus 2019, week after week, as consumer demand increased considerably compared to growth levels experienced in recent years. Similar sales strength was experienced by many international lottery organisations.”
As for 2020 on the whole, Pollard Banknote established a new record for revenue at $414.1m, up 4% from last year (2019: $397.8m), despite the negative COVID-19 related impact on its lotteries/charitable gaming and Diamond Game sales.
Lotteries/charitable gaming and Diamond Game revenues were negatively impacted by COVID-19 related retail shutdowns, reducing revenue by $23.0m year over year. Net income came in at $33.3m, an increase of 51% on the year (2019: $22.0m).
Meanwhile, adjusted EBITDA achieved a new record at $80.6m, 34% higher than the previous year (2019: $60.2m). Cash flow from operations generated $59.7m during the year, a new annual record, while sales from its combined ilottery operations increased to $46.1m (2019: $18.9m).
Throughout the year, Pollard Banknote obtained mkodo in February, successfully renewed several key contracts including extending its deal with the Michigan ilottery, and it acquired Compliant Gaming LLC and Next Generation Lotteries SA.
Doug Pollard, Co-CEO, added: “Our initial investments in the ilottery business go back more than seven years, and 2020 saw this commitment pay dividends as the ilottery business grew dramatically. Beginning early in the second quarter revenue generated from this business, operated through our 50% owned joint venture, grew significantly as consumers were drawn to this distribution outlet and unique play aspects of the lottery style games.
“Our fifth operation started up on September 30, 2020, in Alberta and one of our existing accounts, Virginia, added einstant games to their existing draw based game lineup starting July 1, 2020. All of these factors helped boost revenue and margins to new levels throughout 2020.
“The combined results of our Michigan joint operation, whose results are proportionately consolidated into the overall Pollard results on a line by line basis, and our joint venture NeoPollard Interactive LLC contributed $20.1m to our income before income taxes in 2020, up from $3.4m in 2019. Our share of the underlying revenue of the combined iLottery operations increased by 144% in 2020 compared to 2019.”
He continued: “Despite our organization’s general resilience to the effects of COVID-19, aspects of our business have nonetheless been negatively impacted, like most companies. Some of our ancillary businesses like retail merchandising have seen reduced sales as lotteries reduced their discretionary expenditures.
“Large scale retail shutdowns between March and June and, then again, certain shutdowns in key jurisdictions starting mid-November also had significant negative impacts on our charitable gaming and Diamond Game revenue and profitability. We are pleased to see when these charitable gaming retail sites were open during 2020, consumer demand for our products has been very strong, even exceeding pre-COVID levels. Many of these jurisdictions which closed in late 2020 have now reopened in early 2021.”
“The safety and wellbeing of our employees remains our main focus throughout 2020 and continues into 2021. Early in 2020, we implemented extensive health and safety practices in all of our facilities including widespread remote work practices, mandatory temperature and health checks, mask-wearing and the use of electronic contact tracing tools to manage social distancing throughout our operations. We continue to follow all of the local health authority proclamations and will continue to support our team members with rigorous health and safety measures in all of our locations.”
John Pollard concluded: “2020 has been a year unlike all others, and our belief and faith in our business and our staff has been confirmed through our many achievements. Our business set a number of financial records during the year and, more importantly, we achieved many long term foundational objectives through product development, acquisitions and expansion of customer relationships.
“Both our existing business and newly acquired businesses have exciting expansion opportunities and we believe the markets that we focus on, lottery and charitable gaming, will continue to present Pollard with significant opportunities for growth.”