Momentum has carried over into the new year for Pollard Banknote, according to the company’s Q1 trading update, as revenue continues to grow although profit did slow.
The B2B iLottery technology supplier informed its TSX-listed investors that revenue for the opening three months of the year had reached $124.9m, an increase of 9.4% from Q1 2022 ($113.9m).
However, an increase in operating expenses, with admin expenses being the single largest at $13.4m ($12,6m), contributed to declines in adjusted EBITDA, net income and gross profit, with the former standing at $18.6m, down 2% from $19m the year prior.
Meanwhile, net income fell 25% from $6.4m to $4.8m and gross profit dropped 21% from $21.6m to $17.1m, with overall income from operations falling 18% to $7.6m ($9.3m). His marks a continuation of a trend from 2022, when revenue grew 5.1% but EBITDA and net income dipped.
However, the group remains confident due to the aforementioned growth in revenue, particularly citing ‘significant growth’ for its ilottery operations, which registered income before taxation of $11.5m, up 48% on 2022 results of $5.9m.
John Pollard, Co-CEO of Pollard Banknote, said: “Our overall financial results for the first quarter of 2023 reflected the underlying strong demand experienced for all of our products and solutions for the lottery and charitable gaming markets and, notwithstanding the inflationary head winds impacting our instant ticket segment, provide a foundation for continued growth throughout 2023 and beyond.
“In a number of markets including charitable gaming, eGaming systems and iLottery, we recorded solid earnings and remain confident these results will continue as we move through 2023.”
Pollard acknowledged that there have been continued ‘major challenges’ for the group’s instant ticket business, citing the impact of ‘significant cost increases in paper, ink, packaging and freight prices in Q1.
He added, however, that there is ‘strong demand’ for the group’s offerings, pointing to growth in combined sales during the quarter of 14%, and adding that ‘consumer demand remained very strong in all of our lines of business’.
The Co-CEO continued: “Charitable gaming witnessed robust demand for all its products, including pull-tabs and bingo paper, with revenue increasing almost 15% when compared to 2022 for paper products, and eGaming systems which experienced a 25% year-over-year growth in sales.
“The market continues to absorb increased selling prices to offset inflationary cost increases in our manufacturing inputs for charitable gaming, allowing our gross margins in these areas to remain strong.”
On instant ticketing, the firm believes that it will see a beneficial impact ‘gradually’ of its repricing strategy as a means to offset inflationary input cost increases, expecting this to kick in throughout 2023 and beyond.
Pollard concluded: “We remain confident our repricing strategy will allow us to ultimately return to our historic margins. All of our product and solution offerings remain in high demand by our customers, and ultimately the end consumers.
“We are very optimistic this demand will continue and believe our strong partnership with our lottery and charitable gaming customers will allow us to help them continue to grow and generate significant funds for their good causes.”
The firm’s second Co-CEO, Doug Pollard, added that despite a ‘softening retail environment’, instant tickets remain ‘a very popular offering’ and began to rebound to positive growth during the quarter.
Looking ahead, Doug Pollard stated that the firm is hopeful that interest and renewal of iLotery products across the US will ‘develop into bid opportunities’, which Pollard Banknote may be able to capitalise on.
“We remain very confident in the future of iLottery, both in the US and internationally,” he continued. “Over the past two years we have invested significant resources into the development of our own state-of-the-art iLottery platform and expanded iLottery game content library, and we are very excited to provide this solution to the lottery world when future opportunities present themselves.
“We believe our extensive experience, flexible approach and unique technology will prove itself a leading solution for new and existing iLottery operations and we are actively engaged now in opportunities in the European market.”