WINNIPEG, Aug. 6, 2019 /CNW/ - Pollard Banknote Limited (TSX: PBL) ("Pollard") today released its financial results for the three months ended June 30, 2019.

"Our second quarter generated continued strong revenue reflecting the growth in our core lottery business, particularly in higher ancillary product revenue in the iLottery and digital product lines, and the impact of our recent acquisitions," reflected John Pollard, Co-Chief Executive Officer. "Our profitability was lower than expected due mainly to a mix of instant ticket sales that was weighted toward lower average selling price and more challenging production. Not only did this reduce our gross margin percentage, it also resulted in our production volumes being slightly lower than we anticipated, notwithstanding increasing orders."

"As discussed in previous quarters, our mix of instant ticket orders can vary from quarter to quarter including different order levels from various lottery customers.  Some of our larger volume customers generate lower average selling prices and fewer premium features, resulting in lower margins. During the second quarter our mix of work was heavily weighted towards this type of product, impacting negatively our gross margin and bottom-line profitability."

"Historically our third quarter has generated higher average selling prices as we produce games for the holiday season and we expect 2019 to reflect this, both in terms of premium selling prices and increased volumes.  Our orders continue to increase and our production schedules for the remainder of 2019 are now at levels higher than seen in 2018.  In addition, our current schedule mix for the third quarter reflects a more typical seasonal mix of higher average selling prices with greater premium products including higher volumes of Scratch FX^®."

"Revenue for the second quarter remained at record levels, exceeding $97 million, while net income for the quarter was $5 million, similar to the same period last year, and Adjusted EBITDA, excluding the impact of IFRS 16, achieved $12.3 million. Our ancillary lottery products, including our digital products such as game apps, PlayOn^TM loyalty club programs, and higher iLottery results all contributed positively to our second quarter results.  Our charitable gaming business, under our American Games and International Gamco banners, continues to generate higher revenue and profit when compared to last year and the first quarter of 2019.  Increasing consumer demand for pull-tab products has been an important factor in leading this growth."

"On May 1, 2019, we completed the acquisition of Fastrak Retail (UK) Limited, one of the world's leading instant ticket dispensing and merchandising companies.  Initial feedback from the marketplace has been very positive and our teams from Schafer and Fastrak are already working together on exciting R&D initiatives and new product development.  We are looking forward to building our retail expertise through the combination of these resources."

"During the quarter we were pleased with the New Hampshire Circuit Court's decision concluding that the Wire Act in the United States did not apply to Pollard's and New Hampshire's iLottery operations, effectively confirming the current legality of Pollard's iLottery operations in the United States.  We believe there is increasing interest in iLottery operations from a number of lotteries in the United States and we expect over the long term to increase our presence in this market.  Work continues positively on our North Carolina iLottery roll-out expected to go live this fall."

"The lottery and charitable gaming industries remain very healthy," stated Doug Pollard, Co-Chief Executive Officer.  "Lotteries and other gaming organizations continue to look for increased revenue opportunities and in turn look to partners like Pollard to provide these opportunities. Pollard's stature as the thought leader for lotteries continues to grow.  Our leadership in challenging and helping to overturn the Department of Justice's Wire Act interpretation against iLottery operations was a milestone moment in Pollard's evolution as partner of choice for lotteries in the U.S. and throughout the world."

"Our level of engagement with our customers has never been higher and we continue to leverage this collaboration to not only maximize our instant ticket production opportunities, but also to expand sales of our growing lineup of ancillary products like digital apps, retail dispensing, ScanACTIV^TM in-lane sales, lottery management systems, gaming machines and of course iLottery.  Our strong standing in the industry is testament to the breadth and strength of our contract portfolio and is the foundation for our future growth."

"We are continuing to invest in our business including increasing resources dedicated to expanding and implementing our digital products across a number of lottery customers," concluded John Pollard.  "Over time we are confident our core instant ticket product line will grow profitably as we expand our market share and capitalize on our portfolio of proprietary premium products.  The lottery industry remains very robust and we are looking forward to growing our position as partner of choice to lotteries and chartable gaming organizations."

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.

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 and six months ended June 30, 2019.  These financial statements have been prepared in accordance with the International Financial Accounting Standards ("IFRS" or "GAAP").

On May 1, 2019, Pollard acquired Fastrak Retail (UK) Limited ("Fastrak").  Therefore, Fastrak's financial results have been included in Pollard's consolidated financial statements since acquisition.