Pollard Banknote’s Earnings Call: Record Sales Amid Challenges

Pollard Banknote ((TSE:PBL)) has held its Q4 earnings call. Read on for the main highlights of the call.

Pollard Banknote’s recent earnings call painted a picture of both triumph and tribulation. The company celebrated record sales and successful contract implementations, while also grappling with manufacturing challenges and foreign exchange losses. The sentiment was balanced, reflecting both strong positive growth and notable challenges.

Record Financial Results and Sales Growth

Pollard Banknote reported record sales of $557.1 million, with combined sales reaching $665.9 million. This growth was attributed to higher average selling prices, increased sales of ancillary lottery products, and a strong performance in charitable games. The company also achieved a record adjusted EBITDA of $114.5 million, marking an increase of $23.2 million from the previous year. Income from operations saw a significant rise of 51%, totaling $69.8 million.

Kansas iLottery Contract and Rapid Implementation

The company was awarded the Kansas iLottery contract, which went live on February 13, 2025. This marked the fastest iLottery implementation in North America, with results aligning with expectations. This rapid deployment highlights Pollard’s capability in swiftly executing large-scale projects.

NeoPollard Interactive Joint Venture Success

Pollard’s joint venture, NeoPollard Interactive, successfully extended its contract with the Virginia Lottery until October 2028 and launched the West Virginia iLottery contract in 2024. These achievements underscore the joint venture’s ongoing success and strategic importance.

Significant Investments and Acquisitions

Pollard Banknote invested over $54 million in capital expenditures and intangibles, focusing on press upgrades and digital game content development. The company completed two acquisitions, enhancing its portfolio with a leading bingo marker manufacturer and a popular linked electronic bingo game.

Manufacturing Issues and Reduced Instant Ticket Volumes

The fourth quarter was marred by significant manufacturing issues, leading to high spoilage costs. Instant ticket volumes decreased by $7.9 million compared to the previous year, primarily due to lower orders and the timing of orders.

Increased Costs and Lower Gross Profit Margins

Pollard faced increased costs of sales by $7.2 million, driven by higher charitable gaming volumes and inefficiencies in instant ticket production. This resulted in a decrease in gross profit by $2.4 million, with the gross profit percentage dropping from 18.3% to 16.0%.

Foreign Exchange Losses

The company reported a net foreign exchange loss of $4.4 million in the fourth quarter, a stark contrast to a gain of $2.9 million in the previous year. This was primarily due to the weakening Canadian dollar.

High Income Tax Expense

Pollard recorded an unusual income tax expense of $8.8 million in the fourth quarter, with an effective tax rate of 125.2%. This was largely due to one-time withholding taxes on intercompany dividends.

Forward-Looking Guidance

Looking ahead, Pollard Banknote remains optimistic about 2025. The company expects stable instant ticket volumes and increased margins from repriced contracts. Despite challenges in the fourth quarter, the company is buoyed by its record financial achievements, including a significant operating cash flow of $73.9 million, which supports further investments and acquisitions.

In conclusion, Pollard Banknote’s earnings call highlighted a year of remarkable achievements tempered by significant challenges. While the company celebrated record sales and successful contract implementations, it also faced manufacturing issues and foreign exchange losses. Looking forward, Pollard remains optimistic about its growth prospects in 2025, driven by stable ticket volumes and improved margins.