1

Preservation of HOPE Scholarship Program

Joint House & Senate Study Committee

Debbie AlfordCEO/President

September 14, 2015

• Nov. 1992 - Georgia voters approve a constitutional amendment to create the Georgia Lottery; first ticket sales began on June 29, 1993

• 36th lottery in the United States; now 44 + DC• GLC is established as a body corporate and politic which shall be deemed to

be an instrumentality of the state and a public corporation OCGA 50-27-4• Net proceeds of lottery games shall be used to support improvements and

enhancements for educational purposes and programs and that such net proceeds shall be used to supplement, not supplant, existing resources for educational purposes and programs

• The GLC is governed by a Board of Directors composed of seven members appointed by the Governor and approved by the State Senate

• Legislative Oversight Committees: House Regulated Industries/Senate Economic Development

• Receives no state appropriations; operating dollars come from revenues; currently operate at 10.5% of net revenues

• GLC transfers profit to the state treasury quarterly; does not administer the Lottery for Education Account or reserve funds

• In 2013, HB 487 transferred regulatory oversight of COAM’s (coin operated amusement machines) in Georgia to the GLC

2

Georgia Lottery Corporation (GLC)

On average, the GLC raises approximately $2.7 Million every day for Georgia’s HOPE & Pre-K Programs

To date, the GLC has raised more than $16.5 Billion for education

• More than 1.7 Million students have attended college on a HOPE Scholarship or Grant

• More than 1.4 Million four-year-olds have attended a lottery-funded Pre-K Program

3

Students Benefit

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Return to Education

362633

500428

543236

581439

555073

646703

683827

691672

726202

751557

782724

802240

822400

853550

867686

872082

883878

846106.298249998

901328.290290001

927478.347160002

945096.637939998

980500.83343

$100,000

$300,000

$500,000

$700,000

$900,000

$1,100,000

Return to Education Since Inception($ in Thousands)

$138 $43 $38 -$26 $91 $37 $8 $35 $25 $31 $20 $20 $31 $14 $5 $11 -$37 $ 55 $26 $18 $35

$ Change YOY

4

$ in millions

Over $16.5 Billion Returned to Education

5

FY14 FY15 FY16 (B)

Traditional $940,097 $969,581 $989,811

COAM $5,000 $10,920 $19,318

Total $945,097 $980,501 $1,009,129

GLC Transfer to Lottery For Education ($ in Thousands)

Worldwide Rankings • #17 total sales • #5 total per cap

sales • #10 instant sales • #2 instant per cap

sales

Source - LaFleur’s 2015 World Lottery Almanac

National Rankings • #2 total per cap sales • #2 instant per cap

sales • #4 per cap returns to

beneficiaries

Source- LaFleur’s Magazine (September/October 2014)

6

Worldwide and National Lottery Rankings

7

FY 2015 Top Profit per Capita (PPC) Lotteries

($ in Thousands)

Lottery Began Years Population Net Sales Profit Profit Per Cap

Massachusetts 1972 43 6,750 $5,011,000 $983,500 $145.70

New York 1967 48 19,750 $7,251,000 $2,203,000 $111.54

Georgia 1993 22 10,100 $3,908,000 $969,600 $96.00

Connecticut 1972 43 3,600 $1,144,000 $319,700 $88.81

Maryland 1973 42 5,980 $1,762,000 $525,000 $87.79

Pennsylvania 1972 43 12,790 $3,820,000 $1,061,000 $82.96

Michigan 1972 43 9,910 $2,728,000 $762,800 $76.97

Florida 1988 27 19,890 $5,580,000 $1,500,000 $75.41

South Carolina 2002 13 4,830 $1,405,000 $349,000 $72.26

Virginia 1988 27 8,330 $1,844,000 $533,800 $64.08

New Jersey* 1970 45 8,940 $3,001,000 N/A N/A

NOTE: Population data obtained from 2014 U.S Census (rounded). FY15 sales and profit data obtained directly from specific lotteries.

* FY15 actual profit unavailable at this time. FY14 profit per cap was $107.94.

8

Top PPC Lotteries YOY $ Change

($ in Thousands) YOY

Lottery FY14* FY15** $ Change % Change

South Carolina $330,700 $349,000 $18,300 5.5%

Georgia $940,097 $969,600 $29,503 3.1%

Michigan $746,820 $762,800 $15,980 2.1%

Massachusetts $974,560 $983,500 $8,940 0.9%

Maryland $521,100 $525,000 $3,900 0.7%

Florida $1,495,000 $1,500,000 $5,000 0.3%

Connecticut $319,500 $319,700 $200 0.1%

Virginia $538,600 $533,800 ($4,800) (0.9%)

Pennsylvania $1,079,600 $1,061,000 ($18,600) (1.7%)

New York $2,302,760 $2,200,000 ($102,760) (4.5%)

New Jersey $965,010 N/A N/A N/A

*Based on data obtained from La Fleur's 2015 World Lottery Almanac except for Connecticut, Maryland, and New York which came from their financial statements.

** Unaudited FY15 data received directly from the specific lottery.

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FY 2015 Top Lotteries Based on $ Profit($ in Thousands)

Lottery Began Years Population Net Sales ProfitProfit Per

Cap

New York 1967 48 19,750 $7,251,000 $2,203,000 $111.54

Florida 1988 27 19,890 $5,580,000 $1,500,000 $75.41

California 1985 30 38,800 $5,500,000 $1,350,000 $34.79

Texas 1992 23 26,960 $4,529,700 $1,242,702 $46.09

Pennsylvania 1972 43 12,790 $3,820,000 $1,061,000 $82.96

Massachusetts 1972 43

6,750 $5,011,000 $983,500 $145.70

Georgia 1993 22 10,100 $3,908,000 $969,600 $96.00

Michigan 1972 43

9,910 $2,728,000 $762,800 $76.97

Ohio 1974 41 11,600 $2,743,100 $739,900 $63.78

Virginia 1988 27

8,330 $1,844,000 $533,800 $64.08

Maryland 1973 42

5,980 $1,762,000 $525,000 $87.79

Illinois* 1974 41 12,880 N/A N/A N/A

New Jersey* 1970 45

8,940 $3,001,000 N/A N/A

NOTE: Population data obtained from 2014 U.S Census (rounded).

* FY15 actual profit unavailable at this time. Illinois FY14 profit was $742M. New Jersey FY14 profit was $965M.

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Top Lotteries Based on $ Profit Comparison of Change in Profit

YOY

Lottery FY14* FY15** $ Change % Change

Georgia $940,097 $969,600 $29,503 3.1%

Michigan $746,820 $762,800 $15,980 2.1%

Texas $1,220,720 $1,242,702 $21,982 1.8%

California $1,328,000 $1,350,000 $22,000 1.7%

Massachusetts $974,560 $983,500 $8,940 0.9%

Maryland $521,100 $525,000 $3,900 0.7%

Florida $1,495,000 $1,500,000 $5,000 0.3%

Virginia $538,600 $533,800 ($4,800) (0.9%)

Pennsylvania $1,079,600 $1,061,000 ($18,600) (1.7%)

Ohio $764,900 $739,900 ($25,000) (3.3%)

New York $2,302,760 $2,200,000 ($102,760) (4.5%)

Illinois $741,900 N/A N/A N/A

New Jersey $965,010 N/A N/A N/A

*Based on data obtained from La Fleur's 2015 World Lottery Almanac, except for Maryland and New York which came from their financial statements.**Based on unaudited data obtained from specific lotteries.

($ in Thousands)

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(All figures in Thousands except for PPC)

FY 2015 Southeast Region PPC & $ Profit

Lottery Began Years Population Net Revenue Profit Profit Per Cap SE Rank in

Total $ Profit

Georgia 1993 22 10,100 $3,908,000 $969,600 $96.00 2

Florida 1988 27 19,890 $5,580,000 $1,500,000 $75.41 1

South Carolina 2002 13 4,830 $1,405,000 $349,000 $72.26 5

Virginia 1988 27 8,330 $1,844,000 $533,800 $64.08 3

Kentucky 1989 26 4,410 $886,930 $236,101 $53.54 7

Tennessee 2004 11 6,550 $1,373,000 $347,785 $53.10 6

North Carolina 2006 9 9,940 $1,970,000 $522,000 $52.52 4

Louisiana 1991 24 4,650 $453,800 $167,000 $35.91 8

NOTE: Population data obtained from 2014 U.S Census data.

12

Southeast Region Comparison of Change in Profit

($ in Thousands)

Lottery FY14 FY15 $ Change % Change

South Carolina $330,700 $349,000 $18,300 5.5%

Kentucky $226,130 $236,101 $9,971 4.4%

North Carolina $503,100 $522,000 $18,900 3.8%

Georgia $940,097 $969,600 $29,503 3.1%

Tennessee $337,270 $347,785 $10,515 3.1%

Florida $1,495,000 $1,500,000 $5,000 0.3%

Virginia $538,600 $533,800 ($4,800) (0.9%)

Louisiana $170,700 $167,000 ($3,700) (2.2%)

YOY

Based on data obtained from La Fleur's 2015 World Lottery Almanac and unaudited data obtained from specific lotteries.

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Who Plays the Lottery

The demographic profile of who has ever played the Georgia Lottery reflects the U.S. Census Bureau’s data of Georgia’s population regarding gender, ethnicity and income. Of those Georgians who have ever played the Georgia Lottery:

• Approximately half are male and half are female• Approximately half are under the age of 45• Approximately half are married• Approximately half are Caucasian• Approximately half have an annual household income of

$50,000 or more

(source: 2012 Bantam Group)

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Jackpot Games: Mega Millions

Powerball Jumbo Bucks Lotto

Daily Games: Fantasy 5 Cash 3

Cash 4 Georgia FIVE

All or Nothing KENO!

Games: $1, $2, $3, $5, $10, $20, $30. Diggi Games

Our Products

Class A: kiddie rides, arcade games, juke boxes, pool tables, claw machines

Class B: line-up, match-up video games with some skill (points carry over)

15

Georgia Lottery CorporationP&L Statements FY2011 – FY2015 (Traditional Lottery)

($ in Thousands)

Gross Revenue 3,597,922 3,834,674 3,912,156 4,022,201 4,195,151

Tickets Provided as Prizes (262,316) (274,782) (276,225) (282,279) (291,684)

Other Revenue 4,793 4,591 4,539 4,536 4,479

Total Net Revenue 3,340,399 100.0% 3,564,483 100.0% 3,640,470 100.0% 3,744,458 100.0% 3,907,946 100.0%

Prize Expense 2,120,835 63.5% 2,289,811 64.2% 2,332,453 64.1% 2,413,844 64.5% 2,528,871 64.7%

Operating Expense 373,458 11.2% 373,344 10.5% 380,539 10.5% 390,517 10.4% 409,494 10.5%

Retailer Commissions 230,929 6.9% 228,713 6.4% 233,222 6.4% 239,322 6.4% 249,008 6.4%

Vendor Fees 68,202 2.0% 70,942 2.0% 74,395 2.0% 76,390 2.0% 84,479 2.2%

Personnel 23,389 0.7% 23,774 0.7% 24,454 0.7% 25,160 0.7% 26,240 0.7%

Advertising 21,130 0.6% 20,563 0.6% 18,796 0.5% 19,563 0.5% 21,113 0.5%

Other Gaming 18,874 0.6% 19,164 0.5% 19,270 0.5% 21,133 0.6% 18,222 0.5%

G&A 10,934 0.3% 10,188 0.3% 10,402 0.3% 8,949 0.2% 10,432 0.3%

Net Proceeds for Education 846,106 25.3% 901,328 25.3% 927,478 25.5% 940,097 25.1% 969,581 24.8%

FY11 FY12 FY13 FY14 FY15

16

FY11 FY12 FY13 FY14 FY15 -

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

Net Scratcher Sales Net Draw Sales

$3.3B

$3.6B $3.6B$3.7B

$3.9B

67.4%67.4% 67.2%

67.8% 68.4%

32.6%32.6%

32.8% 32.2%31.6%

GLC Net Revenue & Product Mix($ in Thousands)

17

Profit Margin = 36.1%Profit Return = $500,428,000

Prize Payout % = 50.5%

Profit Margin = 24.8%Profit Return = $969,581,000

Prize Payout % = 64.7%

30.28%

69.72%

GA Portfolio Mix in FY95

Scratchers

Draw

GLC Product Mix

68.41%

31.59%

GA Portfolio Mix in FY15

Scratchers

Draw

18

Profit Margin 30.4%Profit Per Cap = $111.54

Payout = 60.6%

Profit Margin = 24.8%Profit Per Cap = $96.00

Payout = 64.7%

50.30%49.70%

NY Portfolio Sales Mix in FY15

Scratchers

Draw

GLC Product Mix vs. New York Lottery

68.41%

31.59%

GA Portfolio Mix in FY15

Scratchers

Draw

19

Existing Georgia

Mix Net Revenue Profit

Scratcher 68.4% $2,594,399 $461,301

Draw 31.6% $1,313,547 $508,280

Total Net Revenue $3,907,946 $969,581

Recalculated Georgia based on NY Product Mix

NY Mix Net Revenue Profit

Scratcher 50.3% $1,965,697 $349,514

Draw 49.7% $1,942,249 $751,558

Total Net Revenue $3,907,946 $1,101,071

Incremental Profit $131,490

Revised Profit Margin 28.2%

GLC – Recalculated Based on New York’s FY 2015 Product Mix($ in Thousands)

20

FY2011 FY2012 FY2013 FY2014 FY2015

Scratchers 243,792 257,300 260,244 266,854 278,505

Draw 18,524 17,482 15,981 15,425 13,179

TOTAL TICKETS PROVIDED $262,316 $274,782 $276,225 $282,279 $291,684

Total % of Gross Revenue 7.29% 7.17% 7.06% 7.02% 6.95%

GLC Tickets Provided as Prizes($ in Thousands)

21

FY2011 FY2012 FY2013 FY2014 FY2015

Scratchers 1,517,823 1,648,098 1,673,597 1,753,572 1,843,914

Draw 603,012 641,713 658,856 660,272 684,957

TOTAL PRIZE EXPENSE 2,120,835 2,289,811 2,332,453 2,413,844 2,528,871

Total % of Revenue 63.49% 64.24% 64.07% 64.46% 64.71%

GLC Prize Expense($ in Thousands)

22

Where We Sell

• Approximately 8,700 Retailers• GLC Direct Sales (Airport Baggage

Claim, 8 District Offices, Headquarters)

• Internet Sales ($25m FY2015) • Top performing retail outlets

located along state borders and Hartsfield-Jackson International Airport

Independent vs Corporate Retailers

23

76% of GLC Retailers are small businesses

Sales by Trade Style

In-de-pen-dent76%

Corpo-rate 24%

C-store71%

Grocery

10%

Other 19%

Retailer Trade Styles

24

Lottery # of Retailers*Avg weekly

sales/retailer

Massachusetts 8,078 $11,522

Georgia 8,700 $8,276

New Jersey 6,834 $8,183

Pennsylvania 9,157 $7,980

New York 18,000 $7,814

Florida 13,256 $7,790

Maryland 4,492 $7,381

Connecticut 2,898 $7,366

Virginia 5,259 $6,622

South Carolina 3,812 $6,356

Michigan 10,674 $4,678

* Data obtained from La Fleur's 2015 World Almanac.

Top PPC Lotteries – FY 2014 Retailer Productivity

25

Lottery # of Retailers*Avg weekly

sales/retailer

Georgia 8,700 $8,276

Florida 13,256 $7,790

Virginia 5,259 $6,622

South Carolina 3,812 $6,356

Kentucky 2,844 $5,702

North Carolina 6,774 $5,224

Tennessee 5,000 $5,073

Louisiana 2,925 $2,952

* Data obtained from La Fleur's 2015 World Almanac.

Southeast Region FY 2014 Retailer Productivity

26

GLC Operating Expenses – Retailer Commissions($ in Thousands)

FY2011* FY2012 FY2013 FY2014 FY2015

Total # of Retailers 8,490 8,496 8,500 8,700 8,665

Total Gross Sales $3,597,922 $3,834,675 $3,912,156 $4,022,201 $4,195,151

Average Weekly Sales per Retailer $7,566 $8,068 $8,236 $8,276 $8,673

Retailer Commissions $230,929 $228,713 $233,222 $239,322 $249,008

Total % of Gross Revenue 6.42% 5.96% 5.96% 5.95% 5.94%

*FY2011 included retailer cashing bonuses and incentives.

NOTE: Gross sales include sales to GLC operated retailers that do not receive commissions such as District office sales, internet sales, etc. Commission paid to qualifying retailers is 6% of their gross sales per OCGA 50-27-17.

27

FL KSM

AM

TND TX AR

OH CT

NH VT

GA

NY

WA N

EDC TN AZ IN N

CW

VOR

0

1

2

3

4

5

6

7

8

9

Lottery Retailer Commissions as % of Net Sales (FY2014)

*Source La Fleur’s 2015 World Almanac

Lottery Retailer Commissions

28

GLC Operating Expenses – Vendor Fees($ in Thousands)

FY2011 FY2012 FY2013 FY2014 FY2015*

IGT 38,599 41,080 43,066 44,808 47,959

SGI 26,606 26,110 26,638 30,174 32,312

All Other Vendors** 2,998 3,752 4,691 1,408 4,208

TOTAL VENDOR FEES $68,202 $70,942 $74,395 $76,390 $84,479

Total % of Net Revenue 2.04% 1.99% 2.04% 2.04% 2.16%

(1) Contracts for IGT and SGI end in September, 2018. Contracts were originally awarded in 2003, renegotiated in 2008 extending the contract to 2013, and again in 2011 extending the contract to September 2018.(2) IGT: Fee based on 1.15% of net sales for traditional lottery, 1.0% for e-instant content services, negotiable fee for development of premium e-instant games, marketing support, and call center support.(3) SGI: Fee based on 0.99% of instant sales.

*FY15 growth due primarily to full launch of e-instant products in the internet wagering channel and a significant increase in traditional scratcher sales.**Includes draw audit fees, shared multi-state game expenses, licensed products, miscellaneous specialty printing and on-air draw expenses.

YOY Change ($) 2,740 3,453 1,995 8,089

• Employee tenure65% over 6 years of serviceAlmost 50% over 10 years of serviceApproximately 17% over 20 years of service

• Employee turnover rateFY11 – 4.5%FY12 – 5.6%FY13 – 4.5%FY14 – 6.0%FY15 – 7.3%

29

Our Employees

Georgia Lottery Employees - Ethnic Diversity

30

Minority 66%

Non Minority 34%

Females57%

Males43%

Of the 13 individuals that comprise the GLC’s senior management team, six are minorities and four are women.

*source: Georgia Lottery Minority Business Participation Report (Dec. 1, 2014)

Georgia Lottery Employees - Gender Breakdown

Our Employees

31

# of GLC Employees  

286

287

284

288

291

298

# of COAM Employees

-

-

-

11

29

Total Employees  

286

287

284

288

302

327

FY10 FY11 FY12 FY13 FY14 FY15 16,000

17,000

18,000

19,000

20,000

21,000

22,000

18,055

17,441 17,781 17,921

18,906

20,587

GLC Operating Expenses – SalariesTotal Salary and Headcount

($ in Thousands)

32

FY10 FY11 FY12 FY13 FY14 FY15$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

$2,000,000$1,890,899

$713,247

$520,520

$246,896$170,923

$324,093

Bonuses FY 2010 – FY 2015

33

FY2011 FY2012 FY2013 FY2014 FY2015

Production $5,276 $4,370 $5,668 $5,722 $5,094Media $15,854 $16,193 $13,128 $13,841 $16,019TOTAL ADVERTSING EXPENSE $21,130 $20,563 $18,796 $19,563 $21,113

Total % of Revenue 0.63% 0.58% 0.52% 0.52% 0.54%ROI $40.04 $43.83 $49.34 $48.05 $45.92

GLC Operating Expenses – Advertising ($ in Thousands)

34

Advertising costs as % of net sales

MA

WV

MD FL NJ

TX OR OK KY AR SD MT

NM WI

MN M

E LA WA CO AZ ND NE

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Source: 2015 Lafleur’s World Almanac

35

GLC Operating Expenses - Marketing($ in Thousands)

FY2011 FY2012 FY2013 FY2014 FY2015

   

Advertising $21,130 $20,563 $18,796 $19,563 $21,113

Other Gaming 18,874 19,164 19,270 21,133 18,222

TOTAL MARKETING EXPENSE $40,004 $39,727 $38,066 $40,696 $39,335

   

Total % of Revenue 1.20% 1.11% 1.05% 1.09% 1.01%

ROI $21.15 $22.69 $24.36 $23.10 $24.65

36

FY11 FY12 FY13 FY14 FY150%

20%

40%

60%

80%

100%

General & Admin Advert. & Other Gaming Vendor Fees Retailer Commissions Prize Expense Proceeds for Education

24.8%$970M

25.3%$901M

25.5%$927M 25.1%

$940M

25.3% $846M

GLC Distribution of Net Revenues - Traditional Lottery

• By game• By price point• Based on historical trends• Incorporating strategic initiatives• New game launches and matrix

changes

37

How We Forecast Annually

38

Historical Profit Growth

GLCTop PPC

Lotteries*PPts Variance %

3 Year (FY13-15) 3.60% 1.57% 2.03 129.3%

5 Year (FY11-15) 1.57% 2.12% (0.55) (25.9%)

10 Year (FY06-15) 1.81% 1.59% 0.22 13.8%

*Based on data obtained from La Fleur's 2015 World Lottery Almanac and unaudited data from specific lotteries.

GLC vs. PPC Lotteries

• Stabilize and grow draw games• Focus on quality distribution and

inventory optimization• Expand corporate business

development, especially non-traditional locations

• Deploy mobile sales channel• Achieve operational efficiencies

39

Our Strategic Focus

40

GLC Traditional Lottery Projected Profits

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 925,000

970,000

1,015,000

1,060,000

1,105,000

1,150,000

Actual 3-Yr Avg. 5-Yr Avg. 10-Yr Avg. National Avg.

$927

$970

$940

$990

Historical Average GrowthGLC: 3 year = 3.60% 5 year = 1.57% 10 year = 1.81%PPC Lotteries (10 yr.) = 1.59%

$1,140

$1,063

$1,054

$1,053

($ in Millions)

41

Coin Operated Amusement Machine (COAM) Origination

HB 487• Signed by Governor Deal on April 10, 2013.• Transferred COAM responsibilities to the Lottery• Responsibilities include:

o Licensure of owners and operators of Class A and B COAMs

o Class A- kiddie rides, arcade games, juke boxes, pool tables, claw machines

o Class B- line-up, match-up video games with some skill (points carry over)

o Issuance of decals for COAMso Collection of license and decal fees for COAMso Implementation of a central accounting systemo Collection of net proceeds from Class B COAMso Compliance and Enforcement

42

Recent COAM Legislation

• SB 190 - July 1, 2015• Provides for licensing of manufacturers and

distributors• Mandates arbitration for licensee disputes• Creates the ability to implement staggered

licensing periods• Places a cap on Master License Holders at

220 with an auction provision• No more than 9 Class B COAMs in a location• Increases late fee for licensing

43

COAM Update – FY 2014

• Established intergovernmental agreements with GBI, DOAA and DOR

• Developed and deployed a revenue reporting system• Developed licensing criteria with integrity checks• Created online license applications• Instituted enforceable rules and regulations• Met monthly with the COAM advisory board• Wrote and awarded an RFP for the centralized gaming

system• Staffed the COAM Division• Implemented responsible gaming initiatives and doubled

the transfer to DBHDD for treatment of problem gambling from $200,000 to $400,000

• Created an anonymous “tip line” for consumers to report COAM fraud and abuse

• Brought licensing and enforcement activities in-house• Processed 8,100 Class A and B licensees with integrity

checks• Tested, certified, and deployed the centralized COAM

gaming system• On-boarded over 20,000 Class B COAMs in approximately

5,000 locations throughout Georgia• Began conducting financial sweeps of retailers• Set up a hearing/arbitration system• Increased compliance, enforcement, and education efforts

through partnerships with GBI, local law enforcement, DOAA, DOR, industry associations, and banking regulators

44

COAM Update – FY 2015

45

FY 2015 COAM Enforcement

• Almost 4,400 compliance inspections were conducted• Over 1,300 citations and warnings were issued by GLC

Compliance Inspectors- almost $1 million in fines levied• More than 340 audits of licensees were conducted• GBI served 58 search warrants, made 36 arrests, and seized

currency, bank accounts, businesses, and property• 48 retailers were suspended due to illegal activities and/or

non-compliance

46

Georgia Lottery CorporationP&L Statements FY2014-2015 (COAM)

FY14 FY15COAM REVENUE        

COAM Centralized System - 0.00% 5,910 38.68%

COAM Licensing Renewals 10,190 99.83% 8,834 57.82%

COAM Fines/Pen/Assmt Fees - 0.00% 470 3.08%

COAM NSF Fees - 0.00% 26 0.17%

COAM Other Revenue - 0.00% 0 0.00%

COAM CC Renewal Processing Fee - 0.00% 9 0.06%

COAM ACH Renewal Processing Fee - 0.00% 21 0.14%

Interest Income 17 0.17% 8 0.05%

COAM Revenue 10,207 100.00% 15,278 100.00%

COAM EXPENSES        

Personnel Costs 1,301 12.75% 1,809 11.84%

Operating Expenses 666 6.52% 1,258 8.23%

COAM Operating Expenses 1,967 19.27% 3,067 21.45%

DOR MOU Expenses 480 4.70% 27 0.18%

DOAA MOU Expenses 380 3.72% 407 2.67%

Investigations and Enforcement 472 4.62% 1,295 8.48%

Other COAM Operating Expenses 1,333 13.06% 1,729 11.32%

Total Operating Expenses 3,299 32.32% 4,797 32.77%

Gaming Expenses        

Intralot Vendor Fees - 0.00% 1,469 9.62%

Total COAM Expenses 3,299 32.32% 6,266 42.38%

Gross Proceeds for Education 6,908 67.68% 9,012 57.62%

Distribution of Retained Earnings - 0.00% 1,908 1.37%

Net Proceeds For Education 6,908 67.68% 10,920 58.99%

Proceeds Held as Retained Earnings 1,908 -

Net Transfer for Education 5,000 10,920

($ in Thousands)

47

COAM Projected Profits($ in Thousands)

FY14 FY15 FY16 FY17 FY18 FY19 FY20 -

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

5,000

10,920

19,318

22414

26074

29734

33394

COAM Actuals COAM Projected Net Proceeds

FY17-FY20 growth based on increases in Georgia Lottery fees as a percentage of net machine revenues.

COAM Fee N/A 5% 6% 7% 8% 9% 10%

48

Consolidated Projected Profits($ in Thousands)

FY14 FY15 FY16 FY17 FY18 FY19 FY20 940,000

990,000

1,040,000

1,090,000

1,140,000

1,190,000

Actuals Total Projected GLC Proceeds (3 yr)Total Projected GLC Proceeds (5 yr) Total Projected GLC Proceeds (10 yr)

$1.182B

$1.099B

$1.091B

$1.009B

49

Our MissionTo maximize revenues for HOPE and Pre-K.

Our VisionTo be recognized globally as a top performer and

innovative leader in the lottery industry and a trusted and valued partner for the state.

Our MottoWe do it for Georgia’s kids!