GTECH Not Hitting Numbers On Hoosier Lottery

It looks like GTECH will have to see a big turnaround in Hoosier Lottery revenues in the last two months of the fiscal year in order to meet its target under its contract with the state lottery agency in order to avoid payment penalties. The private operator is required to produce net income of $256 million to the Hoosier Lottery during the 2014 fiscal year under the terms of its contract. GTECH reported to the Lottery Commission yesterday, revenues through the end of April were $852.4 million. That number will have to reach $1.06 billion by the end of June in order to reach its $256 million net income target and avoid making shortfall payments to the state.

GTECH will have to exceed its budgeted sales numbers by 14% according to the IBJ's Kathleen McLaughlin to meet goal. It's currently running 3% below forecast. Nonetheless, GTECH staff told the Lottery Commission it can still meet its goal by the end of the fiscal year based upon "favorable trends":

The company assumes the Powerball and Mega Millions jackpots will continue to roll over, generating higher sales through June 30. The company also expects a recent rise in sales of the game Cash 5 to continue, and for scratch-ticket sales to continue at historic highs.

Yes, roll overs week after week push up prize payout amounts and cause more consumers to purchase Lottery tickets. My fear with state-run lotteries has always been that the urge to reach higher and higher revenue goals provides a strong incentive by the operators to rig number drawings to cause more roll overs. To my knowledge, there's no evidence that this has occurred in the past with any state-run lotteries, but it's certainly something to keep an eye on, particularly since the operation of lotteries like Indiana's are increasingly being taken over by private operators who face large penalties if revenues don't reach goals. GTECH has a contract with the state of Illinois to operate its lottery and has faced penalties of up to $40 million for failing to meet goal the past two years.