11 REPORT REVENUE Takeaways: • Revenue has grown significantly since launching the Wyoming Lottery. In 2017, total revenue was $25,342,940. Since 2014, total revenue is $76,055,242. All revenue has come from ticket purchases through a variety of statewide retail outlets. Previously (before WyoLotto existed), this revenue left Wyoming. • 2016 was an anomaly due to unusually high Powerball sales from a billion-dollar jackpot run. Large jackpots hugely impact sales forecasts—both for the positive (when jackpots get big), and for the negative (when jackpots stay small). GOVERNOR’S REPOR T:NOVEMBER 2017 2 2016 Expenses Breakdown Transfer to 6.2% Retailer Commission 3: Validations 6.1% Lottery Vendor 1 1.9% Operating Budget 20.8% EXPENSES 2017 Expenses Breakdown Transfer to 1 0.4% Retailer Commission 8n Validations 6.1 Lottery Vendor 1 1.9% Operating Budget 14.3% Prize Pool 55.1% 2015 Expenses Breakdown Retailer Commission 3: Validations 6.4% Lottery Vendor 1 1 Operating Budget 26.2% Prize Pool 57.2% Prize Pool 55.6% 2017 3 EXPENSES Takeaways: • The WyoLotto operating budget has decreased every year since 2015. • By state statute, at least 45% of net proceeds from lottery sales must go to the prize pool. In 2015 and 2016, approximately 55% each year went to the prize pool. In 2017, this rose to 57%. • Transfers to the state started in 2016. In that first year, we transferred 6.16% of total revenue back to Wyoming, and in 2017, this increased to 10.42%. Transfers to the state reached an all time high in 2017. GOVERNOR’S REPOR T:NOVEMBER 2017 4 OPERATING EXPENSES • Contract Services includes legal, marketing, and accounting • Business Expenses includes board expenses, recruitment, insurance, and membership dues • Gaming Expenses includes gaming vendor (Intralot), commissions, and validation bonuses • Prizes paid increased due to projected increase in revenue GOVERNOR’S REPOR T:NOVEMBER 2017 5 Annual Operating Expenses - of Total QPERATING EXPENSES GL 2016 {Budgeted} 2016 of Total 201? 201? Total of 2016 2016 of Total 2015 2015 of Total M4 2014 of Total Prizes Paid 1 6,05?,624 66% 62% 16,366,230 65% 6,?46,433 54% NA NA Gaming Expenses 4,660,666 20% 4,56?,636 20% 6,005,66? 21% 3,206,?03 16% NA NA Business Expenses 233,?6? 1% 316,030 1% 241 ,?55 1% 1?2,546 1% 166,644 15% Contract Services 1,464,002 6% 2,116,361 6% 2,202,241 6% 3,640,611 20% Facilities 6 Equipment 35?,666 1% 240,666 1% 236,0?5 1% 156,026 1% 61,602 Operations 160,303 1% 135,654 1% 146,522 1% 106,?45 1% 61,146 6% Salaries 6 Bene?ts 1,166,166 5% 1,32?,636 6% 1,210,25? 4% 1,10?,34? 6% 461,506 36% Total 24,402,621 100% 23,203,611 100% 100.00% 16,166,616 100% 1,266,660 100.00% - I . I a OPERATING EXPENSES • Facilities and Equipment increase reflect purchase of new promotional vehicle for traveling the state for community events. • Operations increase reflect increased office space and necessary office equipment GOVERNOR’S REPOR T:NOVEMBER 2017 7 OPERATING EXPENSES Notes & Takeaways: • 2018 Prizes Paid shows an estimated 11% increase based on an increase in revenue forecasted • 2018 Gaming Expenses shows an estimated 7% growth based on an increase in revenue forecasted • 2018 Facilities & Equipment shows an estimated 49% increase based on the purchase of a new WyoLotto vehicle • Operations increase reflect increased office space and necessary office equipment GOVERNOR’S REPOR T:NOVEMBER 2017 8 OPERATING EXPENSES Takeaways: • Prizes paid have increased every year since launch (from 54% in 2015 to a projected 66% in 2018). • Total operating costs have remained at approximately 1% of the total budget every year. • Prizes paid increased year over year (with a big jump in 2016 due to a billion-dollar jackpot). • Salaries and benefits have remained pretty consistent with no big jumps or changes. Since launch year (2015), they have remained around 4-6% of the total budget. • Contract services was highest in our launch year and has steadily decreased since then, year over year. GOVERNOR’S REPOR T:NOVEMBER 2017 9 CQMPENSATIQN WyoLotto Job Positions and Compensation Position Annual Salary CEO $191,616 COO $114,000 - $137,004 CFO $72,900 - $109,356 Security Manager $66,396 - $64,000 Players Services and $67,992 - $60,004 Marketing Manager Player Services $32,620 - $56,400 Specialist Draw Coordinator $54,996 - $66,996 PT Draw Coordinator $3,600 Executive Assistant $26,206 - $54,996 2017 10 COMPENSATION CEO Annual Compensation State Comparison We chose to report on these lotteries because they are not state agencies, just like the Wyoming Lottery. Recently Launched Lotteries and CEO Salaries* We chose to report on these lotteries because they were launched in the last 15 years, like WyoLotto. These are the starting salary figures for each state. GOVERNOR’S REPOR T:NOVEMBER 2017 11 marketing & advertising Takeaways: • In launch year, marketing and advertising was higher because of the cost to create a new brand, install marketing in all retailers statewide, create a player base, and launch a multi-million-dollar entertainment company from the ground up. GOVERNOR’S REPOR T:NOVEMBER 2017 12 marketing & advertising Takeaways: • Since launch, WyoLotto has drastically decreased its marketing spend while moving into stabilization periods. The spend compared to total expenses has gone from 6.5% in 2016 to 4.5% in 2017, and is projected at 4% for 2018. GOVERNOR’S REPOR T:NOVEMBER 2017 13 MARKETING IUDGET 2017 Warehouse Twenty One Marketing Spend Premetiens I F'ubie Re atiens Media Buy Seeia Media Management I I Campaign Creative 2017 14 MARKETING IUDGET 2017 WyeLette Marketing Spend New Game Swag General Swag 4.89:; i 4.4% Internal Marketinng'mmatiena 0.3% Eventaf?penaerahipa E1 .3945 New Game Testing New Game Retailer Training 2.5% New Game Giveawayr Misc. Marketing 1.2% ?is; New Game Giveawayr 2 15.3. 4.49:, New Game itiehiele 5.2% 2017 15 marketing Budget Breakdown Takeaways: • In Wyoming, some items live within our marketing and advertising budget that are not always noted as marketing items. Those include public relations and social media management. • We also launched a new game for Wyoming in 2017—Lucky for Life. Expenses for the media buy, campaign creative and promotions for that launch are reflected in those items that are not a part of our routine marketing expenses. • Our total routine marketing for 2017 was $858,500. For 2018, our routine marketing budget is now at $650,000. • To support sales and maintain awareness with Wyoming lottery players, we develop marketing campaigns and creative. Those campaigns are then supported through a media buy, which we work with local media outlets throughout Wyoming to carry the message. Those local outlets are critical to our success, and we value contributing to those businesses through advertising. GOVERNOR’S REPOR T:NOVEMBER 2017 16 marketing & advertising 2016 continued as a launch year for WyoLotto as we added Lucky For Life to our portfolio, and we were also developing the brand and building our players for Cowboy Draw. GOVERNOR’S REPOR T:NOVEMBER 2017 17 marketing & advertising 2016 Marketing & Advertising Dollars Spent Per Person* *Cost per person is estimated based on population 18 and over for each state from US Census Bureau 2016 population estimates. GOVERNOR’S REPOR T:NOVEMBER 2017 18 marketing & advertising Takeaways: • More heavily populated states require a smaller percentage of total budget go toward marketing and advertising. • Lotteries with a smaller population and smaller annual operating budget tend to spend somewhere around 4% of their annual budget on marketing and advertising, which WyoLotto keeps an eye on to help benchmark their non-launch routine spend. • Lotteries with larger revenue (more products to offer) and bigger operating budgets spend a smaller percentage of their overall budget on marketing and advertising. A smaller percentage of massive sales is sufficient to reach their population. • Wyoming has a smaller operating budget and revenue stream because we have fewer games than other states. In addition, we require more marketing and advertising because we have fewer games to organically draw players. • Newer lotteries, especially those with smaller populations, cost more to get established. • Advertising in Wyoming costs more than states with a larger population, because it costs more to reach a smaller population across a large geographic footprint. • WyoLotto’s spend per person falls in line with what other states are spending and falls under the average spend per person across the states compared. GOVERNOR’S REPOR T:NOVEMBER 2017 19 marketing & advertising Marketing and Advertising Vendor Our agency of record for all marketing and advertising is Warehouse Twenty One (W21), located in Cheyenne, Wyoming. The Board of Directors selected this firm to create the name and brand identity for the organization, and then later joined the Lottery executive team in selecting them as the agency of record for all marketing in 2014. W21 won the contract via an RFP open competition selection method. Since then, W21 has been a WyoLotto business partner helping establish, promote, and grow the brand and business. We have a five year contract with W21 with the option to renew based on Lottery’s satisfaction with their performance. We review our marketing performance throughout the year and also quarterly with the Board of Directors. GOVERNOR’S REPOR T:NOVEMBER 2017 20 BOARD EXPENSES This data represents Board of Director compensation, which includes travel, per diems, meetings, and event participation. According to Statute: Each member shall only receive compensation from the corporation for each day or part of a day in which engaged in the performance of their official duties at the same salary and per diem provided members of the state legislature under W.S.28-5-101 and shall be reimbursed for actual and necessary expenses incurred in the performance of their official duties. Members shall receive no other compensation from the corporation. Takeaways: • Annual board expenses started higher in launch years and have steadily decreased since then. We keep board expenses to a minimum and are proud of the overall reduction. GOVERNOR’S REPOR T:NOVEMBER 2017 21 GIVING BACK TO WYOMING Takeaways: • Giving back to Wyoming communities through quarterly revenue transfers is a vital part of our mission. So far, we have transferred over $5 million since launch. We are committed to giving back as much as possible each quarter. • We significantly exceeded the McGee, Hearne & Paiz Auditor calculation both years (FY16 by $445,000 and FY17 by $500,000). These over-transfers are due to our commitment to transferring as much as possible to the state each quarter. • July 2017 marked our first full year of transfers. Therefore, a “True-Up” was necessary, which resulted in a lower Q4 transfer. FY17 transfers increased 30% over FY16. • Multi-State Lottery Association (MUSL) required the Mega Millions game change, which resulted in costs being incurred that were not planned for and funded by FY17 operating budget. • April 2016’s transfer occurred after the billion-dollar Powerball jackpot, so we naturally saw massive sales. This was the first transfer of its size. This Powerball jump allowed us to pay off our startup loan and transfer a large amount to the state. GOVERNOR’S REPOR T:NOVEMBER 2017 22 GIVING BACK TO WYOMING Takeaways: • These transfers are inclusive of all distributions made to Wyoming cities, towns, and counties. • A side benefit of giving back is that Child Support is seized if the winner is delinquent in support payments. The total seized for Child Support Services thus far is $33,240. • The Wyoming State Legislature updated the statute during its 2017 session to change how the state transfers WyoLotto funds across the state. The statute initially established that revenue transfers would go to Wyoming’s 99 cities, towns, and 23 counties based on the sales tax formula. Now, those same cities, towns, and counties will receive allocations based on lottery ticket sales for each municipality. These changes went into effect July 2017 beginning with the October 2017 transfer. GOVERNOR’S REPOR T:NOVEMBER 2017 23 WYOMING IS WINNING Takeaways: • Since 2015, we have seen 2,269,922 WyoLotto players win $33,505,280! N/A N/A GOVERNOR’S REPOR T:NOVEMBER 2017 24 Approximate Total Retailer Commission by County (August 2014 - Present) RETAILERS Takeaways: • There are 451 WyoLotto retailers around the state. • With over $5 million paid in retailer commissions, WyoLotto is giving small businesses around the state a new revenue source they didn’t have before the Lottery was formed. GOVERNOR’S REPOR T:NOVEMBER 2017 25 McGee. Hearne 8: Successful Financial Successful Financial Successful Financial Paiz Statement Audit by Statement Audit by Statement Audit by MHP MHF MHP Security -MUSL Security Audit -lndependent -MUSL Audit Aug. checks Security Audit 2014 cf Lcttery Retailers -Ccn1pliance checks -Ccn1pliance checks -Annual RNG cf Lcttery Retailers cf Lcttery Retailers Certi?caticn -Annual RNG -Annual RNG Certi?caticn Certi?caticn lillulti-State Lottery MUSL MUSL MUSL Asscciaticn (MUSL) Checks cf Vendcr Checks cf Vendcr Checks cf Vendcr Facmdes Facmdes Facmdes 2017 26 COMPLIANCE Takeaways: Financial Security Audit • The Wyoming Lottery avoids long-term debt, which results in unnecessary interest expense leading to higher transfers to the state. • MUSL Security Audits and Independent Security Audits were successful. • A positive Net Position after only 3 years in operation. • Without Lucky for Life’s new game expenses, FY17 Operating Expenses would have decreased by 19%. • The annual RNG inspection showed proper certification revealing there was no tampering. • MUSL mandates that all vendor locations must have security inspections each year. Each location is secure and meets the MUSL requirements. • The Lottery maintains a limited staff to maximize available funds for transfer. GOVERNOR’S REPOR T:NOVEMBER 2017 27 CORPORATE RESPONSIBILITY Problem Gambling Leading up to the much-anticipated Wyoming Lottery Corporation launch in 2014, key lottery staff members organized a team to follow the Wyoming Legislature’s mandate to promote safe gambling in Wyoming. Shortly thereafter, in partnership with the Wyoming Department of Health, the Wyoming Lottery formed the Wyoming Responsible Gaming Coalition—a team of key stakeholders from a variety of industries across the state. In those early days, the coalition worked hard to define priority initiatives that would carry its purpose forward, including a benchmark study to gauge problem gambling in Wyoming, a pilot study to research problem gambling in Fremont County, and the development of a responsible gaming certification program designed in coordination with the University of Duluth. Today, the coalition is actively pursuing projects that encourage responsible gaming and help limit the addictive behaviors commonly associated with gambling, thus breaking the dependency cycle. In the next few years, the coalition intends to prioritize research, as well as strengthen marketing and communications to spread the message that gaming can and should be fun, not damaging. The Wyoming Responsible Gaming Coalition (WRGC) exists to foster smart gaming in Wyoming through statewide collaboration and creativity, and to encourage people to gamble responsibly. In partnership with the Department of Health, the Wyoming Lottery Corporation contributes financially and is an active participant in the newly created WRGC. While we are statutorily required to provide up to $200,000 annually from unclaimed prizes to create programs for responsible gaming, we also believe supporting those who struggle with gambling in our state is critical to show we care about Wyoming’s players. We support responsible gaming.​ GOVERNOR’S REPOR T:NOVEMBER 2017 28 CORPORATE RESPONSIBILITY Wyoming Lottery sponsored and participated in the following events: • Fridays on the Plaza (Cheyenne) Local Sponsorships Since startup, Wyoming Lottery has worked to get our brand recognized by players throughout the state. The Wyoming Lottery sponsored the biggest state events, including Cheyenne Frontier Days. As we now transition into a corporation, we set a goal to be in as many communities as possible throughout the state and to focus on our relationship with retailers and smaller communities. This summer we visited nine communities across the state, some of which had multiple events (14 in total). As a result, we totaled $26,729 in sales for all events. • Wyoming Downs (Evanston) • Sheridan Rodeo (Sheridan) • Flying H Polo Club (Big Horn) • Park County Fair (Powell) • Sweetwater County Big Show (Rock Springs) • Beartrap Music Festival (Casper) • Sundance Burnout (Sundance) • Wyoming State Fair (Douglas) • Townsquare Media Eclipse Event (Casper) • Edgefest (Cheyenne) WyoLotto is also a major sponsor of University of Wyoming Athletics. We sponsor athletes through the Scholarship Circle and provide entertainment at football and basketball games throughout the season. GOVERNOR’S REPOR T:NOVEMBER 2017 29 2017 CQNTIIUTIQNS T0 WYQMING 2017 Wyethtb Contributions to Wyoming Revenue Transfer Retailer Win ninge Sponsorships! Donations Media Problem Gambling Tetal $1 551995.99 $19,513,294.99 $93,251.99 $299,999.99 $15,544,856.51 2017 Contributions to Wyoming Sponsorships/D on atio ns Problem Gambling Media Retailer Commissions Revenue Transfer Winnings 2017 contibutions to wyoming Takeaways: • WyoLotto gives back to Wyoming in multiple ways. Not only do we make direct revenue transfers to Wyoming, which is distributed according to statute, we also contribute to the state through winners, retailer commissions, sponsorships, and media dollars in the state. • When we have a media buy, we spend those dollars with local media outlets across Wyoming. Those outlets are local businesses and relationships that we value. Those relationships helped us to share our message as we established our brand. • From the $25,426,564.00 in 2017 total sales, our retailers received $1,557,965.99 in commissions we pay out to them. Those Wyoming businesses have an additional source of revenue and an increase in traffic from lottery players that were previously going out of state. • We also sponsor events in communities across Wyoming, including local fairs and rodeos, Thankful Thursdays, and music festivals. • Our winners are mostly Wyomingites, who spend their winnings locally, keeping those dollars in state. • Lastly, we contribute to the wellness of Wyoming through our support of the Wyoming Responsible Gaming Coalition, a committee of Wyoming businesses, nonprofits, state entities, and mental health providers that support responsible gaming around the state. GOVERNOR’S REPOR T:NOVEMBER 2017 31 Getting the Message Out • We will continue to provide updates through statewide outreach to key stakeholders about our revenue, giving back, corporate responsibility, contributions to problem gambling and other important information we included in this report. We plan to provide those updates immediately through: • Legislator meetings • Local Government Offices • Local Chambers of Commerce, Lion’s Club, Elk’s, Rotary, etc. • Wyoming Association of Municipalities meetings • Colorado Wyoming Petroleum Marketers Association meetings • We also plan to provide information continuously through legislative outreach, including: • Attend key meetings during 2018 Legislative Session • Attend Legislative Session • Host a Legislative event during session • Attend 2018 Wyoming County Commissioners Association (WCCA) Legislative Conference - February 14 - 16, 2018 • Attend 2018 Wyoming Governor’s Hospitality & Tourism Conference- February 26 - 27, 2018 • Wyoming Lodging and Restaurant Association (WLRA) update meetings GOVERNOR’S REPOR T:NOVEMBER 2017 32 SOURCES Compensation (Pg 10-11) Marketing & Advertising (Pg 12-20) Giving Back (Pg 22-23) • http://trib.com/wyolotto-salary-sheet-released-tuesdayjune/pdf_9b204e9f-e73c-5b32-ac6a-d39de76fc759.html • https://www.lottery.nd.gov/_elements/pdf/ financial-statements/Audit16.pdf • • http://media.bizj.us/view/img/8478922/georgialottery-2015-salaries-above-100000.pdf • http://leg.mt.gov/content/Publications/ Audit/Report/15-30B.pdf • http://www.arkansasonline.com/ news/extras/lotterysalaries/ • http://govdocs.nebraska.gov/epubs/ A9000/B171-2015.pdf • http://www.myajc.com/news/state--regionalgovt--politics/more-staff-payouts-for-georgialottery/Mz9g8bFdTkaLQL2jJBJ2bJ/ • https://nelottery.com/media/annualreport16.pdf • http://www.courier-journal.com/story/news/ local/2017/03/24/660-reported-applicantskentucky-lottery-ceo-job/99590274/ https://gas-cdn.lotteryservices.com/ content/dam/portal/pdfs/about-us/georgialottery-corporation-2016-fs-final.pdf • https://www.arktimes.com/ArkansasBlog/ archives/2012/02/11 bishop-woosley-chosen-as-arkansas-lottery-director https://www.kylottery.com/export/kylmod/ galleries/documents/KYLottery_annual_report/ KLC-Final-Financial-Statement-FY-16.pdf • http://www.arklegaudit.gov/pdf. aspx?id=SALC08516%20-%20Arkansas%20 Lottery%20Commission • • Wyoming State Treasurer’s website for Lottery Proceeds distribution reports, https://statetreasurer. wyo.gov/Finances.aspx GOVERNOR’S REPOR T:NOVEMBER 2017 33