Jumbo sees revenue rise in FY23 despite “volatile” jackpots

In the 12 months to June 30, 2022, only five jackpots were larger than AU$50.0 million (£25.5/€29.7 million/US$32.1 million). According to Jumbo, there were significantly fewer than 13 last year, which meant there was less incentive for players to buy tickets.

Jumbo said the first and third quarters were relatively subdued, reflecting the third and fourth lowest average per jackpot period in four years. In the second quarter, however, there were Powerball jackpots of $100 million and a record $160 million.

The retailer also saw a decline in lottery ticket sales in FY23 for only the second time in a decade. However, CEO and founder Mike Veverka was largely optimistic, praising the resilience of the company and lotteries in general and predicting further growth in FY24.

“This is not the first time we have seen unfavorable jackpot developments,” Veverka said. Fortunately, our flexibility allowed us to quickly adapt to the operating environment and optimize our cost base.

“Good cost discipline and our ability to drive strong ticket sales on major jackpots, particularly in June for the $60.0 million and $100.0 million Powerball jackpots, led us to exceed our initial expectations were able to exceed the EBITDA margin.

“Our player health metrics remain robust despite the unfavorable jackpot profile. Lotteries remain a spending category that continues to prove resilient to economic downturns, including the current environment of higher inflation and interest rates.”

The decline in sales cannot stop the lottery’s growth

Full-year consolidated revenue reached $118.7 million, up 13.9% from $104.3 million a year earlier. Total transaction value (TTV) – the gross amount generated from the sale of goods and services during the period – also rose 29.1% to $851.9 million.

Specifically, the lottery was by far the top source of revenue, contributing $91.3 million, up 0.2% from $91.1 million in FY22. This was despite a decline in lottery TTP by 2.5% to $449.1 million, a 24% decrease in new players and a 0.5% decrease in active customers.

Jumbo said the increase in sales in its lottery business reflected its product mix and the decision to change prizes in May 2023.

Managed Services Acquisitions Drive Sales Growth at Jumbo

Managed Services was Jumbo’s core growth segment. Revenue increased 289.6% for the year to $18.7 million, driven by the 2022 acquisitions of Stride Management and StarVale. TTV also rose 547.8% to $206.0 million.

In June last year, the group acquired Canada-based lottery management provider Stride Management. It also added UK third-party lottery manager and digital payments company StarVale Group to its portfolio in November 2022.

Stride contributed $8.1 million to managed services revenue, StarVale contributed $6.9 million. US dollars, while another $3.6 million came from the British company Gatherwell.

In Software-as-a-Service (SaaS), external revenue increased by 15.3% to $8.7 million. Jumbo licenses its digital lottery platform “Powered by Jumbo” to government and not-for-profit lottery operators in Australia and globally. Underlying TTV rose 17.6% to $196.0 million.

The bottom line is that net profit increases by 7.2%

Looking at expenses, cost of sales increased 24.0% to $18.0 million, while other expenses, excluding share-based compensation, increased 18.1% to $41.8 million.

Stock-based compensation was $1.1 million and depreciation and amortization was $8.6 million. Jumbo also recorded depreciation and amortization of $2.7 million related to acquired intangible assets and net interest of $212,000.

Pre-tax profit therefore amounted to US$46.6 million, an increase of 3.1% compared to the previous year. Jumbo paid $15.1 million in taxes and also accounted for $2.2 million in after-tax depreciation of acquired assets. With this, net profit stood at $33.7 million, up 7.2% from $31.5 million in FY22.

Additionally, earnings before interest, taxes, depreciation and amortization (EBITDA) rose 7.6% to $58.1 million.

CEO Veverka expects further growth for Jumbo

“The response to our pricing changes has been positive and supports our premium pricing and premium service model,” said Veverka. “These changes, combined with more normal jackpot history, continued growth in online penetration and the latest Lottery Corporation service fee increase, mean we are well positioned for FY24 and beyond.”

“The strength of our balance sheet, strong cash generation profile and debt headroom provide flexibility to support further organic growth and our strong M&A pipeline, while market repurchase remains an effective means of returning excess capital to shareholders.”