Jumbo sees revenue and earnings rise despite “volatile” jackpots in FY23

During the 12 months to 30 June 2022, only five jackpots were greater than AU$50.0m (£25.5/€29.7m/US$32.1m). This, Jumbo said, was significantly less than 13 in the previous year creating less incentive for players to buy tickets.

Jumbo said the first and third quarters were relatively subdued, reflecting the third and fourth lowest average value per jackpot periods, respectively, in four years. In contrast, Q2 included Powerball jackpots of $100m and a record $160m.

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

“This isn’t the first time we’ve seen an unfavourable run of jackpots,” Veverka said. Pleasingly, our nimbleness means we were able to quickly adapt to the operating environment and flex our cost base. 

“Good cost discipline and our ability to drive strong ticket sales at large jackpot levels, particularly in June for the $60.0m and $100.0m Powerball jackpots, meant we were able to exceed our original EBITDA margin expectations.

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

Sales decline fails to halt lottery growth

Group revenue for the full year reached $118.7m, which was 13.9% higher than $104.3m in the previous year. Total transaction value (TTV) – the gross amount received from the sale of goods and services rendered in the period – also jumped 29.1% to $851.9m.

Breaking this down, lottery was by far the main source of revenue, contributing $91.3m, up 0.2% from $91.1m in FY22. This was despite lottery TTP declining 2.5% to $449.1m, with new players falling 24% and active customers slipping 0.5%.

Jumbo said the revenue increase from lottery reflects its product mix and the decision to change prices in May 2023.

Managed services acquisitions drive revenue growth at Jumbo

Turning to managed services, this was core segment of growth for Jumbo. Revenue hiked 289.6% to $18.7m for the year, driven by the acquisitions of both Stride Management and StarVale in 2022. TTV was also 547.8% higher at $206.0m.

The group acquired Canada-based lottery management provider Stride Management in June last year. It also added UK external lottery manager and digital payments business StarVale Group to its portfolio in November 2022.

Stride contributed $8.1m in managed services revenue and StarVale $6.9m while a further $3.6m came from UK-facing Gatherwell.

As for software-as-a-service (SaaS), external revenue increased 15.3% to $8.7m. Jumbo licenses its Powered by Jumbo digital lottery platform to government and charity lottery operators in Australia and worldwide. Underlying TTV was 17.6% higher at $196.0m.

Bottom line net profit rises 7.2%

Looking at spending, cost of sales increased 24.0% to $18.0m, while other expenses, not including share-based payments climbed 18.1% to $41.8m.

Share-based payments hit $1.1m and depreciation and amortisation $8.6m. Jumbo also noted $2.7m in amortisation related to acquired intangible assets and $212,000 in net interest.

As such, pre-tax profit amounted to $46.6m, up 3.1% from the previous year. Jumbo paid $15.1m in tax and also accounted for $2.2m in the amortisation of acquired assets after tax. This left bottom-line net profit at $33.7m, a 7.2% increase from $31.5m in FY22.

In addition, earnings before interest, tax, depreciation and amortisation (EBITDA) climbed by 7.6% to $58.1m.

CEO Veverka expects further growth for Jumbo

“The response to our pricing changes has been positive, supporting our premium price and premium service model,” Veverka said. “These changes combined with a more normal run of jackpots, continued growth in online penetration and the final step-up in The Lottery Corporation service fee, 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 pipeline of M&A, while the on-market buy back remains an effective way of returning surplus capital to shareholders.”