Jumbo Interactive shares are down about 20% since releasing their FY21 Earnings report on the 26th of August. Whilst the group delivered a 37% increase in TTV and a 17% increase in revenue this didn’t seem to live up to many investors expectations. So we take a look into Jumbo Shares Earnings report for 2021
Jumbo Interactive FY21 Earnings
Headline results for Jumbo’s FY21 result are as follows:
- TTV up 37% to $487.0 million
- Revenue up 17% to $83.3 million
- Underlying EBITDA1 up 13% to $48.9 million
- Underlying NPAT1 up 7% to $28.3 million
- Underlying EPS1 up 7% to 45.4 cents per share
- Fully franked final dividend of 18.5 cents per share, taking the total FY21 dividend to 36.5 cents per share, up 3%
Jumbo prior to their Gatherwell and lottery SaaS offering, saw their performance very much linked to the number and size of large Powerball / OzLotto jackpots. The more jackpots and the higher value the more TTV Jumbo would typically make. This was very much a toll road style business where they would ‘clip the ticket’ on the way through taking a small margin from ticket sales.
The group entering the UK based Gatherwell and opening up a SaaS lottery system very much in our opinion is Jumbo’s attempt at de-linking their earnings result from large jackpots. However, until such time as these other segments generate meaningful TTV, we cannot expect this to eventuate.
Jumbo’s split of TTV currently seems to be ~25% linked to their SaaS offering, ~3.6% linked to their other services and the remaining attributable to their traditional lottery business. We would like to see the SaaS segment grow substantially to steady the earnings mix during high jackpot seasons.
FY21 reflects another record result for Jumbo. Importantly, while our Lottery Retailing segment is trading well without the benefit of jackpot growth, our SaaS and Managed Services segments have made a meaningful contribution to overall performanceCEO Mike Veverka on the groups FY21 result
Powered By Jumbo Segment Performance
One of the most important aspects of the business in our opinion is the success of the companies Powered By Jumbo (PBJ) SaaS solution. This SaaS offering in our opinion will be the critical link between removing the earnings instability which is skewed by the timing of large value jackpots.
Jumbo Interactive has made impressive in-roads in the PBJ segment in FY21 with an impressive performance in TTV increasing from 8.7million to 104.8million PCP. Revenue of the segment has also increased in line with TTV from $1.2million to $32.1 million in FY2021.
This is impressive, however, due to coming from an immensely small base, we want to wait to see if this growth is likely to continue which we will find out in the Jumbo Interactive FY22 H1 report when it comes out later in the year.
JIN Earnings FY21 Dividend
A fully franked final dividend of 17.0 cents per fully paid ordinary share for the year ended 30 June 2020 was paid on 30 September 2020, and a fully franked interim dividend of 18.0 cents per fully paid ordinary share for the year ended 30 June 2021
was paid on 19 March 2021.
On 26 August 2021, the Directors have determined to pay a fully franked final dividend for the financial year ended 30 June 2021 of 18.5 cents per fully paid ordinary share (2020: 17.0 cents per fully paid ordinary share), to be paid on 24 September 2021.
In the Jumbo FY21 Earnings report, the group once again announced an increasing dividend compared to the prior comparable period. The group has also when a large frequency and dollar value of jackpots come around pay a special dividend in the past.
Jumbo FY21 Acquisition of Stride Management CA
Jumbo on the same day as announcing their JIN Earnings FY21 also announced that they have entered into an agreement to acquire 100% of the shares in Canadian based Stride Lottery Management.
Jumbo has agreed to purchase Stride Management for a total of $11.7million all-cash consideration, subject to certain conditions being met. Stride should contribute about ~A$2.5 million of Net profit before tax to Jumbo’s fundamentals and will allow JIN to operate in the A$1.2billion of TAM Canadian Charitable Lottery and Raffle sector.
Completion of the transaction remains subject to Alberta and Saskatchewan Gaming Regulator’s approval which is expected to occur in late calendar year 2021. Whilst this hasn’t impacted the JIN Earnings FY21 we should start to see these feeding into next years reporting.
JIN Earnings FY21 – Shares Price
The Share price of Jumbo Interactive took a ~20% beating after the 2 proceeding sessions after announcing their FY21 Earnings report to the market. However, shares are still trading up 17.5% for the year to date and are up 770% over the past 5-years.
Jumbo shares have a 52-week range of $10.66 – $18.56 and are currently trading at a share price of $14.92, which sits around the middle of this range. The company has a market capitalisation of $1billion at the current share price.
As always we surveyed a number of Prophet Invest community members and present the below sentiment values (taken from this article). We can see modest investor sentiment towards the hold classification.
Prophets Take on Jumbo Shares Earnings FY21
Jumbo FY21 result was quite impressive, however, growth seems to have slowed considerably from previous years. The group’s performance is still heavily reliant on large scale jackpots in the Powerball and Oz-Lotto, however, should they be able to grow their SaaS offering we should start to see earnings stabilise whilst being provided with an extra bump when a good lottery season comes around.
The group in their Jumbo FY21 result flagged that the TAM of the SaaS offering is potentially a $25billion dollar market of which >90% of this demand would be from the North American Market. The group flagged their interest in an international expansion through a partnership style model or acquisition.
Jumbo Shares Earnings whilst impressive is not quite enough for us to justify re-entering a position. We would want to see their SaaS solution continue to gain traction first. We would also be very excited if the group managed to make in-roads to a North American market due to the large TAM of the segment in that region. Should the group tick the boxes on those points we would be looking to re-assess the company.
For the moment we are more than happy holding a portion of JIN in our VAS (ASX200 ETF).