The Jumbo Interactive Ltd (ASX: JIN) share price is higher today following an announcement last night.
The Jumbo share price surged to $13.09, up 3.23% in morning trade before dropping back to $12.83 at the time of writing. In comparison, the S&P/ASX 200 Index (ASX: XJO) is down 1.4% to 5,867 points.
New agreement
Jumbo subsidiary, TMS Global Services signed a binding term sheet with Lotterywest, a Western Australia state government-owned lottery operator. The deal will see Jumbo provide its online software platform and services to Lotterywest for up to the next 10 years.
The 'Powered by Jumbo' software platform will be integrated with the Lotterywest 'White Labelled' program and branding. This will allow current Jumbo Western Australia members to continue playing online on a platform they are accustomed to. The total transaction value (TTV) for FY20 was $33 million.
The key terms for the binding term sheet stipulate that Jumbo will receive a service fee for every customer transaction through the White Label platform. The service fee will cover Jumbo's software operation, technical and customer support, and development services and costs.
The agreement is to be a three-year initial term, with the option for a further three and four years. The extension options are to be decided by Lotterywest.
In addition, Lotterywest will oversee the marketing strategy for players, which Jumbo will manage customer support on the White Label platform.
The binding term sheet is pending legislative amendments, regulatory approvals, and performance and financial guarantees by Jumbo.
Both companies are expected to complete the software integration by 21 December 2020.
Jumbo share price summary
The online lottery company reached new peaks in 2019, as it set ambitious targets of $1 billion in ticket sales by 2022. As TTV hit $320 million from its FY19 report, investors appeared not confident of Jumbo achieving the milestone. Thus, the Jumbo share price was heavily sold from September 2019, falling more than 50% to today's price.
In March, Jumbo was impacted with its share price tumbling to as low as $6.99, but has now returned to pre-COVID-19 levels.
I think that if Jumbo picks up momentum in ticket sales and delivers on its targets, then its share price will follow.
