Investors are selling the Jumbo Interactive Ltd (ASX: JIN) share price this morning after the company released its FY21 full-year results.
Shares in the digital lottery business briefly opened 1.20% higher to $18.50 on open, before overwhelming selling pressure dragged its shares well into negative territory.
At the time of writing, the Jumbo Interactive share price is down 8.37% to $16.78.
Jumbo Interactive share price tumbles despite record result
The Jumbo Interactive share price is sinking despite a well-rounded financial performance with the addition of two new segments, Software as a Service (SaaS) and managed services. Some key highlights include:
- Total transaction value (TTV) increased 37% to $487 million
- Revenue up 17% to $83.3 million
- Underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) up 13% to $48.9 million
- Underlying net profit after tax up 7% to $28.3 million
- Fully franked final dividend of 18.5 cents per share
- Total FY21 dividend of 36.5 cents per share.
What happened to Jumbo in FY21?
Despite today's sharp selloff, the Jumbo Interactive share price has been a solid performer this year, up 31% year-to-date.
This year, the company took a different approach, reporting its FY21 results under three distinct operating segments of lottery retailing, SaaS, and managed services.
Lottery retailing continued to grow strongly, with TTV, revenue and active players up 15%, 17.1% and 1.5%, respectively. The company said that the net effects of COVID-19 mobility restrictions had been positive for overall performance, but the strong growth also highlighted the value from its ongoing investment into data and analytics.
Jumbo reported that its emerging SaaS and managed services segments made material contributes to the increase in TTV.
The company said its SaaS segment had grown significantly since its inception in FY20, reflecting several clients being fully operational and billable for the year. SaaS revenues currently have a 4Q21 annualised run-rate of $132.2 million TTV.
FY21 is Jumbo's first year reporting its managed services segment, which comprises its wholly-owned UK subsidiary, Gatherwell and new Australian business, Jumbo Fundraising.
Gatherwell was acquired in November 2019 and provides lottery management services to approximately 80 local authorities and 2,000 school lotteries in the UK.
Another acquisition
In addition to today's FY21 full-year results, Jumbo also announced its acquisition of Stride Management Inc.
Stride will represent the company's first managed services acquisition in the Canadian lottery market. Jumbo forecasts this acquisition to generate ~A$122 million in TTV with an estimated service revenue of ~A$6.5 million and net profit before tax of ~A$2.5 million.
Jumbo believes this will provide the company with a strategic foothold in the Canadian charity lottery market with a significant A$1.2 billion estimated total addressable market.
Jumbo will front up A$11.7 million for the acquisition, funded entirely from available cash. 70% of the consideration will be payable on completion of the acquisition, while the remaining 30% will be paid in two instalments in FY22 and FY23, subject to earnings hurdles.
Management commentary
Jumbo Interactive CEO and founder Mike Veverka commented on the company's performance, saying:
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 performance.
Our seamless transition to the new Tabcorp Agreement and strong performance in our lottery retailing segment is noteworthy. These continue to deliver steady growth at low jackpot levels, while boosting sales significantly at the larger jackpots.
Looking ahead, Veverka reaffirmed his confidence in the company's long-term growth prospects for digital lotteries.
FY21 has been a milestone year for Jumbo, as we implemented a new operating model, improved our governance structure and moved from one to three operating segments. The global digital lottery industry shows no signs of slowing down and we will continue to invest in the business to ensure we are ready to capitalise on the medium to long term growth opportunities that lie ahead. We now look forward to integrating Stride on our journey.
What's next for Jumbo?
Jumbo believes its lottery retailing is well-positioned to capitalise on the ongoing digital evolution across the lottery sector.
The board maintained a dividend policy of 85% of statutory NPAT, translating to a final dividend of 18.5 cents per share or full year FY21 dividend of 36.5 cents.
The Jumbo Interactive share price will go ex-dividend on Thursday, 2 September, with dividends paid out on Friday, 24 September.
