Can Jumbo Interactive (ASX:JIN) deliver growth living up to its name?

Jumbo Interactive (ASX:JIN) is a lotteries retailer and a provider of a SaaS platform that helps government and charity lottery operators do business. There are several things to like about this company including that it is founder-led, profitable, has a track record of growth and a significant untapped market segment. And a recent downtrend appears to have been reversed.

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Jumbo Interactive has a track record of growth

Jumbo Interactive has a long history, starting out in 1995 as a builder and seller of website design services. One of its clients was an online lotteries provider and Jumbo, seeing the growth in online lotteries, bought a company that sold Oz Lotto and Powerball tickets online.  

Fast forward to 2025 and Jumbo Interactive has over 2 million players from Australia and abroad.  It has a white-label SaaS platform for other lotteries around the world to utilise and grow their lotteries, particularly in the US and the UK.

Founder Mike Veverka has remained at the helm since its inception and retains a 14.1% stake in the company. And with only 36% of lotteries having gone digital, there is more opportunity for Jumbo to capture at home and abroad. On top of all this, it has a resale agreement with gambling giant Tabcorp.  

A difficult period during the pandemic

Unlike many tech stocks, Jumbo has not recovered to its pre-Corona Crash highs of $27. Admittedly it is well up from the $8.35 low at the bottom of the crash and its recent results were not received well. 

A significant challenge that Jumbo Interactive has endured, even prior to the pandemic, has been compressed margins and subsequent investor reaction to the shock. The reason for this is increased business development, merchant and marketing costs for its SaaS business, and the lack of revenue from the SaaS business to make up for the increased costs. Acquisitions of Gatherwell in the UK and Stride in Canada also have taken longer to reap revenues than expected.

Notwithstanding that the Tabcorp deal was good news, it included new fees that effectively halved the 9.3% commission it received from Jumbo and saw Tabcorp sell its stake in the company less than a year later.  

There has also arguably been concern about its exposure to gambling, a no-go zone for ESG investors. However, it has increasing exposure to charities and causes that run lotteries. And furthermore, it has not exposure to ‘pokies’, it is exposed to government-run lotteries.

FY24 and FY25 were good years

What is helping Jumbo Interactive is not just being employed by an increasing number of lotteries and charities, but also because lottery prizes have gotten bigger and bigger. For this reason, Jumbo gained a major boost to revenue and profits – including a record $200m Powerball. So revenues were $159.3m, TTV (Total Transaction Value) exceeded $1bn and its profit was over $40m.

FY25 was a year of retreat as revenue fell 9% to $145.3m, TTV fell to $996.1m and its underlying profit was ~$40m (down 8-9%). Nonetheless, the company’s profit was the second highest on record. Although the jackpot cycle was somewhat softer (i.e. no jackpot exceeded $100m after 3 jackpots >100m in FY24), the company’s SaaS segment went well with TTV exceeding $250m and revenue topping $10m with robust margins.

Post-jackpot downturn, Jumbo quickly rolled out a new marketing “playbook”, focusing on higher-quality players and lifetime value. While active player numbers dipped, average spend per player increased, illustrating a shift toward more engaged and valuable customer segment In H1, the launch of the “Daily Winners Premium” loyalty program boosted engagement and helped stabilise margins.

FY26 looking good (so far)

For FY26, Jumbo Interactive has guided to a 46-50% EBITDA margin in Australia. It anticipated a larger jackpot frequency and larger sizes along with strong charity products momentum. It guided to 10-15% EBITDA growth in its UK Managed Services business and for 5-10% growth in Canada. Investors were told to expect 65-85% of its profit to be paid out.

Consensus estimates for FY26 suggest 16% revenue growth, 11% EBITDA growth and 9% profit growth. Then in FY27, 8% revenue growth, 9% EBITDA growth and 13% profit growth. The mean share price is $12.53 per share – just over 10% ahead of the current price. Turning to its multiples, Jumbo’s EV/EBITDA is 8.3x, its P/E is 15.5x, but its PEG multiple is 1.5x.

Last week, Jumbo signed a long-term (specifically 5 years) software license agreement with RSL Queensland to power its Dream Home Art Union lottery program. This is Australia’s largest prize home lottery, generating $200m in ticket sales. This deal should illustrate to investors the kind of company Jumbo is and the opportunity ahead of it.

Risks associated with Jumbo Interactive

We think the key risks with this company are changes in regulation, slower than expected growth, compressed margins, and cyber-attacks. Investors should be particularly wary of the latter two, margins because this has impacted the company’s share price before, and cyber attacks because there have been plenty of high-profile examples recently.

We are not overly concerned about the macroeconomic environment impacting Jumbo Interactive, as it has not in the past. In fact, Canadian and Irish research has found that people experiencing financial difficulties are more likely to buy lotteries and scratch tickets – who would’ve guessed?

Jumbo Interactive could be a good opportunity

We think there are two types of investors who should stay clear of Jumbo. The first group is ESG investors, because they despise gambling companies. The second group is dividend-oriented investors, given the low payout ratio and yield.  

For growth-oriented investors, however, we think this is a stock with significant upside potential. As we mentioned above, we think there is an opportunity for Jumbo to capture as lotteries go digital. We are encouraged that unlike other stocks that benefited from the shift to online activities during the pandemic, momentum held up as the economy re-opened, and there’s still more growth to come.