Jumbo making gains from the lottery market


by Lelde Smitts

Transcription of Finance News Network Interview with Jumbo Interactive Limited (ASX:JIN) CEO and Founder, Mike Veverka
Lelde Smits:Jumbo Interactive Limited (ASX:JIN) operates popular lottery websites around the world including OzLotteries in Australia, JumboLotto in Germany and is working towards selling lotto tickets in the US.
I’m Lelde Smits and joining me at ASX Investor Series is the company’s CEO and Founder, Mike Veverka. Mike welcome.
Mike Veverka: Thank you.
Lelde Smits:Could you outline what services does Jumbo provide and also, what is your model for generating revenue?
Mike Veverka: Jumbo sells the national lottery that’s the same lottery that you buy on the street, but we sell it over the Internet. That means over a computer, on a mobile and just recently, even on an Apple watch. So we’re using technology to sell an existing product that’s been around for decades. Our model is simply we receive a commission based on each sale that we make - very, very simple. So the more tickets that we sell, the better we do as a company.
Lelde Smits:Could you outline how the company is embracingtechnology and also marketing to enhance its offering?
Mike Veverka: Well technology is very much the number one driver in what we do. When we first started out, we could really see a day where technologies driving the sale of lotteries. We found that lotteries are the perfect type of product for the Internet. Nothing needs to be delivered, it’s a regular type of thing, it’s a huge time saver.
So we really embraced technology, we wrote the software for it. We moved it over to mobile and now we’re onto Smart watches. And people, our customers, they’ve  already adopted the technology. They’re using this technology just to buy the tickets that they always have been buying.
Lelde Smits:Could you outline some exciting trends in the lotteries industry?
Mike Veverka: One of the positive trends from this technology is that we’re driving a much younger demographic. Typically lotteries are a 40 to 50 year old demographic, but now with technology, we’re finding a 30s demographic. And that’s very important for the lottery industry, that we’re getting a much younger customer coming in.
And that provides sustainability for the lotteries. The main reason for the lotteries is to generate cash for schools and hospitals, and worthwhile causes. So it’s good to see that this new generation of people that have adopted technology, are now playing the lottery because of all this.
Lelde Smits:What kind of growth is predicted in this sector?
Mike Veverka: Sustained growth. We’ve grown from virtually a standing start to about 100 million in sales, over about a 15-year period, but a pretty regular type of growth. In Australia there are about 10 per cent of sales that happen over the Internet. Some countries are already around 30 per cent, while most countries around the world are still just starting. So as we look internationally, we see that there’s a huge opportunity, as the whole world has to pretty much catch up with these sort of 30 per cent levels.
Lelde Smits:Could you give us an overview of the company’s financials?
Mike Veverka: Jumbo’s been profitable now for about four/five years. When we first wrote the software and got the platform working, we used up some cash. But then when we became profitable, or when the sales reached a level that we became profitable, we found that it’s an extremely scalable business.
So we’re now at a stage where we’re redirecting some of that cash that we’re making, into opening up new markets. And so some of our profits are going into that. But then when that becomes profitable, we should have two countries, Australia and Germany, as we look towards the next country that we want to get into.
Lelde Smits: Finally Mike, what is Jumbo’s growth strategy in Australia and abroad and what are your plans to execute it?
Mike Veverka:We’ve seen some terrific growth just in the Australian market. But there’s nowhere else for us to go in Australia, except just sell more tickets in Australia. So we’re really looking geographically to expand the company’s growth. We started about five years ago, we received the contracts that we needed in Germany about two years ago, and we went live about a year ago.
We’re also looking in other markets such as the USA and Mexico; these are important markets to us. So it’s very much a geographic thing as we go from one national lottery to the other. Our model is about going to the Government, explaining the benefits for using the Internet to sell the lottery tickets, receiving all the required approvals and then going about the business of selling tickets, for the benefit of that country.
Lelde Smits:Mike Veverka, thank you for the update from Jumbo Interactive.
Mike Veverka: Thank you.