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Jumbo Interactive (ASX:JIN) extends agreement with Tabcorp (ASX:TAB)

"The next 10 years will see a lot of advances in the lottery industry both in Australia and abroad. The new 10-year reseller agreements are the longest ever term in Jumbo's history and provide a basis for continuing expansion," CEO and Founder Mike Veverka commented. "In addition, growing the Australian online lotteries business with continued access to Tabcorp's existing successful portfolio of lottery games, Jumbo will continue to pursue international lottery opportunities, leveraging Jumbo's lottery software-as-a-service (SaaS)," he added.

Digital lottery company Jumbo Interactive (JIN) has extended its 15-year relationship with Tabcorp (TAB) for a further 10 years.

This extension comes after a binding term sheet was signed on June 28, 2020, and will apply to all States and Territories, except Western Australia and Queensland.

Jumbo is currently in discussions with Lotterywest over its WA customers, but there is no certainty that any agreement will be reached.

If one cannot be reached, then the company says will seek alternative routes.

"The next 10 years will see a lot of advances in the lottery industry both in Australia and abroad. The new 10-year reseller agreements are the longest ever term in Jumbo's history and provide a basis for continuing expansion," CEO and Founder Mike Veverka commented.

"In addition, growing the Australian online lotteries business with continued access to Tabcorp's existing successful portfolio of lottery games, Jumbo will continue to pursue international lottery opportunities, leveraging Jumbo's lottery software-as-a-service (SaaS)," he added.

For this 10-year extension, Jumbo will pay an upfront fee of $15 million to Tabcorp, and a service fee totalling 4.65 per cent of the ticket subscription price.

This fee will begin at 1.5 per cent in FY21, 2.5 per cent in FY22, 3.5 per cent in FY23, and 4.65 per cent for every year after that.

From FY21 to FY23, and when the subscriptions exceed $400 million per year, Jumbo will pay an additional 4.65 per cent of the exceed value.

If Jumbo fails to meet or perform any of its obligations, then Tabcorp may terminate with 30 days' notice.

FY20 guidance

Jumbo has also reaffirmed its FY20 guidance, first announced on April 1.

Despite originally estimating 41 large jackpots would take place in the 2020 financial year, Jumbo is now certain 39 jackpots will occur. These have an aggregate value of $1.57 billion, compared to FY19's $1.88 billion, and an average value of $40.1 million, as opposed to last financial year's $38.4 million. In FY19, 49 large jackpots took place.

Even though there has been a significant decline in large jackpots due to COVID-19, Jumbo believes it can still increase sales due to greater demand for online lotteries.

However, after being reinstated back onto the market, Jumbo has dropped 11 per cent and is trading for $10.15 each.

On the other hand, Tabcorp is up a slight 2.72 per cent, with shares priced at $3.40 each at 11:16 am AEST.

https://themarketherald.com.au/jumbo-interactive-asxjin-extends-agreement-with-tabcorp-asxtab-2020-06-29/