The Jumbo Interactive Ltd (ASX: JIN) share price has been very volatile on Wednesday morning.
After initially surging 6% higher, the online lottery ticket seller's shares are now down 4% to $9.06.
Why is the Jumbo share price on the move?
This morning Jumbo provided an update on the impact of COVID-19 on its operations, current trading conditions, and its expectations for the full year.
According to the release, Jumbo has now implemented work from home initiatives with minimal impact to operations. Management has also implemented measures to ensure ample capacity for online lottery ticket sales to ensure smooth operations during large jackpots.
The company notes that prior to the onset of the COVID-19 crisis, almost 75% of all Australian lottery tickets were sold via retail channels.
With the expected impact that social restrictions will have on retail channels, management believes the company is well placed for an increase in online lottery demand.
One slight disappointment is that some minor delays are expected in the progress of the Lottery SaaS (Software as a Service) business "Powered by Jumbo." This is due to restrictions on person-to-person meetings.
Jumbo advised that it currently has four contracts with ~$140 million in potential ticket sales volume at various stages of rollout. These are expected to contribute ~$3.5 million to net profit before tax when fully rolled out. Though, no material contributions from these contracts is expected in FY 2020.
FY 2020 guidance.
With the current unprecedented market conditions, management advised that it is taking a cautious approach to estimating the business performance over the remaining three months of FY 2020.
Based on an estimate of 41 large jackpots (compared to 49 in FY 2019) with an aggregate value of $1,605 million, and all other operating conditions remaining constant, the company has forecast revenue of $68.5 million to $69.9 million and net profit after tax of $24.4 million to $25.3 million.
This compares to revenue of $65.2 million and net profit after tax of $26.4 million in FY 2019.
Management commented: "Improved customer engagement is expected to deliver higher TTV and Revenue during a period of lower jackpots. Increased expenses to support future growth has impacted EBITDA and NPAT with the benefit expected in FY2021."
Pleasingly, with a strong cash balance of $65.5 million and no debt, the company intends to maintain its dividend policy of 85% of net profit after tax.
