Thank you for standing by, and welcome to the Jumbo Interactive acquisition of StarVale conference call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Jatin Khosla. Please go ahead. Good morning, everyone, and thank you for joining our conference call at such short notice. On the call today, we have our CEO and founder, Mike Veverka, and CFO, David Todd. Mike will make some opening remarks on today's announcement on the acquisition of StarVale, after which we will move to Q&A. May I take this opportunity to remind you that we are currently in blackout with our 1H FY2022 results scheduled for release on Tuesday, the twenty-second of February. With that in mind, can I ask that you please keep your questions related to today's announcement and the strategic acquisition of StarVale. I'll now hand over to Mike. Thanks, Jatin. Morning, everyone, and thanks for joining us on this call. Today, we've announced that we've entered into an agreement to acquire 100% of the StarVale Group, a leading U.K.-based external lottery manager. This follows our conditional acquisition of Stride in Canada and also Gatherwell in the U.K., which all follow the same strategy of adding scale to our Managed Services and SaaS business segments. The global lottery industry is in the midst of digital change, and our Powered by Jumbo software platform is key to supporting lottery through this change. The acquisition of StarVale, together with our recent acquisition of Stride in Canada, will almost double our active player base from 1.8 million to 3.4 million active players. This is a key metric for us as, and provides the foundation for future growth as we seek to use our software platform to improve performance and attract new active players. Jumbo will conditionally acquire StarVale for approximately GBP 17 million and up to GBP 4 million-GBP 4.5 million of deferred consideration payable following 30 June 2023 and subject to achieving certain earnings hurdles. The total consideration, excluding surplus cash funds of approximately GBP 5 million, which is to be acquired as part of the transaction, represents an implied enterprise multiple of 7.3x StarVale's expected net profit before tax for the 12 months to 30 June 2023. The multiple does not reflect the acquisition of DDPay Ltd, a wholly owned subsidiary of StarVale, and a digital payments company that provides in-house direct debit origination services and cost-effective payment solutions to StarVale's weekly lottery clients. We see this additional capability as a potential source of cost efficiencies for Gatherwell and any other potential future UK SaaS deals, as well as giving us the strategic optionality to gain further access to the charitable giving market in the U.K. To fund this acquisition, we've secured a new $50 million senior debt facility for up to five years with an initial tranche of $30 million to be used to acquire StarVale and a further $20 million available for future acquisitions and growth initiatives. The acquisition is expected to be completed by the end of the FY 2022 financial year and is subject to customary terms and conditions under the agreement and U.K. Gambling Commission approval of the change in corporate control. The transaction is expected to deliver low- to mid-single-digit earnings per share accretion in the first 12 months post-completion. Given the timing of the announcement, StarVale's final audited figures for the year ended 31 December 2021 were not yet available. However, we have included in the release management's latest forecast for the period, which includes approximately GBP 63 million in annual ticket sales, adjusted revenue of GBP 5 million at a margin of around 8%, an adjusted net profit before tax of GBP 2 million at a margin of around 40%. The adjustments principally relate to removing the one-off benefit from the U.K. government Coronavirus Job Retention Scheme. Finally, as part of a review of our broader capital management framework, the board has resolved to change our dividend policy, and we will now aim to pay out 65%-85% of statutory net profit after tax to shareholders as ordinary dividends. We believe this enhances the group's flexibility to repay debt while maintaining an appropriate dividend to shareholders. The new policy will be effective from FY 2023. In summary, the StarVale acquisition is a significant step forward in the U.K. market, boosts our active player base to 3.4 million, is profitable and includes a digital payments company bringing cost efficiencies to Gatherwell and any potential future deals. With that, I'm now happy to move to questions. Thank you. If you wish to ask a question please press star one on your telephone and wait your name to be announced. If you wish to cancel your request press star two. If your on a speaker phone please pickup the handset to ask your question. Your first question comes from James Bales from Morgan Stanley. Please go ahead. Oh, hi, guys. Just wanted to check a couple of numbers. Firstly, can you give any color on StarVale's organic growth rate? Low single digits at the moment. StarVale was impacted through COVID. Recent numbers were flat, but over a period of time, I think the three-year compounding or growth rate was 12%. Is that right, Guy? Yeah. Just low double-digit growth, James, if you back out the COVID period. Okay, got it. That, was that the revenue or earnings line? Revenue. Okay, perfect. Can you give any color on the earn-out metrics that they have to achieve in order to get paid that additional consideration? Basically, the GBP 16 million is payable as kinda like a worst case scenario if it doesn't perform. We expect it to achieve a profitability of around about GBP 2.2 million, of which an additional GBP 4 million will be paid. We've allowed another half a million GBP for over-achievement as well. I suppose the most likely scenario is that we end up paying GBP 16 million for a business that's producing about GBP 2.2 million profit. Okay, that's helpful. Can you help us understand what sort of synergies you expect in terms of StarVale's profitability having access to the Powered by Jumbo platform? Look, having access to the Powered by Jumbo platform is more of a longevity issue for them. They've got 45 clients using their system, about half of them of which are non-remote and the other half are remote. They are in need of a much deeper and better digital platform in which to go forward. It's not so much about cost savings, it's more about giving these clients a much more of a digital pathway into the future. While StarVale at the moment was very limited in their digital experience, Jumbo's got the tools to give these clients for the next five, 10 years. Got it. The other way, what do you think StarVale's impact on Gatherwell's profitability will be with its payment solution? Look, it'll be, it'll have some benefit, but we don't have an exact number on that. It'll only be limited at this point in time, you know, Gatherwell being a bit smaller. However, by combining these businesses together, I think we can start delivering some of these synergies and, yeah, we'll see how we go after that. It could potentially help us in other regions as well. The idea of having a payments business was key to us, as we think that's something that is very interesting and it's something I've been meaning to set up for a while now, and StarVale have already got that. Initially, probably not too much of an impact, although it will be a positive impact, but longer term, it'll be much more relevant. Got it. Finally, just to sort of understand your thinking around taking on debt to fund this acquisition and reducing the payout ratio, are these moves designed to improve liquidity for further M&A? Or how should we interpret the signals here, given that you could have funded this completely internally? Going with debt was the choice because of the impact on earnings per share. We felt that with our strong balance sheet, you know, we didn't need to go out and dilute existing shareholders at this point in time. With the cash that we're generating, in addition to the $50 million facility that we now have in place, we can quite comfortably acquire StarVale, still have some powder left over for something else. You know, with the cash we're generating, I think we're still in a pretty good position. We'd still like to pay the dividend. We just like to give ourselves a little bit more room just to make sure that we can pay back the debt. You know, we'll see how it goes. If we need to reduce it to 65%, we can. However, we will be earning, you know, we'll have more profits to use. And, yeah, I think that just puts us in the best position going forward. Got it. No, thanks for the help. I appreciate it. James, sorry, just to correct my previous statement. Jatin has mentioned to me that growth is double digit in TTV and mid-single digit on revenue. Okay. Got it. Thank you. Thank you. The next question is from Sacha Krien, from Evans and Partners. Please go ahead. Morning. Most of my questions have been answered and asked, but I'll just quickly ask you. Good morning, guys. If I could just quickly ask you in terms of where StarVale ranks in the U.K. in terms of the ELM options available in terms of size. It's certainly one of the larger ones. The largest one is the Postcode Lottery. They do dominate that market, but there are a couple there that are sort of the next level down, StarVale and a few more after that, but it's certainly one of the larger ones. Tower is another one that is out there as well, and then they start getting smaller after that. It was a decent size, good size for us at this point in time. Would've been happy with something a little bit bigger, but you know, in terms of being able to digest this one, I think it's just about the right size for us right now, in addition to what we're doing with Stride and Gatherwell, of course. There's a bit on the plate with integrating both of those two businesses. I mean, can you talk a little bit about what the strategy is going forward in terms of, you know, continuing to look for acquisitions in the ELM market in U.K. and Canada? Yes. We're continuing to look for more acquisitions. We're, I suppose, getting better at it over time and knowing what to look out for and seeing where the value is and seeing how it'll work with us. Obviously we'll need to integrate this into the business, so there'll be a bit of work, but we've been gearing up for that as we flagged six months ago, that we are adding some costs so that we can absorb these businesses a lot more effectively. You know, the businesses are somewhat similar, so it's not like we're trying to integrate businesses that are quite a bit different from each other. They are quite similar, so we think it should go smoothly and give us some capacity to maybe acquire some more down the track. Okay. In terms of StarVale, can you comment at all on the customer concentration there? I think you mentioned 45 clients. You know, is most of the TTV, you know, within a few of those larger clients, and maybe a comment on how long they've been with those clients or the stickiness of the relationship? Yeah. As typical in this industry, most clients have been there for a very long time. I think a third of the clients have been there for over 20 years. Another third have been there for over 10 years. The spread is not too bad. The top largest client is 11%. The top ten account for 2/3 of the business. There are a few large clients there, but you know, with 45 clients there, some smaller ones there as well, they're all in our target market for our Powered by Jumbo platform. You know, the rationale obviously is, you know, what can we do with these clients once we put them onto a state-of-the-art software platform, and how we can grow them after that. Okay. Does that suggest there's margin upside to that TTV in terms of your take rate? In time, margin upside, but it's more initially around trying to boost their sales through a better software platform. They're all causes that have some great brand names and some strong followings, but you know, obviously during COVID, they've been impacted like many others. They're kind of at the point in their growth where they're saying, "Look, we really, really need to prioritize our digital transformation," and this will be what they need. Got it. Okay. Thank you. Thank you. The next question is from Suthesh Jeyakandan from UBS. Please go ahead. Hi, Mike. Hi, David. Maybe just to follow on, it looks like the revenue to TTV is around the 8% mark, which is probably less than half of what Gatherwell does, but margins still look relatively high. Can you give us a sense of how the business model of StarVale is different to Gatherwell? Yeah. Bigger clients, basically. Gatherwell focuses on the smaller clients, which need a lot of work, hence the more expensive price and the higher percentage of revenue to TTV. As you go up the scale and you're dealing with larger organizations that have some internal skills and resources that they can use, the deals tend to vary from a complete external lottery manager to just, you know, buying bits and pieces to what they need. Hence, you know, some of the larger ones need less support. It's just what it looks like when you start dealing with larger clients. Yeah. Would it be fair to say, looking forward, while there's potential for those fees to drift higher, we shouldn't really expect them to ever get to that, you know, 15%-20% mark than what Gatherwell does? Look, it's, that'll certainly be a long-term play to get up to those levels. You know, we'll have to wait and see what the demand is for sophisticated software tools. You know, right now it's all pretty basic software tools. As time goes on and, you know, the expertise that's required keeps on stepping up and up and up, you know, there is scope for these organizations to outsource a lot more to us and do less, in-house. Sure. Just on DDPay, how much sort of revenue and earnings is that part of the business contributing? Is that in those forecast numbers that you guys provided, the AUD 9.6 million revenue or the AUD 3.8 million in EBIT? Suthesh, the contribution's about 16%-17% of total revenue. 16% of that AUD 9.6 million, is that? Yeah, that's right. Of the total group revenue. Got it. Okay. Thank you. Just in relation to the debt facility that you guys are taking out, can you give us a sense of where your cost of debt would be sitting on that facility? If we look at a five-year fixed rate, all our costs will be around 3.9%. Obviously, if we go with some floating rates, that'll be much lower, probably around the 2.2% level. That's helpful. The last question I had was just on the acquisition multiple. The 7.3x, which seems a little bit higher than what you paid for Stride, I think that was around 4.5x. Is that sort of a reflection of prices in the market right now, or more a reflection of the comfort you have in StarVale sort of operating market, given you have already got a business in Gatherwell over there? It still meets with our criteria of the multiple that we'd like to pay. We took into account the DDPay, the payments business. That was something that we thought was attractive. The size and the years in operation, you know, 27 years in operation and the stickiness of the clients was also a big factor. Yeah, look, we're quite happy with the multiple that we ended up paying. You know, considering every business is slightly different. Yeah, the payments business and the size and the big step forward it gives us is well worth 7.3x multiple. That's all from me. Thanks, guys. Thank you. The next question is from Kurt Gelsomino from Morgans. Please go ahead. Oh, hi, guys. This might be a question for David, but I was just wondering sort of where you'd be comfortable taking the balance sheet to from a leverage perspective? Would you sort of be comfortable moving into a modest net debt position or is your preference to remain net cash? Our preference is to remain net cash positive, Kurt. Yeah. You know, we historically have had a very strong balance sheet. There is scope for us to take on some of that debt. Yeah, our preference is to retain some strength in there. That's why we prefer to stay net cash positive. Terrific. Maybe just the existing management team and founders of today's acquisition, how long are they still committed to staying in the business? There is a senior management team in place that will stay post-acquisition. The founder will stay through his one-year earn-out and then potentially longer after that. Now we've got our own resources a lot more developed than they were a year or two ago. We'll be able to quickly, you know, come up to speed on the business a lot quicker so that we can take on a lot of the managerial tasks in the business a lot faster, which is why we've gone for a much faster earn-out than we have in the past. With them we've got the management side of things covered. Understood there. Yeah, just given some of that managerial capability, I think you have built out over the last 12 months or so. I guess can you just talk to you know how quickly you could look to make further acquisitions and maybe what geographies would be of focus next? Do you have sort of the scale that you're also happy with in the U.K., and would maybe Canada and the U.S. be more of a focus next? Well, we are running the two regions. You know, if you lump Canada and the U.S. together in parallel, we now have a lot more scale in the U.K. While we're letting that settle down, we could certainly look towards North America and the U.S. or in Canada as our next acquisition. You know, we can't always predict exactly how these deals will come. We'll take them when the time is right and you know, it might come from one or the other. Definitely keen to keep the momentum going. That's good. Thanks for that, guys. Thank you. The next question is from David Fabris from Macquarie. Please go ahead. Hi, Mike. Hi, David. Happy New Year. David. A-a-a- Hello. A lot of my questions have been answered, but I just kinda wanna understand the strategy around acquisition. Just to be clear, you've got more acquisitions coming down the track. You wanna keep the momentum going. Does that imply you're gonna make more acquisitions in the next 12 months? Beyond that, how do you have the propensity to integrate these businesses and execute if you keep acquiring them? Well, that's the trick of course. We could get ahead of ourselves and go a bit too fast and then end up with you know a business that's not integrated very well. Trying to get that cadence right is important. You know it's been more than six months since we did Stride. We think the timing's right. We know the management are ready to take on the challenge of picking up StarVale and you know maybe another six months or so or thereabouts for the next acquisition. We can't tell exactly of course. We feel we've got it in hand pretty well. Okay. Just to dig into that, are there targets set by the board around, I guess, the aggregate TTV they wanna see the business acquire or the number of businesses that are acquired, or is it a case-by-case basis here? Yeah, look, it is a bit of both. You know, we have internal targets that we'd like to reach, but it is a case-by-case thing. You know, in a perfect world, we'd like to reach certain targets, but the opportunities come up and the founders are ready to sell, you know, when they're ready type of thing. You know, the industry is populated by quite a few businesses around about this size, maybe even a bit smaller. It's not gonna be like a massive acquisition or anything like that. It'll probably be more of the same, you know, something in the vicinity of Gatherwell, Stride, and StarVale. Okay, great. Just one last question from me on those comments. If the businesses are of similar size, can you maybe help us understand where valuation or multiples are sort of trending here? Is this kind of towards the low end, the midpoint? I guess, do you have to start paying more as people are aware you've got an acquisitive strategy or where do you think the multiples go from a transaction perspective? Yeah, look, there'll obviously be a bit of pressure with any new acquisitions asking for a bit more. There's a lot to choose from there. We think that we can still keep the multiples down around the six to seven level. Again, it depends on what we're actually buying. There could be some valid reasons why we go a little bit higher. There's still quite a few out there. You know, if somebody wants more than 10, well, we'll just keep on walking and go to the next one. We're not gonna overpay for anything. Yeah, look, I think there's still opportunity to pick up more around about these multiples. Okay, great. That's all from me. Thanks a lot. Thank you. There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.