Lottery Corp Bets On Digital

Australia | Jun 11 2026

Lottery Corp's digital-led transformation is centred on product innovation, customer engagement and data-driven growth. Analysts see significant earnings upside.

• Lottery Corp’s digital migration represents earnings upside
• Higher digital channel margins, AI to increase participation
• Around 4.3m unregistered customers being targeted
• Victorian licence renewal considered an “outstanding outcome”

By Mark Woodruff

Australia's largest lottery and keno operator, Lottery Corp ((TLC)), is seeking to evolve from a traditional lottery provider into a digitally led entertainment platform spanning both retail and digital channels.

The strategy is centred on product innovation, enhancing the customer experience and leveraging data analytics and artificial intelligence to drive engagement and growth.

Last week’s 2026 investor day presentation indicated three new standalone business verticals (Lotteries, Digital, Keno) will replace the prior structure from July 1.

This change is expected to generate around $10m in annualised savings on a full run-rate basis, which will be reinvested into digital capability, AI and product development.

Citi supports management's decision not to provide hard targets, particularly given Managing Director & Chief Executive Officer Wayne Pickup is still early in his tenure.

Following the May 5 announcement of the Victorian licence extension to 2068, Morgans highlights over 90% of lotteries turnover is now licenced until at least 2050.

The company owns and operates a portfolio of well-known brands, including Powerball, Oz Lotto, Saturday Lotto, Lucky Lotteries, Set for Life, Instant Scratch-Its and Keno, operating under long-term licences across Australia.

Lottery remains the company’s core business, with management aiming for “a more consistent model that uses product, brand, and portfolio liquidity to engage players across life stages, connect with younger adult cohorts, and grow a deeper base of known, returning customers".

Management noted lottery turnover has grown at a compound annual rate of 3.5% over the past 20 years, broadly in line with underlying population growth and inflation.

The ambition is to accelerate revenue growth beyond these historical levels through ongoing game innovation, including enhancements to Set for Life in September 2027 and Oz Lotto next year, alongside initiatives aimed at increasing player participation and engagement.

In a network difficult to replicate, management notes, Lottery Corp has around 7,100 retail and licensed venue points of sale across Australian communities. Lottery has 3,862 outlets, while Keno has 3,260 licensed venues.

Social gaming product Keno is sold mainly through pubs, clubs, hotels, casinos, and TAB venues, with a wide venue network in several states.

Lottery Corp’s performance is driven by jackpot cycles, retail traffic, digital adoption, and regulatory settings. The business is generally viewed as defensive compared with other consumer stocks because demand for lottery products tends to be relatively steady.

Revenue growth is driven by population growth, higher jackpot activity, product innovation and increasing digital penetration, with online sales now representing a significant proportion of turnover.

A capital-light business model and high-margin earnings (with upside from digital growth) support management’s targeted reinvestment and 80%-100% profit (NPATA) payout from FY27.

Near-term cash flows will be reinvested into digital, AI, product and customer capability.

Targeting unregistered customers

AI is being embedded into how the company grows customer value by providing clear pathways to grow participation and engagement. Ongoing retail investments are intended to convert the circa 4.3m unregistered player base through convenient digital touchpoints.

In FY25, the company had around 8.6m active customers across its lottery network. Of these, approximately 4.3m were active registered Lottery customers, including digital, omni and retail customers.

Digital customers purchase tickets online or through the app, omni-channel customers engage across both digital and retail channels, and registered retail customers buy tickets in-store but have identified themselves through membership or loyalty programs.

The implication is that roughly half of the company’s 8.6m active customers remain unregistered.

While these customers may regularly purchase lottery products through retail outlets, they do so anonymously, limiting the company's ability to market directly to them, personalise offers, analyse purchasing behaviour or encourage more frequent participation.

Costs in check

Management emphasised the company's capital-light, high-cash-flow business model.

Near-term operating expense guidance was trimmed by -$10m at the midpoint and all existing guidance was reaffirmed.

Macquarie notes the cost base has remained broadly stable at $300m-$310m over the past three years, representing around 8% of revenue, with approximately half of total costs attributable to personnel.

Overall, UBS believes the updated strategy places greater emphasis on growth initiatives than cost reduction in the near term, while maintaining management's commitment to keeping cost growth below normalised revenue growth.

Upside from digital migration

Macquarie anticipates operating leverage to improve over time, supported by enhancements to digital products and more effective use of artificial intelligence and data analytics.

The digital sales mix reached 41.2% in the first half of FY26 despite the weakest jackpot environment since de-merger, Morgans observes.

The analyst notes this remains well below the approximately 55% digital penetration achieved in comparable markets such as Finland and Sweden.

Closing even half that gap over the next three to four years would generate around $45m in additional earnings with minimal incremental costs.

The superior economics of digital channels are also noted, where operating margins are around 20.5% compared with approximately 8.2% for retail sales.

According to company management, each one percentage point increase in digital mix would contribute around $6m in earnings, providing a meaningful earnings lever as customer migration to digital platforms continues.

Keno

Online Keno will be discontinued from 1 January 2027 following federal policy changes, with the -$25m earnings headwind reflected in brokers forecasts.

Potentially providing some offset, UBS highlights the new bring-your-own-device (BYOD) distribution model, which allows customers to participate using their personal devices.

This broker believes this model could improve venue economics by removing the need for traditional terminals, while also increasing the proportion of registered players and enhancing customer data capture.

Morgans explains management's strategy for Keno is centred on modernising the legacy gaming platform and introducing bring-your-own-device (BYOD) functionality to convert anonymous venue patrons into registered customers.

Refreshing the product offering and strengthening brand appeal is also part of the plan, along with improving productivity across the existing venue network before pursuing selective expansion opportunities.

Morgans notes venue penetration remains relatively low in key markets, at around 18% in Victoria and 25% in the ACT, compared with an addressable national market of approximately 8,000-9,000 pubs and clubs, leaving significant scope for future growth.

Extension of Victorian licence

In an “outstanding outcome”, in Ord Minnett’s view, given the typical 10-year renewal terms previously, Lottery Corp recently won a 40-year extension of its licence in Victoria until 2068 for a fee of -$1.145bn payable to the state government.

Representing approximately 30% of lottery revenue and 20% of group earnings, the licence's renewal is described as significantly de-risking the company's long-term cash flows.

At the time, Morgan Stanley noted the licence renewal extends the company’s average remaining licence duration to 25 from 18 years and strengthens the long-term visibility of cash flows.

Accordingly, management announced a new dividend payout policy of 80%-100% of net profit before amortisation charges from FY27 versus 80%-100% of net profits prior, supported by stronger licence security and cash generation.