ZEAL Network SE: ZEAL continues to grow in the first half of 2021

ZEAL continues to grow in the first half of 2021

- Increased billings and revenue
- Stable gross margin achieved
- Profitability significantly improved
- Guidance confirmed

(Hamburg, 12 August 2021) The business of ZEAL Network SE (lotto24.de, tipp24.de), Germany's leading online provider of lottery products, achieved further growth in the first half of 2021 thanks to the stability of the business model, with a much weaker jackpot development than in the same period last year.

Increased billings and revenue, stable gross margin achieved

In the first half of 2021, billings of the ZEAL Group rose by 6% to EUR 332.9¹ million (2020: EUR 314.4 million), of which the Germany segment accounted for almost the entire amount at EUR 332.8 million (2020: EUR 313.8 million). Revenue increased by 2% to EUR 44.5 million (2020: EUR 43.6 million), of which EUR 41.8 million was attributable to the Germany segment (2020: EUR 39.0 million). At 12.3%², the gross margin in the Germany segment was thus stable compared to the prior-year figure (2020: 12.4%).

The market environment for lotteries in Germany during the first six months of 2021 was comparatively weak: at just EUR 9.0 million, the average jackpot of the German lottery 'LOTTO 6aus49' was even lower than in the previous year (2020: EUR 9.4 million) and only exceeded the EUR 20 million mark once (2020: twice). At EUR 38.3 million, the average jackpot of the European lottery 'Eurojackpot' fell significantly short of the high prior-year figure (2020: EUR 51.2 million) and reached the EUR 90 million mark twice (2020: six times). Low jackpots have a negative effect on billings, gross margin and customer acquisition.

Despite this market environment, the Company gained 291 thousand new registered customers in the Germany segment (2020: 593 thousand). The increase in acquisition costs per new registered customer (cost per lead, CPL) of EUR 32.85 (2020: EUR 27.13) was also a consequence of the enhanced marketing strategy, which takes the expected customer quality into account: higher CPLs in low jackpot phases are justified by the fact that it is precisely those lottery players won during these periods who generally exhibit higher long-term activity and thus a better customer lifetime value (CLV). As a result, the payback periods of new customers are only slightly longer. At EUR 13.8 million, marketing expenses in the first half of 2021 were below the prior-year level (2020: EUR 18.3 million) as a result of the significantly weaker jackpot development.

Profitability significantly improved

Personnel expenses and other operating expenses of EUR 10.2 million and EUR 23.7 million, respectively, were also well below the corresponding prior-year figures (2020: EUR 11.2 million and EUR 30.1 million). Consequently, adjusted EBITDA rose to EUR 10.7 million (2020: EUR 3.3 million) - there were no non-recurring expenses or income. The Germany segment accounted for EUR 9.8 million of this amount (2020: EUR 1.5 million). EBIT and net profit of EUR 6.3 million and EUR 5.7 million, respectively, were also well above the prior-year figures (2020: EUR 2.0 million and EUR 0.4 million).

'The fact that we have managed to continue to grow with a significantly weaker jackpot development compared to the previous year makes us proud and shows us that we have taken the right measures to continuously improve both in terms of customers and results,' says Jonas Mattsson, CFO of ZEAL Network SE. 'The scalability of our business model will also help us in the future to take advantage of market opportunities, adapt to the dynamic environment and continuously optimise.'

Guidance confirmed

For the fiscal year 2021, ZEAL continues to plan the expansion of its market leadership as an online provider of state lottery and other permitted lottery products. Depending on the general conditions, in particular the jackpot development, the Company still expects billings of at least EUR 700 million for the Germany segment. Following exceptionally strong jackpots in the previous year, ZEAL has assumed an average jackpot development, resulting in a lower growth rate than in the previous year. Moreover, the Company continues to expect revenue of at least EUR 95 million in fiscal year 2021. With similarly high marketing investments as in the previous year of around EUR 32 million, adjusted EBITDA is still expected to reach at least EUR 20 million.

_{¹ For contractual reasons, the billings of our ONCE business in Spain are not included in this total.
² As the Spanish ONCE business is not included in billings but only in revenue, the margin trend is better reflected by the Germany segment than at Group level.}

Selected financial key figures as of 30 June 2021:

	2021	2020
Billings (EUR million)	332.9	314.4
Revenue (EUR million)	44.5	43.6
Adjusted EBITDA (EUR million)	10.7	3.3
Gross margin (Germany segment, %)	12.3	12.4
New registered customers (Germany segment, thousand)	291	593
CPL (Germany segment, EUR)	32.85	27.13

About ZEAL Network SE:ZEAL Network SE, Germany's leading online provider of lottery products, is a Hamburg based e-commerce Group which mainly brokers customers' tickets to the state lottery companies through the brands lotto24.de and tipp24.de, for which it receives a commission. The offerings include among others 'LOTTO 6aus49', 'Spiel 77', 'Super 6', 'Eurojackpot', 'GlücksSpirale', lotto clubs, 'Keno', the 'Deutsche Fernsehlotterie' and 'freiheit+'. Founded in Germany in 1999, it was initially set up as a lottery broker. In 2005, it was floated on the Frankfurt Stock Exchange (Prime Standard) and became one of the most successful initial public offerings (IPOs) in Germany at the time. In 2009, the Group changed its focus from lottery brokerage to the secondary lottery business. It moved its registered office to London and was renamed as ZEAL Network SE in November 2014. In May 2019, ZEAL completed the takeover of LOTTO24 AG, returned its Tipp24 secondary lottery to the German brokerage business in October 2019 and relocated its registered office back to Germany in the same month.

Contact:
ZEAL Network SE
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Investor Relations
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