ZEAL raises guidance after strong first half of 2020

(Hamburg, 20 July 2020) According to preliminary calculations, ZEAL Network SE (Lotto24.de, Tipp24.com), Germany's leading online provider of state-licensed lotteries, has not only significantly increased billings but also exceeded its annual target for new registered customers in the Germany segment already in the first half of 2020 supported by a strong EuroJackpot development with correspondingly high marketing investments and consequently raised its guidance for 2020.

In the first six months of 2020, the Company achieved billings of EUR 314.4 million (2019: EUR 179.4 million) - mainly thanks to the inclusion of Lotto24 and the good jackpot development - with growth of around 75% according to preliminary calculations. The Germany segment contributed a preliminary EUR 313.8 million to this, billings of the Spanish ONCE business are not included for contractual reasons. In a year-on-year comparison, it should be noted that ZEAL 2019 offered additional products in the secondary lottery business which were discontinued in October 2019 due to the business model change. Moreover, Lotto24's online lottery brokerage business has only been part of ZEAL Group since 14 May 2019. The Lotto24 billings up to 14 May 2019 were therefore not included in the previous year's figures.

This positive development was due in particular to the strong EuroJackpot in the first half of 2020 with an average jackpot amount of EUR 51.2 million (2019: EUR 35.3 million) and six draws in the amount of the EUR 90 million mark (2019: one), of which five were made in the second quarter of 2020 alone (2019: one).

Due to the expected revenue dis-synergies in connection with the business model change revenue decreased by a preliminary 44% to EUR 43.3 million (2019: EUR 77.5 million). Similar to billings, revenue in the first half of 2019 still included the secondary lottery business but not Lotto24's online lottery brokerage business up to 14 May 2019. Revenue in the Germany segment amounted to preliminary EUR 39.0 million in the first half of 2020.

Supported by the market launch of the social lottery freiheit+ in March 2020 and the positive development of lottery clubs, the gross margin in the Germany segment was a provisional 12.4% in the first six months of 2020 (2019: no Germany segment).

As a result of the revenue dis-synergies in the course of the business model change, the adjusted EBITDA in the ZEAL Group of a preliminary EUR 3.3 million was, as expected, down on the previous year (2019: EUR 31.2 million). Due to the increased marketing investments of EUR 18.3 million (2019: EUR 11.0 million) to acquire new customers in the first half of 2020, which offset the cost savings, ZEAL was able to gain 593 thousand new registered customers in the Germany segment, with preliminary acquisition costs per new registered customer (cost per lead, CPL) of EUR 27.13 (2019: no Germany segment).

In fiscal year 2020, ZEAL plans to continue expanding its market leadership as an online provider of state lottery products with the Lotto24 and Tipp24 brands. Due to the strong half-year figures, the Company now expects billings of between EUR 590 million and EUR 610 million (previously: between EUR 550 million and EUR 570 million), revenue of between EUR 76 million and EUR 79 million (previously: between EUR 70 million and EUR 73 million) and a gross margin in the Germany segment of slightly above 12% (previously: around 12%) in fiscal year 2020. Depending on the general conditions, in particular the jackpot development, the continuation of the high marketing investments for the acquisition of new customers and the implementation of the synergy effects, the Company expects the adjusted EBITDA to be between EUR 7 million and EUR 10 million (previously: between EUR 5 million and EUR 8 million). Due to access to proven, more cost-effective marketing channels, ZEAL expects the number of new registered customers to be around 800 thousand in the Germany segment in 2020 (previously: almost twice as many new registered customers as in the previous year with 274 thousand) with a lower CPL than in the previous year.

The half-yearly financial report as of 30 June 2020 will be published on 13 August 2020.

Explanations of the key financial figures used can be found in the Annual Report 2019 on the Company's website (available at https://www.zealnetwork.de/en/investors/publications/).

Contact:
Frank Hoffmann
Investor Relations Manager
T: +49 (0)40 808 141-123
[email protected]