Zeal Network SE — Call Transcript 2021

Nov 11, 2021

Earnings Call

Quarterly Statement as of 30 September 2021

11 November 2021

Content

SUMMARY

FINANCIAL UPDATE

GUIDANCE

KEY TAKE-AWAYS

ZEAL NETWORK SE EARNINGS CALL | NOV 2021 2

• Summary 9M 2021 ➢ Further growth in a weaker jackpot situation
  • Billings and revenue increased despite low jackpots
  • Profitability significantly improved
  • ➢ Successful stock market withdrawal of LOTTO24 AG
  • ➢ ZEAL supports vaccination campaign of the Federal Government
  • ➢ The largest price ever paid out by ZEAL – €49m for a winner in Bavaria
  • ➢ Guidance adjustment

Current regulation works in our favour

New GlüStV 2021

• No expiry date (can't be terminated before 2028)
• Opportunities: Games, Sports Betting

Games License

• Application (permit) filed in July 2021
• Authority stated recently: "First permits will be issued earliest in Q4 but certainly in the first quarter of 2022"

Broker License

• Lotto24 broker permit valid until June 2022
• Renewal considered a formality

Financial Update

Jackpot development - only 3 peaks in 2021 vs. 9 in 2020

* Since 23 September 2020, the amount of the jackpot has been limited to a maximum of 45 million euros each and is no longer paid out after twelve consecutive draws

in €m	Average	Peak
YTD 2021	38	3
YTD 2020	44	6

Draw

in €m

ZEAL Income Statement 9M 2021 - condensed

in € thousand	9M 2021	9M 2020	Change in %
Revenue	65,053	64,457	+0.9
Personnel expenses	-14,485	-16,593	-12.7
Other operating expenses	-33,216	-42,976	-22.7
Marketing expenses	-18,615	-25,304	-26.4
Direct operating expenses	-7,470	-7,236	+3.2
Indirect operating expenses	-7,131	-10,436	-31.7
Adjusted EBITDA	17,649	6,903	+155.7
Amortisation and depreciation	-6,573	-7,695	-14.6
Non-recurring income and expenses	-	+3,656	n.a.
EBIT	11,076	2,864	286.7
Net profit after taxes	7,344	6,537	+12.3

	Comments
➢	Revenue: − Revenue increased by 1%, despite low jackpots
➢	Total costs of operations: − Total costs of operations decreased by 19% compared to previous year
	➢ Personnel expenses: − Number of employees decreased from 160 to 158 FTE's − The 13% decrease in costs is mainly due to the revaluation of the long-term incentives to match the current share price and the reduction of employees
	➢ Marketing expenses: − Decrease in Marketing expenses as a result of the significantly weaker jackpot development
	➢ Direct operating expenses: − Increase of 3% in line with 5% billings growth
	➢ Indirect operating expenses: − Decline in indirect operating expenses of 32%, mainly due to savings in services and external staff costs as well as the release of provisions in respect of litigation.
➢	Adjusted EBITDA: − EBITDA increased by 156% driven by savings in personnel expenses, marketing expenses and indirect operating expenses,

as well as by the increase in revenue

ZEAL NETWORK SE EARNINGS CALL | NOV 2021 7

Income Statement

Other performance indicators I

decrease in gross margin

Other performance indicators II

Strong net cash generation mainly driven by operating profitability

Net Cash New registered customers (Germany segment)

Management dialed down marketing resulting in fewer new customers

Other performance indicators III

Guidance 2021

Consolidated Guidance 2021

in €m	2021 Guidance	2021 previously	2020 Actual
Billings (Germany segment)	around 650	at least 700	651.8
Revenue	around 86	at least 95	87.0
Adjusted EBITDA1)	around 25	at least 20	12.7

1) Earnings before interest, taxes, depreciation, amortisation and non-recurring expenses

Depending on the general conditions - in particular the further jackpot development - the company now expects for the financial year 2021 a transaction volume of around EUR 650 million (previously: at least EUR 700 million) in the Germany segment. In addition, the company now assumes that revenue will amount to around EUR 86 million (previously: at least EUR 95 million). ZEAL now expects an adjusted EBITDA of around EUR 25 million (previously: at least EUR 20 million).

Dividend Policy

• Due to the positive liquidity situation of the ZEAL Group and the expected further increase in profitability, we have paid-out a total of €20.1 million (2019: €17.9 million) respectively €0.90 per share (2019: €0.80) in dividends to our shareholders in June 2021
• Depending on the economic development of the ZEAL Group, we have set ourselves the target of proposing a dividend of €1.00 per share to the shareholders at the Annual General Meeting in 2022

Total pay-out p.a. in million €

Key Take-Aways

KEY TAKE AWAYS

Further growth despite comparatively low jackpots

Profitability significantly increased

Successful stock market withdrawal of LOTTO24 AG

We adapt our marketing measures to the respective market situation

Questions

ZEAL NETWORK SE EARNINGS CALL | NOV 2021 16

Answers

Disclaimer

The information contained herein must not be relied upon for any purpose and may not be redistributed, reproduced, published, or passed on to any other person or used in whole or in part for any other purpose.

This document contains certain forward-looking statements relating to the businesses, financial performance and results of the Companies and/or the industry in which the Companies operate. Such forward-looking statements, including assumptions, opinions and views of the Companies and statements from third parties, are uncertain and subject to risks. A multitude of factors can cause actual events to differ significantly from any anticipated development. The Companies do not guarantee that the assumptions underlying such forward-looking statements are free from errors, nor do they accept any responsibility for the future accuracy of the opinions expressed in this presentation or the actual occurrence of the forecasted developments.

No representation or warranty (express or implied) is made as to, and no reliance should be placed upon, any information, including projections, estimates, targets and opinions contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, none of the Companies or any of their subsidiary undertakings or any of such person's officers, employees or advisors accepts any liability whatsoever arising directly or indirectly from the use of this document.

By accepting this presentation, you acknowledge that you will be solely responsible for your own assessment of the market and the market position of each of the Companies and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of each of the Companies' businesses.

This presentation is for information only and shall not constitute investment advice. It is not intended for solicitation purposes but only for use as general information..

This presentation is dated November 2021. Neither the delivery of this presentation nor any further discussions of any of the Companies with any of the recipients, shall, under any circumstances, create any implication that there has been no change in the affairs of any of the Companies since such date.

Appendix

ZEAL NETWORK SE EARNINGS CALL | NOV 2021 18

Consolidated Income Statement and Balance Sheet in €k

t n e m e at St e m o c		9M 2021	9M 2020	Change in %
	Revenue	65,053	64,457	+0.9
	Total costs of operations	-48,081	-59,291	-18.9
	Adjusted EBITDA1)	17,649	6,903	+155.7
	EBIT	11,076	2,864	+286.7
	Profit before taxes	10,760	5,595	+92.3
n I	Net Profit	7,344	6,537	+12.3

et		30/09/21	31/12/20	Change in %
	Current assets	146,266	104,432	+40.1
e h	Non -current assets	389,860	389,902	-0.0
S e	ASSETS	536,126	494,334	+8.5
c n a al B	Current liabilities	80,861	36,051	+124.3
	Non -current liabilities	70,885	62,721	+13.0
	Equity	384,380	395,562	-2.8
	EQUITY & LIABILITIES	536,126	494,334	+8.5

1) Earnings before interest, taxes, depreciation, amortisation and non -recurring expenses

Business Unit Segment Reporting as of 30/09/21 in €k

	Germany	Other	Total
Revenue	61,460	3,593	65,053
Other operating income	676	2	677
EBITDA	16,553	1,096	17,649
Depreciation/amortisation	–	–	-6,573
EBIT	–	–	11,076
Financial result	–	–	-124
Share of loss from associates			-191
EBT	–	–	10,760
Income tax	–	–	-3,416
Net Profit/loss	–	–	7,344

KPIs

Billings (in	€m)	Q3 2019	Q4 2019	Q1 2020	Q2 2020	Q3 2020	Q4 2020	Q1 2021	Q2 2021	Q3 2021
		153.3	134.0	140.0	174.4	157.3	181.0	163.3	169.5	160.4
ABPU	(in €)	Q3 2019	Q4 2019	Q1 2020	Q2 2020	Q3 2020	Q4 2020	Q1 2021	Q2 2021	Q3 2021
		57.3	48.4	49.5	54.5	54.9	61.3	56.4	58.4	54.4
MAU	(in k)	Q3 2019	Q4 2019	Q1 2020	Q2 2020	Q3 2020	Q4 2020	Q1 2021	Q2 2021	Q3 2021
		917	925	942	1,065	954	984	966	968	982
CPL	(in €)	Q3 2019	Q4 2019	Q1 2020	Q2 2020	Q3 2020	Q4 2020	Q1 2021	Q2 2021	Q3 2021
		24.80	42.50	26.00	27.80	29.00	28.80	33.48	34.00	17.60

Financial calendar 2021

Publication of Annual Report 2020	25 March 2021
Publication of Q1 Quarterly Statement	7 May 2021
Annual General Meeting	1 June 2021
Publication of Half-Year Report	12 August 2021
Publication of Q3 Quarterly Statement	11 November 2021
Publication of Annual Report 2021	24 March 2022

Contact:

Frank Hoffmann, CEFA

Senior Investor Relations Manager

ZEAL

Straßenbahnring 11 20251 Hamburg

T +49 (0)40 809 036 - 042 M +49 (0)175 267 3420

frank.hoffmann@zealnetwork.de www.zealnetwork.de