Zeal Network SE — Call Transcript 2023

Nov 9, 2023

EARNINGSCALL

Quarterly Statement Q3 as of 30 September 2023 09 November 2023

Tipp24 ZEAL BERIA ZEAL ZEAL INSTANT

CONTENT CONTENT CONTENT CONTENT CONTENT

- Summary

ZEAL

ZEAL INSTANT

• Business Update
• Financial Update
• Guidance 2023
• Key Take-Aways

SUMMARY

SUMMARY 9M 2023

GROWTH INITIATIVES BRING SUCCESS

• Further strong business volume growth $\chi$
• Increased profitability despite expanded investment into $\Rightarrow$ customer acquisition and brand building
• Games offerings expanded in third quarter $\bigoplus$

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BUSINESS UPDATE

GAMES BUSINESS ON TRACK

Games business successfully launched

New Games offer is very well received - full business roll-out in 2024

ZEAL still frontrunner in the lottery segment among peers with strong opportunity to capture early growth in new market segment

Continuous expansion and refreshing of the games portfolio $\bigoplus$

Currently 28 games online - more games will follow in the next weeks, but the authorities are still the bottle neck

FINANCIAL UPDATE

JACKPOT DEVELOPMENT - 5 PEAKS IN 2023 VS. 5 PEAKS IN 2022

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ZEAL BERIA

ZEAL INSTANT

24

ZEAL INCOME STATEMENT 9M 2023 - CONDENSED

INCOME STATEMENT	9M 2023 $(in \in k)$	9M 2022 $(in \in k)$	CHANGE (in %)
REVENUE	86,012	74,451	$+15.5$
- Lotteries	79,418	69,420	$+14.4$
- Games	1,216
TOTAL COSTS OF OPERATIONS	$-63,927$	$-54,573$	$+17.1$
Personnel expenses	$-15,195$	$-13,935$	$+9.0$
Other operating expenses	$-48,796$	$-40,632$	$+20.1$
Marketing expenses	$-30,691$	$-24,096$	$+27.4$
Direct operating expenses	$-8,570$	$-7,697$	$+11.3$
Indirect operating expenses	$-9,535$	$-8,839$	$+7.9$
EBITDA	23,168	21,993	$+5.3$
Amortisation and depreciation	$-6,530$	$-6,518$	$+0.2$
EBIT	16,637	15,475	$+7.5$
NET PROFIT AFTER TAX	10,093	12,142	$-16.9$

$\mathcal{R}$ REVENUE

Revenue increased by 16% due to the strong growth of billings.

TOTAL COSTS OF OPERATIONS $\chi$

Total costs of operations increased by 17% compared to previous year.

Personnel expenses:

Personnel expenses increased by 9% as the average number of employees rose from 159 to 170.

Marketing expenses:

Marketing expenses increased by 27% as marketing activities were significantly increased during periods of high jackpots such as June and September and we expanded our investment into brand building.

Direct operating expenses:

Direct operating expenses increased by 11% despite billings growth of 16% due to one-off costs relating to the set-up of lottery clubs in the previous year.

Indirect operating expenses:

ZEAL

Indirect operating expenses were up by 8%, mainly due to costs for strategic technical projects for our Spanish ONCE business, costs for external legal advice, an increase in software costs and additional provisions for litigation. This was partially offset by a decrease of insurance premiums for our social lotteries.

EBITDA $\Rightarrow$

EBITDA increased by 5% mainly as a result of the strong increase of revenues despite increased customer acquisition costs and brand investment.

NEW FINANCIAL KPI'S AND OTHER INDICATORS

		LOTTERIES			GAMES
	9M 2023	9M 2022	CHANGE	9M 2023	9M 2022	CHANGE
Pay-in (€m.)	503.1 $\sqrt{1.3x}$	430.4	$+16.9%$	3.4 14.9x
Billings (€m.)	633.2	544.4	$+16.3%$	16.7
Pay-in margin (%)	15.8	16.1	$-0.3$ pp.	35.3
ARPU $(E)$	7.65	7.46	$+2.6%$	19.52
Gross margin (%)	12.5	12.8	$-0.2$ pp.	7.3
RTP $(%)$ *	50	50		88

* Only Lotto 6/49 and Eurojackpot

Billings:

Key figure Billings is not representative for the Games business.

NEW KPI's

With the new Games business, three new KPIs implemented.

COMMENTS

Pay-in:

Deposits received from customers into their customer account for playing the games we offer.

Pay-in margin:

Ratio of revenue to Pay-ins.

ARPU (Average revenue per user per month):

Average revenue per customer attributable to each active customer in a given month.

RTP

Return to player

ZEAL BERIA

OTHER PERFORMANCE INDICATORS I (LOTTERIES)

BILLINGS MONTHLY ACTIVE AVERAGE BILLINGS PER USERS (MAU) USER, ABPU (Lotteries) in $\epsilon$ millions (Lotteries) (Lotteries) in thousands $in \in$ $+16%$ $+12%$ $+4%$ 633.2 1,153 61.02 1.034 544.4 58.47 9M 2022 9M 2022 9M 2023 9M 2023 9M 2022 9M 2023 Successful use of the high Continuous increase in the customer base Further increase at already high levels jackpot phases and higher level of customer activity

ZEAL

ZEAL INSTANT

OTHER PERFORMANCE INDICATORS II (LOTTERIES)

GUIDANCE 2023

GUIDANCE 2023 - CONFIRMED

In $\epsilon$ m	2023 GUIDANCE	2022	Guidance for FY 2023 based on a normalised jackpot situation
Billings (excl. Games) 1)	$800 - 830$	758.4	$\sqrt{2}$ ZEAL will make the necessary investments for future growth Marketing expenses in the range of $E$ 34-39m
Revenue 2)	$110 - 120$	105.2	expected for FY 2023 $\alpha$ Expected mid-term revenue growth in low double-digit range (CAGR 2022-2027)
EBITDA 3)	$30 - 35$	31.7

¹⁾Based on an average jackpot development | ²⁾Including income from jackpot insurance | ³⁾Marketing expenses of €34m – €39m are expected

KEY TAKE-AWAYS

KEY TAKE-AWAYS

• ZEAL continues to grow $\mathcal{P}$
• Games business launched successfully in June $\chi$
• Customer acquisition accelerated, especially $\phi$ during high jackpots
• Expansion of investment into brand building $\bigoplus$

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 2023. 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

CONSOLIDATED INCOME STATEMENT AND BALANCE SHEET IN €K

INCOME STATEMENT	9M 2023 $(in \in k)$	9M 2022 $(in \in k)$	CHANGE (in %)	BALANCE SHEET	30/09/23 $(in \in)$	31/12/22 $(in \in)$	CHANGE (in %)
Revenue	86,012	74,451	$+15.5$	Current assets	81,430	139,538	$-41.6$
Total costs of operations	$-63,926$	$-54,573$	$+17.1$	Non-current assets	309,779	320,197	$-3.3$
EBITDA	23,169	21,993	$+5.3$	ASSETS	391,209	459,736	$-14.9$
EBIT .	16,639	15,475 .	$+7.5$	. Current liabilities	52,386	44,562	+17.6
Profit before taxes	15,633 .	15,485 .	$+1.0$	Non-current liabilities	73,894	81,137	$-8.9$
				Equity	264,929	334,037	$-20.7$
Net Profit	10,094	12,142	$-16.9$	EQUITY & LIABILITIES	391,209	459,736	$-14.9$

ZEAL

ZEAL INSTANT

BUSINESS UNIT SEGMENT REPORTING AS OF 30/09/23 IN €K

	GERMANY	OTHER	TOTAL
Revenue	82,095	3,917	86,012
. Other operating income	1,083		1,083
EBITDA	22,029	1,140	23,169
. Depreciation/amortisation			$-6,530$
EBIT			16,639
Financial result	,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,		$-979$
Share of loss from associates			$-27$
			15,632
Income tax			$-5,538$
NET PROFIT/LOSS			10,094

ZEAL

ZEAL INSTANT

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KPIS (LOTTERIES)

	Q1 2020	Q2 2020	Q 3 2020	Q 4 2020	Q1 2021	Q2 2021	Q 3 2021	Q 4 2021	Q1 2022	Q2 2022	Q 3 2022	Q 4 2022	Q1 2023	Q2 2023	Q 3 2023
Pay-in (in $\epsilon$ m)	110.1	138.0	120.6	140.8	121.4	128.4	125.9	128.0	142.5	140.2	147.7	171.3	158.8	167.3	177.0
BILLINGS (in $\epsilon$ m)	140.0	174.4	157.3	181.0	163.3	169.5	160.3	163.4	181.2	177.1	186.1	214.1	201.2	209.9	222.1
ABPU (in $\epsilon$ )	49.46	54.48	54.90	61.30	56.36	58.40	54.40	58.00	58.31	58.18	58.90	60.73	60.99	61.42	60.73
ARPU (in $\epsilon$ )	6.00	6.89	6.60	7.51	7.16	7.00	6.55	6.99	7.57	7.41	7.39	8.07	7.55	7.73	7.67
$MAU$ (in $k$ )	942	1,065	954	984	966	968	982	938	1,036	1,015	1,053	1,175	1,100	1,142	1,217
CPL (in $\epsilon$ )	26.00	27.77	28.96	28.79	33.48	32.12	17.65	29.61	38.09	37.07	34.76	34.86	36.77	50.83	50.39

ZEAL

9.11.2023

KPIS (GAMES)

	Q2 2023*	Q3 2023
Pay-in (in $\epsilon$ m)	O.1	3.3
BILLINGS (in €m)	0.6	16.2
ABPU (in $\epsilon$ )	58.74	306.18
ARPU (in $\epsilon$ )	5.49	22.02
$MAU$ (in $k$ )	9	18

* Games business started in June 2023.

ZEAL GAMES

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FINANCIAL CALENDAR 2023

	2023										2024
	Jan.	Feb.	Mar.		Apr. May	Jun.	Jul.	Aug.	Sep.			Oct. Nov. Dec.		Jan. Feb.		Mar. Apr.	May	Jun.
Publication of Annual Report 2022					23 March 2023
Annual General Meeting						9 May 2023
Publication of Q1 Quarterly Statement							11 May 2023
Publication of Half- Year Report									10 August 2023
Publication of Q3 Quarterly Statement												9 November 2023
Publication of Annual Report 2023																	20 March 2024

ZEAL

ZEAL GAMES

Contact

Frank Hoffmann, CEFA

Senior Investor Relations Manager

$T + 49(0)40809036 - 042$ M +49 (0)175 267 3420 frank.hoffmann@zealnetwork.de www.zealnetwork.de

ZEAL

Straßenbahnring 11 20251 Hamburg