ZEAL Network SE

Good morning and welcome. Thank you for your interest and for joining the call. I hope you can hear me loud and clear. I trust that all of you have access to the webcast link, which should have been distributed to you. But if not, it's also available on the SEED website in the investor relations section. Additionally, you will find a link for you that you can download this presentation. On slide two, you will find today's agenda. highlighting the main areas I will cover before giving you the opportunity to ask questions. We will start off with a summary of the first nine months, followed by a financial update and our revised guidance before we're finishing off with the key takes away. Let's start with the summary, and I will now hand over to our CEO, Helmut Becke, that will take you through slide four.

Thank you, Jonas. And good morning, everybody, also from my side. Let me summarize our first three quarters this year. Our billings are up 42%, but we are comparing apples with oranges still with this number. To interpret this number, you will have to consider a number of one-off effects. So the ZIL nine months number for 2020 includes lotto 24 and tip 24 billings the um zeo nine months 2019 only includes lotto 24 from the second half of may onwards when we started to consolidate lotto 24. Second effect is that the TIP24 billings were influenced by the business model change, the loss of customers and products that we experienced in October 2019. So to give you a number that is more apples with apples, let us just look at Lotto24 and compare the full nine months 2020 with the full nine months of 2019. And there we actually see a relatively similar growth number. So we see 38% billings growth for lotto24. We have improved our gross margin also in comparison or in comparison with lotto24 from last year by adding and selling more premium products. We plan to continue to grow our share of premium products We can use that extra margin to either boost our short-term profitability or to acquire more customers and invest into our future. Again, in Q3, we managed to acquire a high number of new customers efficiently, even though the jackpot situation was worse than in Q1 and Q2. And based on the progress we made, we've again raised our guidance for 2020. We'll get back to that later in the presentation. Let me hand back to Jonas.

Thank you, Helmut. Let me now take you through the numbers in greater detail. So let's move to slide six. What you see on this slide is a summary of our income statement. And I will explain part of this in more detail also in the coming slides. Revenues at 63.9 million indicates healthy first nine months of this year, in which we have taken advantage of the positive market environment, but also the full inclusion of Lot24. As explained in previous call, if you compare with last year, the revenues are impacted by the business model change, and the lower revenues should not be read as anything worrying in our business, just a natural evolution of now operating in a more sustainable business model, the brokerage business model. Some of you have also asked about comparison to Lot24 standalone. So let me provide a bit clarity, even if they were not formally part of the seed group in the first four and a half months of 2019. But it will nevertheless give you an indication how the business has developed. So revenues for Lot24 AG, the company, was approximately 28 million in the first nine months last year. This means that we have more than doubled the broker revenues to 58 million euros with inclusion of the tip business. And if you would exclude the tip, meaning only selling the Lotto24 brand, the revenue would have been approximately 41 million, a 49% increase. From my perspective, this is an amazing growth we have seen in the broker business. It makes me even more confident about this decision to change business model as we did last year, as well as the great performance by the company. Let me now move on to costs. We've been able to reduce the cost by nearly 14 million. It should also be noted that a lot of 24 costs were not yet included up to the first four and a half months of last year. So the cost savings would have been correspondingly higher compared to previous year. Having said this, it's clear that the synergies as we are and were committed to deliver are mostly already realized. On top of this, we also invested 9.2 million more market in marketing to take advantage of the positive marketing environment with relatively high jackpot throughout the year. The purpose is, of course, to acquire more customers, which I will come back to in a moment. And finally, an adjusted EBITDA of 6.9 million euros. As expected and communicated to you, it's below previous year, but at that time we did operate a different business model. I'm very satisfied with the result, especially considering the marketing investment the company has undertaken this year. With a lower marketing investment, EVDA would have been naturally much higher. But it indicates the strong first nine months we have experienced when being able to absorb such a big marketing investment and still delivering a good profit. Just as a final note, the non-recurring income is mainly related to the stamp duty reserve tax that we recently got back from the UK Tax Authority. Let me now give you a bit more insight on some of the key performance indicators that you will find on slide seven. Group B links. Group B links, which is showing the transaction volume we are handling, have grown by 42% to $472 million, which is truly amazing for SEAL, and of course, driven by the inclusion of Lotto24, but also thanks to the successful customer acquisition we have seen this year. This indicator is of significant importance since our business is highly dependent on economies of scale, and we clearly have the scale. Even if Lotus24 was not part of the SEAL group for the full 2019, let me still provide a bit of clarity how the development would have looked like. If we look at Lotus24 standalone, its billing amounted at $241 million in the first nine months of 2019. And in 2020, billings rose by 38% year on year. And including TIP, meaning what volume goes through the Lot of 24 company, we almost doubled that volume. Once again, this is important in science matters in this broker business. If you do the comparison, the same comparison for revenues, we have a 49% increase, as I just mentioned. In terms of SEAL gross margin for the Germany segment, we are in the first three quarters at 12.3%, thanks to strong sale of our premium products like lottery clubs and supported by the market launch of our social lottery triathlons in March this year. This is giving us confidence that the margin can be further increased in the medium term. For a better comparison, we have also included the gross margin of Lotto24 as a standalone company from last year, which were 11.4%. So we're clearly making improvements here. On slide, we have highlighted net cash and new registered customers. Net cash is now at 58 million euros. down 55% due to the payment we made to the German tax authorities of 54 million in January this year. And the payment, as probably you know, was made in order to earn interest and avoid penalty. We have also paid dividends of 18 million to our shareholders, as I'm sure you're all aware of. But even if we are confident to ultimately win the case, we have indicated that the remaining VAT cash exposure is 22 million. To summarize this part, we're optimizing the cash situation of the company to either gain a risk-free return or as close risk-free you can get on the excess cash or return to shareholders in line with our dividend policy. Let me now talk about acquisition. It has been a remarkably strong first nine months in terms of acquisition. In fact, the best ever in the history of seed. We can proudly report 787,000 new registered customers in the Germany segment. And if we compare that with Lotto24 standalone for the same period last year, they acquired 27,000, which means 174% increase year on year. So what we see is that the additional marketing investments are paying off. And our ambition to grow and being the market leader is on its way. All this sets us up for an interesting future when these customers continue using our services. As we've explained previously, the customer that ultimately sticks are very loyal for many, many years. On slide nine, you will find further performance indicators. Cost per lead is reduced by 2% if you compare with lot 24 from last year. This is thanks to more efficient marketing channels that the entire SEAL group now have access to. But I also want to call out that the target is not to reduce this to the lowest level possible, but to continue the best in marketing when we get a good payback time and a healthy return on our investments. So a lower cost per lead is, of course, nice, but needs to be seen in a wider concept and not a target, let's say. The average monthly active user for the first nine months of this year is close to 1 million. The sharp increase that you can see on the slide is due to that level 24 was not part of the first four and a half months, but also thanks to the growing business we have had this year. From next year onwards, this number will be much easier to analyze since we would have better and fairer comparison data. The last KPI on this slide is average billing per user is at healthy 53 euros. This is a decrease from last year, but please remember that we were operating a secondary lottery operation with a very different and wider product offering, so nothing to be worried about. Let's now talk about the guidance for the financial year, and you'll find that on slide 11. I'm very pleased to announce that we have raised our guidance again, and after the strong first nine months, you will see the new guidance, which is billings in the range of 610 to 630 million euros, revenues 80 to 83 million, adjusted EBITDA in the range of 8 to 10 million euros, And we expect the gross margin for our German segment slightly above 12% where we are now. The CPL cost per lead is lower than previous year, which we are already tracking as we speak. And the new registered customer we expect now to be around 900,000. Please note that if one would optimize for the short term, EVDA could have, of course, been significantly higher without this additional marketing investment that we're doing. But the long-term profitability would then suffer, while growing the business is key and fully in line with our strategy. This would also create the most shareholder value to all of you. Let me now hand back to Helmut, and he will take you through the key takeaways that you will find on slide 30.