ZEAL Network SE

Good morning everyone and welcome to SEALs earnings call. I hope you all have access to the presentation but if you don't it's accessible on our home page on the investor relations section as well. On this content slide we will talk about today's agenda and we will start off with a summary of the first six months of the year followed by a business and a financial update We will then reiterate our guidance for the year before we are finishing off with the key takeaways. After the presentation, we will give you the opportunity to ask questions. I will now hand over to our CEO, Helmut Becker.

Good morning and welcome. On the summary page for the first half of 2023, we're going to go through some highlights. We continue to grow the business, and we do that by using opportunities for efficient growth investments. As a result, we've been able to significantly increase our billings volumes by 15% compared to last year. We do this in line with our marketing strategy. And what I mean by that is that we are accelerated. We have accelerated customer acquisition, particularly during a high jackpot phase in June. That was a Euro jackpot jackpot phase. And on top of that, another significant highlight for the first six months of the year was the long awaited receipt of the license for virtual slot machine games in Germany that we received from the national regulator. We were well prepared and launched our offering very quickly with an initial portfolio in June. We will now step by step expand our games portfolio. And The final highlight for the third time this year, one of our customers won a very large jackpot that happened very recently in August. And we are very excited to have so many of our customers win big jackpots. I actually have the privilege to talk to these customers. And that's always a highlight for me. And often, there's a great story that we can tell the world. Jonas? Oh, no, I think I'm continuing. And now we are talking about a particular new business that we've launched. That's the games business. As I mentioned before, we were able to launch our games business in a very short period of time after receiving the license already in June. With our brands, we are a front runner in the lottery segment. To date, no state lottery company has launched a comparable games business. We launched our first six games in the first half of the year, and since then, we've actually launched 12 more games in two phases, so we're now at 18 games. And we expect to continuously expand our games portfolio in the second half of the year. having a lot of games in 2024 on top, and constantly refreshing our games portfolio. The business is ramping up nicely. But for the first half of the year, we've only had two weeks of data and only six games live initially. And so it's a bit premature to already draw detailed conclusions or forecast this business for the rest of the year. Jonas, over to you.

Thank you, Helmut. Let's go to the next page, and I will start describing the jackpot situation for the year because it has such an impact on our performance. So on this slide, you can see the jackpot development for our two main products, Lotto 6049 on top and Eurojackpot below. For Lotto 6049, the jackpot situation has been significantly weaker than comparable time last year. Average jackpot is slightly lower, but more importantly is that we only had one peak jackpot in the period versus four last year. This has, of course, an impact on both customer position and billings number for the period. For Euro jackpot, it was the other way around. The average price is similar, but we had 220 million draws in June, fueling our growth, while last year we had none. So what does that tell us? In summary, slightly better jackpot compared with last year, but still below the statistical average. Let's now move into the income statement that you will find on next slide. Thanks to the strong performance, and especially in June, we grow revenues by 11%. Due to the intensive marketing investment, total cost increased by around 20%, but let me break this down for you. Personal costs are in line with the year, despite a slightly larger workforce. Marketing expenses. This is where we made significant investment to capture as many customers as possible, especially in June. In total, for the first six months, we have spent 20 million, which is a step up from last year by 44%. As we've explained before, the marketing investment is short-term suppressing our EBITDA, but long-term highly value created for the company. Direct operating expenses only grow by 9%, while the volume grow by 15%. This is due that we were able to make savings in, for example, age verification costs that helps offsetting the general increase that would normally come from a transaction volume increase. Similar to what I explained in the first quarter, indirect operating expenses are driven by more consultancy and other external costs linked to the projects that we are currently running. And as I just said, the additional market investment has short-term suppressed EBITDA for the first six months and is standing at close to 14 million for the period. This equals to 25% EBITDA margin for the period, which is lower than what we normally have, but fully explained by this exception investment we made in the period. And finally, EBIT is at 9.3 million and net profit close to 6 million. Both are down from last year, which was the same reason for EBITDA, the increased marketing investment. In the coming three slides, we will look closer at some KPIs. So let's go to slide 10. Our billings grow by 50% to 412 million for the period. This is an impressive growth, fueled by the peak jackpot, especially the one we had in June. Gross margin of 12.5% is slightly down versus last year, and it's driven by the product mix. Last year, we had a comparable more sales of charity products with a higher margin than this year. But this is nothing that is worrying me since the product mix is always changing over the course of the year. On the next slide, we've highlighted net cash and new registered customers. Let's first talk about net cash, which is down 34%, fully reflected the large dividend payment we made in June of close to 80 million to our shareholders. And we still have a healthy net cash of 23 million, even after this dividend payment. And as you can see from the chart, we have made a fantastic acquisition numbers by bumping up newly registered customers by almost 20%, resulting in us acquiring 349,000 new customers for the year so far. Moving on to slide 12, here you'll find some additional KPIs. The general increase in media cost and more intensive online advertising by our competitors, pushing up the bidding price for keywords in combination with our strong push in the customer acquisition, resulted in higher cost per lead. The cost for the first half of the year is 45 euros and 9 cents, an increase by 20% versus last year. The MAO, the monthly active users, are up 9% for the first six months, and standing now at 1.1 million monthly users on average. And finally, average billing per user is continuing to increase and now at 61 euro, 5% up from last year. This is indeed very satisfactory, but I don't expect this to go further up until the games are fully ramped up. But we do expect high level of cannibalization with our lottery product with what the customer spent on games. Let me now reiterate the outlook for the years that you will find on slide 14. So the guidance that we reiterate for the year is that we continue, believe, to have billings around 800 to 830 million euros, revenues of around 110 to 120, and EBITDA of around 30 to 35 million euros, mostly depending on how much we ultimately invest in marketing. And we are planning a step change, as you saw from the first six months, and have assumed marketing spend in the range of 34 to 39 million for the year. For the games business, we have assumed a low single-digit EBITDA impact for the year. Obviously, the business is expected to continue to grow in the coming years. And the above numbers indicate a double-digit revenue growth, which is also our expectation for the midterm. And as always, this is based on the average jackpot for the rest of the year. Over to you, Helmut, to bring us home.