ZEAL Network SE

Good morning, ladies and gentlemen, and a warm welcome to today's earnings call of the ZEAL Network SE following the publication of the Q3 figures of 2025. I am delighted to welcome the CEO, Dr. Stefan Tverase, and the CFO, Andrea Behrendt, who will guide us through the presentation and the results. After the presentation, we will move on to a Q&A session. in which you will be allowed to place your questions directly via audio line. Questions via chat cannot be submitted today. So having said this, Andrea, the stage is yours.

Thanks a lot. And good morning, everybody. So welcome to our earnings call for Q3 this morning for your network. I hope you have the presentation. If not, please have a look on our investor relations section on our homepage there. Everything is available. So before we start, I really want to welcome Stefan. Stefan, your first earnings call with us. So I'm happy you're joining us today and I'm looking forward to build this future together with you. So let's go to the content, the agenda of today's call. We will start with a brief overview on the highlights of the first nine months. Then let's dive into the financials. That's what we are here for to talk about. And then have a look on the strategic focus and talk about our updated guidance 2025. And then we will wrap it up with the key takeaways and go to our Q&A session. And with that, for the first time, handing over to Stefan for a short summary.

Andrea, thank you very much. And good morning, everyone, also from my side. I'm obviously super excited to be here. I've joined Zeal now a bit more than two months ago, and it has been a blast. I really enjoy being here and obviously enjoy attending this call with you to update you on our financials. The headline that we want to communicate is that we continue to execute our strategy very consistently and very successfully. As you all know, a major driver of our business is the jackpot environment. And Andrea will deep dive into this, the jackpot environment that we've been able to witness in the first three quarters of this year has been below the statistical average. But despite this, not so a welcoming environment, we've been able to really drive our business very successfully. We have accelerated the growth of our customer base. We have been able to continue to significantly increase the gross margin of our business and thus also have grown the profitability of Zeal Network as a consequence. And you notice we have been able to adjust our ambitious targets upwards and I've increased our guidance in September 2025. But back to Andrea for all the details.

Thanks, Stefan. Yeah, let's go through the details of the financials. On slide number six, you will get the jackpot environment. Like you know, it's really important to put our results into context from the jackpot side. The jackpot is an upside potential that if it comes, we have the option to acquire even more new customers and actually reactivate existing ones. So it's a real driver. But in the first nine months of 2025, it was unfortunately a weak jackpot situation, but we delivered strong results with that. We saw only four peaks in the nine months this year, while last year, for example, we had six peaks already by end of Q3. And as you all know, Q4 was a blast last year. Like I said, despite this situation, we delivered strong results. And let's see how that translates into financials on slide number seven. Here, I want to highlight three numbers for you. So let's talk about revenues. The revenues grow by 34%. And that's driven by an increased billings of 12% year over year and a notable improvement of the margin, as we know, based on the price increase that happened last year. We increased also our marketing spend by 35%, investing into future growth of Zeal and acquired a significant number of new customers in such a weak jackpot environment. And bottom line, we delivered a strong EBITDA of 54 million and we really are maintaining this momentum of efficient growth, what is really matter for us. Let's take a closer look on the billings. Slide number eight. We grow our billings 12% year over year. This is based on an increased customer base of 17%. That is based on Q4 strong acquisition from last year, but also the new FDMPs or leads that we acquired this year. And so we reached over 1.5 million monthly active users this year on our platform. And they spent around 59 euros per month, a really strong number. Previously, I already mentioned that our margin increased. And the key driver here is really the successful price increase from last year. And on the other hand, what we are really actively working on, steadily improving our product market mix. And herefore, we ended up with an overall gross margin of 17.5%. So the other side of the growth for Zeal is the customer acquisition, and you see that on slide 10. We acquired in the first nine months 879,000 new customers. This is a clear sign of effective marketing also in weak jackpot environments. And we are really able to grow our customer base also in these situations. And that's a real also a strategic goal for us, as you know. This overall led to a CPL of 46.5 euros. And this was, of course, an expected increase compared to last year because of the weak jackpot environment, but also because of overall increased media prices and the investments that we are doing in the new businesses to really test new target audiences and widen our market. The CPL for the core brokerage business was actually at 42.5 on levels as expected. On our other side of the business, the games business, we are seeing continuous growth and improved traction. So we increased our games portfolio up to nearly 600 games and see how the product features really resonate with our customers. So overall, the business grow by 51% year over year on the revenue side. And now, last but not least, to our Traumhausverlosung. We already have done four draws this year, or have planned our fourth draws this year for the house raffles. In this slide, you will see the performance of the first four houses for Traumhausverlosung. And we also this time added the overall duration of the campaign to give you even a bit more context for the numbers. And as you see, the House 4, our house in St. Peter Ording, was a success. It was higher than all our expectations and even previous performances. So really a strong delivery here. And we are delighted to announce that we are already on our fifth house. So we have a beautiful house that you see there on the picture in Bavaria that you are able to win until Monday. So maybe you want to still buy a ticket and get your chance on it. It's so far my favorite house. But then we are looking already on the next house campaign. And here we choose the favorite holiday destination for the Germans. It's in Mallorca. So I'm really waiting for this one to go. And yeah, go live. And with this, let's give an update on our strategic focus areas and our guidance. On slide 14, you will see the three focus areas that I presented to you already in March and that I'm always updating you on because they are so important to us. So firstly... We continue to improve our customer acquisition and profitability in our core brokerage business. And you have seen in the first nine months, our underlying gross margin is at 17.5%. That's a really strong number. And we already improved our customer acquisition in this weak jackpot environment. The second focus area, Traumhaus, we are scaling Traumhaus. And as you see, the numbers are running well. And we delivered already the fourth house campaign and all of them actually exceed our expectations. And on games, we also delivered what we told you. We are currently on track to deliver over 14 million euros in revenues. And we saw year to date so far a year over year growth of 51%. And on the guidance, you know that we already increased our ambitious guidance for this year. And thanks to the increased lottery gross margin and also the positive development of Traumhausverlosung, we communicated you an increase. And now we expect revenues for 2025 to be in the range of 205 to 215 million euros. And EBITDA is expected to be in the range of 63 million. to 68 million euros. And now over to Stefan again for the key takeaways. And after that, we will head to the Q&A session.

Thank you, Andrea. And as you can see, everyone on the call, it has obviously been a great environment for me to start because we've been able to accelerate the growth of our customer base. We have added about 880,000 first-time paying customers and have been able to motivate more than 1.5 million people to be active on our sites on a monthly basis. We have increased our gross margin for Remarkable 17.5% driven by both price measures as well as product mix improvements. And that overall led to a very profitable business. The strength of our business led to an increase in the profitability and thus an increase in the guidance that we've been able to give to the markets. This concludes our presentation. And obviously, we are now happy to answer any question that you might have.

Yes. Thank you very much for the dive into your third quarter and congratulations on your results, Stefan and Andrea. Ladies and gentlemen, we will now move on to the Q&A session and are happy to take your questions in person via audio line. We have a few raised hands already. If you have dialed in by phone, please use the key combination star nine followed by star six. And please note that questions via chat box cannot be submitted today. We will start with the questions from Henry Wendisch. You should be able to speak now.

Yes. Hi. Thanks, everyone. Thank you, Andreas. And welcome, Stefan. I have a couple of questions. First one, I think, is regarding the recently upgraded guidance. I think on sales, I totally agree with your new guidance, but on EBITDA, now that we have seen the Q3 results, you are implying 9 to 14 million of Q4 EBITDA, and this seems rather weak in my view. So do you also agree that this is a rather conservative estimate, or are you expecting any sorts of jump costs that are not foreseen by us in that sense? And then I think, shall we do all at once or one by one?

We can do one by one. Hi, Henry. So let's start with the guidance one. So, yeah, I mean, we had strong Q3 results. You have seen that. I agree with you that we will most likely end up at the upper end of the guidance. So you're not seeing anything wrong there. But of course, also in Q4, we want to grow and invest into efficient marketing and we are searching for these opportunities all the way. So that's just like giving us with the guidance a little bit of a breathing room.

Okay, thanks. Understood. Next one is regarding the user activity. Just on the Q3 level, I've seen a large jump in activity and it was bigger than I expected, actually. I wanted to... maybe get a bit more color on how this happened. I mean, we've seen two peak jackpots in Q3, which might be a result, or actually probably a big result, but is it already also maybe that there's a recovery of the strong cohort that you acquired in Q4, that they sort of, they played quite well in Q4, and then Q1, Q2, the activity went down, and now it went up again, because they sort of gained trust with you, and they sort of also return to a higher player frequency as they got to know your offering and how it works at Zeal and now the activity is going up. So is it a mix of both or what's the real answer here?

Yeah, I think you're kind of right. But it's not only the Q4 2024 cohort, but it's actually basically all cohorts really got well activated in this Q3 with the two peak jackpots. We saw a lot of activity there. And on top of that, really also the Dreamhouse Raffle is really driving activity on the platform increasingly. in the existing customer base, but also bringing in new customers. So that's the two main reasons that we can mention here.

Right. Thanks. And then on the gross margin improvement, if I... We've seen the 2.2% in price optimization on a nine-month basis, but now Q3 is the first quarter without this base effect sort of. So does that mean that there was no price effect in Q3 and then the increase in gross margin in lottery was only driven by a mixed effect?

Exactly. If you compare Kusui to previous year, you have now a clean gross margin comparison. So there's no additional price increase, no relevant price increase topics there. What you see is mainly really the hard work in optimizing our products mix, getting our customers focusing on premium products and therefore increasing all the overall gross margin.

Good. Got it. Understood. Next question is regarding the user intake. I think it was the second largest user intake we've seen following, I think, Q4 2024, which was the biggest. And that with only, in quotation marks, only two peak jackpots. So is there anything, I mean, beyond marketing efficiency gains that has driven this strong intake? I mean, obviously, there's a townhouse effect in that because a lot of people signed up for that as well. But are we missing anything?

No, exactly. I mean, there are two points. So the one point, Traumhausverlosung, exactly. So we really see that this is a product that works very, very well in customer acquisition. So it drives customers into our platform. On top of that, we really worked hard on optimizing our marketing playbook in certain jackpot environments so that we are not only able to harvest a lot of new customers during peak jackpots, but also in lower jackpot phases. So I think that's a combined success of both measurements that the team is driving.

Great. And then I can jump over to Dreamhouse. It was quite a big, and I was surprised positively by the demand there regarding especially average billing per user, if my math is correct, also the average revenue, which developed proportionately. Is there any, besides the big demand, any effect that maybe played a role that pushed this average billing per user figure higher than the previous draws?

I think we also, on top of the normal demand increase, like you already mentioned it, we pushed the product with different price points into our existing customer base, and that increased the average billings for use, I think.

Right, cool. And then my last question, also regarding the Tom Hoss, Green Hoss Raffle, We've seen in the last, I think, two or three quarters that Omaze, sort of your small investment from the UK, what you copied from them to UK, now they copied to you in Germany. And they have quite, I think, very, very similar offering. And it looks almost the same. So what's sort of your assessment on this? How are they performing against you? And do you see this as a threat maybe? Or what's sort of your take?

No, first of all, like I always say, I get a lot of this question. We were welcoming competition and it's good competition. Especially we see that Omeris helps us actually with their investments into this product category. to make this really a relevant product category in Germany, because the marketing pressure that comes in now from two providers helps really to make this known product concept in Germany. So it's not a threat. We are happy to see that it also works for them. As you know, we are also invested in Omaze and no negative impact there.

Okay, but you're also not teaming up in any sense. So vice versa, spillover effects, but not like you have a joint effort.

No, no. I mean, we are competitors.

Yeah. Cool. Thanks very much.

Thank you for your questions, Henry. And we will move on to Tim Kruse in a moment. One note, please make sure that you use your full and real name in the queue. and rename yourself to get the permission to speak. Tim Kruse, the stage is yours.

Yes, thanks. Good morning. Yeah, a lot of questions already asked by Henry, but a few follow-ons. Can you confirm that the lottery margin, even if my calculations excluding the Dreamhouse raffle, the core lottery margin was very, very strong in Q3. So is that something from a mix effect that we should look at in the next quarters as well?

I mean, we told you already that we are on a high gross margin and that we see this sustainable. Although Q3 is, of course, a special effect because you have two peak jackpots and you had this drives, of course, especially sales on the lottery clubs that has a significantly increased margin compared to the or brokerage business. So you need to adjust it a little bit down, but not like massively.

Yeah, okay. Okay, understood. And then on marketing, that was significantly above last year. And also the first two quarters, you said that you will be planning to increase marketing. Can you maybe split that a bit? Was that a lot coming from the Dreamhouse raffle? And what is sort of the expectation for Q4? Maybe just sort of a similar or slightly lower level? That would be helpful.

Yeah, on the marketing side, it has two effects. So, of course, we are trying, like I said, also in weak jackpot situations, acquire new customers in our core brokerage business. And therefore, you see that this worked out and we were able to efficiently acquire. And on the other hand, you're right. Of course, the acquisition of Dreamhouse Rattle works very well. And we are investing relevant amounts there as well to grab as much of the market as possible, as fast and efficient as possible.

Maybe a follow up on the dream house. Can you give us a bit of guidance in terms of the number of houses? I mean, you are still at a quite similar pace in terms of days for duration between the periods. What are your expectations going looking into next year in terms of the number of houses you will be expecting to raffle next?

Our idea is to increase the frequency clearly because the demand is there and it's a really well-known product. So this year we were able to deliver at the end 4.5 houses, let's say. The draw of the last house will be beginning of next year. So you can for sure add a few houses on top of that for next year.

Okay, perfect. And then maybe finally, personal costs in Q3 were quite a bit higher also than the previous quarters. Were there any one-offs we have to look at? Or is there any sort of volume-related personal costs there? Or is that a level which we should look at sort of for the next quarters as well?

I think there was one special effect that is really a one-off because of our change in the CEO position. Of course, we have to record for that and we put everything of that already into our Q3 results inside. And we also had some increase on the short-term and long-term incentives because of the success of the company. But as we want to be successful out of the future quarters, I would say that's rather something that we would not define as a one-off.

Okay, understood. Thanks a lot. All the best.

Thank you, Tim. Thanks, Kim. And we will move on to the next person in line, Henrik Lehmann. The stage is yours.

Ja, vielen Dank. Ich hoffe, ich darf in Deutsch die Frage stellen. Sie können aber gerne in Englisch antworten. My name is Henrik Lehmann. I am from Brandenburg, from the neighborhood of Hohen Neuendorf, where the first Traumhaus-FINN was launched. I am a private investor, but also invested in CL Network with my Wikifolio Top 10 Germany dividend. And I say that CL Network belongs to the top 10 stocks in Germany from my point of view. I am very excited about what you are doing. Congratulations to the first three quarters, to what you have achieved in all three areas, both in the lotto and in the games, and especially in the Traumhaus award. I am a bit surprised by the prognosis. Of course, you have raised it a bit, but if we are honest, 216 million turnover in three quarters, on average 54 million. And if we put that on top of the previous turnover, we are already above the prognosis of you. At the same time, they are constantly growing and we have a Q4 ahead of us, which is typically the strongest. In this respect, I have to ask again, is there anything that we should know that worries you or are you just still so conservative in planning? And the second question is, is there any doubt about a prognosis adjustment this year or will you only consider the annual results next year?

So first of all, of course, we are happy that we are among the top ten German stocks. We are very happy about that. Thank you very much for your interest and the great question. I will switch to English if it's okay, but we can follow up just because we have some audience that don't speak German. So, yeah, on the overall guidance, like I said, I expect us clearly to end up at the top of the, either on the top range of the guidance on two things that I just want to communicate. It's like for us, it's always the jackpots driving significantly top line growth. So if Q4 last year was amazing and that's true, that doesn't mean it needs to be this year. It could be also not the case. So we are already beginning of November. We just have one more chance to get a jackpot run this year and Otherwise, there will be no more jackpots this year lining up because they need a certain time to build up. So that's already kind of envisaged in this guidance. And on the bottom line, if you talk about EBITDA, it's for us really, we want to have the breathing space of power on the marketing investments. If we see investment opportunities, we want to do them. And of course, they might not pay off already in 2025, but in the next years. And therefore, we want to leave us with this freezing space. So there's nothing hidden or any other investments. It's really just we want to have that opportunity to still in Q4 invest if we see opportunities. And invest into customer acquisition. That's a key point here.

And then one more question, because you just said, you referred to the result at the end. I understand that you are a bit more conservative and say, yes, we also want to invest more in marketing. And of course, that also depends on the jackpot, understood. But in total, if you invest more in marketing and already have quite the flow anyway, then I assume that the turnover is higher than in the last three quarters. And my question again, is there still a doubt about a prognosis adjustment or will you only report the next time with the annual figures?

If we are aware that we have to adjust our guidance, then we would of course do that, either in Q4 or at the beginning of next quarter. But we just have to know the knowledge for that. Thank you, Mr. Lehmann.

With this, we will move on to Mr. Matthias Mierwald from Kochbank. You should be able to speak now.

Hi, there is Matthias in Kochbank. Can you hear me well?

Yes.

OK, thank you. I have a question, and this question is more towards your midterm growth algorithm. On the page 15 of your presentation, it says you target continuously double digit revenue growth in the mid-teens and continuously expanding EBITDA margin. My question is, if you look to these outer years, how the scale effects are gonna unfold towards the outer years. How are the cost blocks developing? And specifically, I would be interested in the marketing spend. It was in the region of 31% to 32% of sales in the last two years and this year. So I'm curious how the further growth is gonna scale into profitability.

Yeah. So I cannot give you a fixed percentage on our marketing investment, but what I can tell you is... Maybe directionally. Sorry?

Maybe directionally.

Also not directionally. Let me tell you why. Because we really are keen on acquiring customers now than in the future and really generate value for our shareholders. Therefore, we really look into the opportunities. We don't see any relevant limits that will limit us on marketing investments unless we don't fulfill our boundary conditions on efficiencies that we are setting ourselves. Therefore, If it's today, this year we guided you on 60 to 70 million, maybe next year it's even a bit more because we see more opportunities, right? So that's the kind of mindset that we have. We want to generate growth, efficient growth, of course, that then builds up the value of this company, the additional value that we have. So I'm...

um that's really our guidance we are not limiting us on the investment side that's one of what i want to communicate here so so to sum it up it's basically you you want to keep your opportunistic position on on marketing spend uh but for europe as an investor it's it's also very important to see how this uh how this scales uh if you if you can achieve these growth rates and how this transfers into into margin

Exactly. And therefore, we always communicate and you will see that in the numbers that 80 to 85 percent of that top line growth has to go to bottom line. That's our goal. That's what we also communicate with these increased EBITDA margins. But it's better to look at the EBITDA margin even without marketing to really see how this efficiency gain is and the scalability of this business is really showing up.

And a final point on this, can you give me, you know, if you see that those new activities, newer businesses, also kind of as a marketing spend to win, to acquire customers, is it then that for your traditional, let's say, brokerage model, that the marketing cost to sales relatively declines?

Yeah, exactly. That's why we also started, I think two quarters ago, started to also communicate you the CPL, so the cost per lead for the core brokerage business to really give you a baseline for that, because that's the standard. But I want to also make very clear that we are also growing in the core brokerage business. And if we see investment opportunities there, I mean, it's still an underpenetrated market where we can still double the online penetration. And therefore, we see a lot of investment opportunities also there within the next years.

Okay. Many thanks.

Thank you. Thank you very much, Matthias. And we will move on to our, for now, last hand up, Jörg-Philipp Frey. You should be able to speak now.

Yeah, hello. Philipp Frey of Warburg Research. A lot was covered already, so I would stick to marketing and the cost per lead, actually. You mentioned that the increase of media prices played a significant role in the 31% increase. Can you be a bit more precise how much of this increase was by media spending and how much by the impact of a weaker jackpot environment? Any idea there?

Yeah, it's hard to separate these two things, right? Because we are just paying one price, but our indications is that overall platform media prices increased around 10%.

As far as I've seen, it is mostly driven by the big internet players like Google or Facebook. Exactly. Significantly. Are you exploring alternative media channels, meaning venues like out of home or in-app advertising, which where we've seen, for example, in the in-app advertising, we've seen a a substantial increase in eyeballs, but a decrease in prices. Is there something which way you are looking at for additional efficiency gains?

Absolutely. We are always trying to find new ways to attract new customers in the most efficient and profitable way. So depending on the jackpot situations, we have various media scenarios that we are employing and always new channels that we are adding. At the end of the day, it's the challenge to find the right balance between volume and price. But new channels obviously play an important role here.

That's good. And lastly, one housekeeping question. If I understood it correctly, regarding taxes, you have kind of a 4 million positive one-off regarding deferred taxes, and otherwise we should assume an underlying tax rate of 32%. Does that... Hopefully, you're right.

Okay.

Thank you very much.

Thanks.

And all the best luck you always need for jackpots.

Thank you.

Thank you.

Thank you very much, Mr. Frey. And in the meantime, we have received no further questions. We therefore come to the end of today's earnings call. Thank you for joining and all your questions and your interest in the Zeal Network SE. Should further questions arise at a later time, please feel free to contact Frank Hoffman from Investor Relations. A big thank you also to Stefan and Andrea for your presentation and the time you took to answer the questions. I wish you all a lovely remaining autumn week. Maybe the next dream house is yours. And with this, I hand over again to Andrea for some final remarks.

Yeah, thanks a lot. Yeah, like I can just repeat that. Thanks again for joining this morning and your interest in Zeal. I'm also very happy to see or hear new investors popping up in the earnings call and asking questions. So really, really appreciate that. And of course, special thanks to you, Stefan, your first earnings call. Well done. So more to come. Thanks a lot and have a lovely Wednesday.