ZEAL with promising start 2020

• Positive financial development
• Further cost savings realised
• Impact of the corona crisis
• Guidance 2020 reiterated

(Hamburg,14 May 2020) ZEAL Network SE (Lotto24.de, Tipp24.com), Germany's leading online provider of state-licensed lottery products, has made a promising start into the fiscal year 2020: The ZEAL Group has grown billings, achieved a strong gross margin, further reduced costs and successfully acquired new customers. In order to improve transparency, the Company reorganised its reporting segments: From now on ZEAL will report on the segments "Germany", which mainly comprises the online lottery brokerage business of the Lotto24 and Tipp24 brands, and "Other", which mainly comprises the business of ONCE and ZEAL Ventures.

Positive financial development
ZEAL Group's billings increased by 108% to EUR 140.0 million in the first quarter of 2020 (2019: EUR 67.4 million), mainly thanks to the inclusion of Lotto24. The Germany segment contributed EUR 139.7 million to this, billings of the Spanish ONCE business are not included for contractual reasons. In a year-on-year comparison, however, it should be noted that in 2019 ZEAL offered a broader product range in the secondary lottery business (including "Instant Win Games", the European lottery "EuroMillions" and the US "Powerball" lottery), which were discontinued in October 2019 due to the business model change. Moreover, Lotto24's online lottery brokerage business has only been part of the ZEAL Group since 14 May 2019. The Lotto24 billings from the first quarter of 2019 were therefore not included in the previous year's figures.

Revenue of the ZEAL Group decreased by 48% to EUR 19.0 million in the first quarter of 2020 (2019: EUR 36.5 million), mainly due to the expected revenue dis-synergies in connection with the business model change. Similar to billings, revenue in the first quarter of 2019 still included the secondary lottery business but not Lotto24's online lottery brokerage business from the first quarter of 2019. Revenue in the Germany segment amounted to EUR 17.0 million in the first quarter of 2020.

Supported by a positive development of lottery clubs the gross margin in the Germany segment was 12.1% in the first quarter of 2020 (2019: no Germany segment). Since, among other things, the Spanish ONCE business is not included in billings but only in revenue, the Company's margin development is better reflected in the Germany segment rather than on Group level.

Further cost savings realised
In addition, ZEAL Group succeeded in further reducing its cost base: Personnel and other operating expenses together fell by EUR 8.3 million to EUR 16.7 million in the first quarter 2020 (2019: EUR 25.0 million). It should be noted that Lotto24 AG's costs were not yet included in the first quarter of 2019, so the cost savings would have been correspondingly higher. Other operating expenses fell by EUR 7.8 million to EUR 11.8 million (2019: EUR 19.5 million), although marketing expenses increased by EUR 1.4 million to EUR 6.6 million. This reflects the synergy measures implemented to reduce direct operating expenses (including the costs of covering the bookmaking risk) and non-deductible VAT within the myLotto24 Sub-Group, which only began to take effect on transition of the German business from a secondary lottery to the online lottery brokerage business and will have a full year effect in 2020.

ZEAL therefore confirms the planned annual cost synergies of at least EUR 57.0 million, of which 80% is to be achieved after the first year and 100% after the second year of completing the Lotto24 takeover. Overall, the Company continues to expect total expenses for achieving the planned cost synergies within the targeted range of EUR 15.0 million to EUR 20.0 million. Up to the end of the first quarter 2020, expenses of EUR 15.0 million incurred for this. For the rest of the 2020 fiscal year, ZEAL expects further expenses of up to EUR 2.0 million.

As a result of the revenue dis-synergies in the course of the business model change, adjusted EBITDA in the ZEAL Group of EUR 2.8 million was, as expected, down on the previous year (2019: EUR 12.2 million). The Germany segment contributed EUR 1.9 million to this. After deducting increased depreciation and amortization mainly resulting from the takeover of EUR 2.7 million (2019: EUR 0.6 million) and non-recurring expenses of EUR 0.1 million (2019: EUR 1.8 million), EBIT fell to EUR 0.0 million (2019: EUR 9.8 million).

At acquisition costs per new registered customer (cost per lead, CPL) in the Germany segment of EUR 26.00, the Company acquired 206 thousand new registered customers in the first quarter of 2020 (2019: no Germany segment).

Impact of the corona crisis
Due to the ongoing changes in general conditions following the coronavirus developments, we cannot conclusively assess the effects on ZEAL. On the one hand, the significantly reduced consumer behaviour could also have an indirect negative impact on e-commerce services - a closure of shops, such as lottery retailer outlets, could lead to a reduction of lottery sales and thus to decreasing, less attractive jackpot levels. On the other hand, the restrictions on public life and the significant increase in the amount of time spent at home could also lead to a growth in online sales, especially for e-commerce business models such as online lottery brokerage. Since our internal processes can also be handled essentially without problems from home, we consider ourselves well positioned in these times to continue to offer our customers the best possible online lottery service and, within the scope of our possibilities, help to limit the effects of this crisis by protecting our employees and the community.

Guidance 2020 reiterated
ZEAL still plans to further expand its market leadership as an online provider of state lottery products with the Lotto24 and Tipp24 brands in fiscal year 2020. Recognizing that the previous years' figures are difficult to compare with those forecast for 2020 due to the Lotto24 takeover in May 2019 and the business model change from a secondary lottery to an online lottery broker in Germany in October 2019, ZEAL Group expects billings of between EUR 550 million and EUR 570 million. This includes for the first time the full year billings of Lotto24 and the discontinuation of the international products as part of the termination of the secondary lottery business. Based on the expected dis-synergies as a result of the business model change, ZEAL anticipates revenue of between EUR 70 million and EUR 73 million in 2020. As the gross margin in the online lottery brokerage business is naturally lower than in the riskier secondary lottery business, the company expects a gross margin in the Germany segment of around 12% - a comparable level to Lotto24 in recent years. Depending on the general conditions, in particular the jackpot development, the timing of the implementation of the planned synergy effects and the marketing investments for the acquisition of new customers, adjusted EBITDA is expected to be between EUR 5 million and EUR 8 million. Due to the access to proven, more cost-effective marketing channels, the Company expects the Germany segment to nearly double the number of new customers in 2020 with a lower CPL compared to the previous year.

"We are on a good way to reach our goals, even if some steps of the transition, such as the complete technical integration of Lotto24 AG, are still pending," says Jonas Mattsson, CFO of ZEAL Network SE. "The fact that every Friday in April EUR 90 million were in the EuroJackpot and that we were able to turn two customers into multiple millionaires during this time once again, makes our customers and us of course very happy."

Selected financial key figures as of 31 March 2020:

*In the three months ended 31 March 2019, the Group did not operate a Germany segment. As such prior year comparatives are not available.

About ZEAL Network SE: ZEAL Network SE, Germany's leading online provider of state-licensed lottery products, is a Hamburg based Group which mainly brokers customers' tickets to the state lottery companies through the brands Lotto24.de and Tipp24.com, for which it receives a commission. The offerings include among others »Lotto 6aus49«, »Spiel 77«, »Super 6«, »EuroJackpot«, »GlücksSpirale«, lotto clubs, »Keno« and the »Deutsche Fernsehlotterie«. Founded in Germany in 1999, it was initially set up as a lottery broker. In 2005, it was floated on the Frankfurt Stock Exchange (Prime Standard) and became one of the most successful initial public offerings (IPOs) in Germany at the time. In 2009, the Group changed its focus from lottery brokerage to the secondary lottery business. It moved its registered office to London and was renamed as ZEAL Network SE in November 2014. In May 2019, ZEAL completed the takeover of Lotto24 AG, returned its Tipp24 secondary lottery to the German brokerage business in October 2019 and relocated its registered office back to Germany in the same month.

Contact:
Frank Hoffmann
Investor Relations Manager
T: +49 (0)40 808 141-123
frank.hoffmann@zealnetwork.de