ZEAL Network, the online provider of German state-licensed lottery products, has published its Q1 financial report in which it unveiled a 108% increase in its billings from €67.4m in 2019 to €140m in the first quarter of 2020. 

The promising start to the 2020 fiscal year has seen the group not only grow its billings, but also achieve a strong gross margin, further reduce costs and successfully acquire new customers.

The rise in billings has been mainly attributed to the inclusion of Lotto24 with the Germany segment contributing €139.7m. The firm noted, however, , that in 2019 it offered a broader product range in the secondary lottery business which was discontinued in October 2019 due a change of its business model.

Despite the somewhat promising start to the year, it is this change of business model that has seen the group register a revenue decrease of 48% to €19m when compared to €36.5m at the same point last year. The Germany segment contributed to €17m of the latest Q1 revenue. 

Jonas Mattsson, CFO of ZEAL Network SE, stated: “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. The fact that every Friday in April €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.”

It was also revealed that the group succeeded in reducing its cost base, with personnel and other operating expenses falling  €8.3m to €16.7m compared to Q1 2019’s figures of €25m.

ZEAL also noted that while other operating expenses fell by €7.8m, the group’s marketing expenses saw a €1.4m rise. Moreover, the group also unveiled a decrease in adjusted EBITDA from €12.2m in 2019 to €2.8m with the Germany segment contributing €1.9m. 

In addition to providing its financial results, the online lottery provider also addressed the impact of COVID-19, with the organisation stating that it considers itself well positioned to limit the effects of the crisis but is currently unable to conclusively assess the effects it has had on its operations. 

A forward looking statement from the group read: “Recognizing that the previous year’sfigures 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 €550m and €570m.

“Based on the expected dis-synergies as a result of the business model change, ZEAL anticipates revenue of between €70m and €73m in 2020. 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 €5m and €8m. 

“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.”