The Zeal Group has raised its guidance for the fiscal year 2020 again after reaching the full-year guidance for new registered customers. The forecast had was raised in July 2020, after the first nine months of the year, according to preliminary calculations.
Supported by the good jackpot development of the German lottery Lotto 6aus49 in the third quarter of 2020, the continued high marketing investments led to a growth in billings, revenue and new registered customers that exceeded expectations.
Zeal was able to gain 787,000 new registered customers in the German segment in the first nine months of 2020 alone due to the increased marketing investments of €25.3m (2019: €17.9m) to acquire new customers, with a preliminary CPL of €27.58 (2019: no German segment).
According to preliminary figures, billings increased by around 42% to €471.8m in the first nine months of 2020 (2019: €332.6m). The Germany segment contributed a preliminary €470.9m to this.
It should be noted that, in a year-on-year comparison, Zeal 2019 offered additional products in the secondary lottery business which were discontinued in October 2019 due to the business model change. Moreover, Lotto24‘s online lottery brokerage business has only been part of Zeal Group since May 14, 2019. The Lotto24 billings up to that date were therefore not included in the previous year’s figures.
Due to the expected revenue dis-synergies in connection with the business model change revenue decreased by a preliminary 31% to €63.9m (2019: €93.2m). Similar to billings, revenue in the first nine months of 2019 still included the secondary lottery business, but not Lotto24’s online lottery brokerage business up to May 14, 2019. Revenue in the Germany segment amounted to a preliminary €57.8m in the first nine months of 2020.
Supported by the market launch of the social lottery freiheit+ in March 2020 and the positive development of lottery clubs, the gross margin in the Germany segment was a provisional 12.3% in the first nine months of 2020 (2019: no Germany segment).
With a preliminary €6.9m, the adjusted EBITDA in the Zeal Group was also below the previous year’s level (2019: €28.3m) due to the revenue dis-synergies associated with the business model change.
In the fiscal year 2020, Zeal continues to plan to expand its market leadership as an online provider of state lottery products with the Lotto24 and Tipp24 brands.
Based on the strong nine-month figures and access to proven, more cost-effective marketing channels, the Company now expects the number of new registered customers in the Germany segment to be around 900,000 in 2020 (previously around 800,000) with a lower CPL than in the previous year.
Also, Zeal now anticipates billings of between €610m and €630m (previously: between €590m and €610m), revenue of between €80m and €83m (previously: between €76m and €79m) and an unchanged gross margin in the Germany segment of slightly above 12% in the fiscal year 2020.
Depending on the general conditions – in particular the continuation of the high marketing investments to acquire new customers within the attractive market environment, the jackpot development and the implementation of the synergy effects – the Company now forecasts the adjusted EBITDA to be between €8m and €10m (previously: between €7m and €10m).