Zeal Network reports 23% drop in revenue in 2020

Zeal Network, an online provider of German lotteries, has exceeded the guidance for adjusted EBITDA in FY 2020 according to its preliminary calculations.
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Zeal Network SE, Germany’s leading online provider of state-licensed and other lotteries, has exceeded the guidance for adjusted EBITDA in the fiscal year 2020 according to its preliminary calculations revealed this week.

However, the lottery provider is expected to report a 23% drop in revenue to €86.9m.

Zeal noted it saw a higher than expected growth in billings and revenue due to the good jackpot development of the German lottery ‘Lotto 6aus49‘ in the fourth quarter of 2020, as well as continued high marketing investments. Consistent cost management supported the improvement in adjusted EBITDA too.

The provider stated billings in FY 2020 are expected to increase by 40% to €652.8m (2019: €466.7m) thanks to the full consolidation of Lotto24 and the positive jackpot development, exceeding its latest guidance of €610m to €630m.

The comparability of the prior-year figures was affected by the discontinuation of the secondary lottery business due to the business model change in October 2019 and only the partial consolidation of the Lotto24 billings (May 14 to December 31, 2019).

As previously mentioned, Zeal’s revenue is expected to fall by 23% year-on-year to €86.9m (2019: €113.5m) largely due to the expected revenue dis-synergies in connection with the business model change, but it was also above the guidance of between €80m and €83m.

As with billings, the 2019 revenue still included the secondary lottery business but not the online lottery brokerage business of Lotto24 up to May 14, 2019, meaning it is only comparable to a limited extent.

Zeal took advantage of the good market and jackpot environment to invest into new customer acquisition. As a result, marketing costs increased by €10.5m (preliminary) to €32.2m (2019: €21.7m).

At the same time, the provider further reduced the sum of other costs and in the fourth quarter of last year for the first time realised the 100% of cost synergies originally planned to be achieved by May 2021.

As an expected result of revenue dis-synergies caused by the business model change, Zeal’s adjusted EBITDA of €12.4m (preliminary) was still below the prior-year figure (2019: €29.4m) but significantly above the already increased guidance of €8m to €10m.

On March 25, Zeal will publish its annual report as of December 31, 2020.