ZEAL expects continued growth post-Q3 after launching games offering

ZEAL Network’s guidance for the year-end remains unchanged as the German lottery games developer reported growth throughout the first three quarters of 2023.

The Hamburg-based group outlined that revenue for the first nine months of 2023 trading stood at €86m, a 16% increase on €74.5m recorded the year prior, whilst EBITDA rose 5% from €21.9m to €23.2m.

However, net profit fell 17% from €12.1m to €10m, partly due to some increase in expenses such as marketing costs which increased 27% from €24m to €30.7m whilst direct operating expenses rose 11% from €7.7m to €8.6m and indirect operating expenses were up 8% rom €8.8m to €9.5m.

The marketing costs had a purpose, however, as ZEAL leadership noted that it had ‘stepped up our marketing measures during the high jackpot phases’ which in turn drove acquisition of 518,000 new customers.

Additionally, the group also noted that a wider increase in media advertising costs, which formed part of the expansion of its marketing activity, resulted in “a positive impact of this increased brand marketing on our brand awareness levels in Q3 2023.”

Overall, ZEAL management’s key highlight for the year was the launch outfits games offering after its LOTTO24.AG subsidiary secured a licence to provide games via its flagship LOTTO24 platform and Tipp24 portal.

“We already entered the market with a small initial portfolio in June,” the company’s leadership statement continued. “In the third quarter, we expanded our games offering: we now offer 28 different games and have received approval for 22 further games, which we will be gradually rolling out on our portals over the coming weeks. 

“Moreover, we plan to continue the significant expansion of our games offerings. In addition to expanding our current range of virtual slot machine games by launching further games in this category, we are working on broadening and diversifying our existing games portfolio. 

“We are in close contact with the relevant regulatory body on this matter, but cannot foresee at present if and when games in further categories will be approved.”

Group wide revenue for the first, second and third quarters of the year, with games having been launched halfway through, was driven by billings of €633m from lottery (Q1-Q3 2022: €544m) and €16.7m from games.

Closing Q3, ZEAL expects billings from lotteries – excluding the game segment – from Germany to amount to between €800m-€830m for the close of 2023 and revenue for the full fiscal year to amount to between €110m-€120m, and EBITDA in the range of €30m-€35m.

The aforementioned marketing efforts will continue into the new year, with ZEAL planning investment of between €34m and €39m into this section of its strategy.

ZEAL leadership concluded: “In the fiscal year 2023, we still aim to extend our position as the leading online provider of lottery products and to launch new products, including further games as described above.”