ZEAL Network (Xetra:TIMA) Q2 2026 Earnings Call

0:00 Good morning, everyone, and welcome to ZEAL's Earnings Call Presentation for the First Half Year of twenty twenty six. I'm Andrea Biren, the CFO of ZEAL, and I'm joined today with our CEO, Stefan Pfarrese. The presentation is available on our Investors section and our website. And with that, I will guide you through the agenda. Like always, we will start with the highlights of the first six months of the year. Then I will take you through the financial and operational performance before we give you an update on our strategic progress and the 2026 guidance. We will close with the key takeaways and then open up for a Q and A session. And with that, I hand over to Stefan.

0:46 Good morning from my side as well, everybody. Thanks for joining our call. And I'm happy to report that first half of twenty twenty six has delivered a record in revenue, very profitable growth, and we've been able to continue our strategic diversification. To give you a couple of, more details, we delivered the strongest first half year in ZEAL's history, achieving record number of revenues alongside double digit growth in both EBITDA and profit. This demonstrates that our strong top line momentum continues to translate into very profitable bottom line growth. We've also reached record levels of new customer acquisition further strengthening the foundation for future growth. Through our social lotteries, we continue to support prominent charitable organizations in total, and we are very proud of this. We have already contributed around €240,000,000 to public welfare in 2026.

1:45 And from a strategic perspective, we successfully launched Traum Autofolosung in Germany, expanding our product portfolio beyond traditional lotteries, and we have concluded the acquisition of Seven Canyon in The UK, which represents another important step in our continued diversification. So overall, the first half of twenty twenty six combined record financial performance, strong operational execution and meaningful strategic progress. I'll hand back to Andrea to dive into the numbers for you guys.

2:18 Thanks, Stefan. So like always, let's put our results into context for the jackpot environment in Germany. The jackpot environment improved in the second quarter of this year, particularly in Lotto six out of 49. Lotto six out of 49 reached its €50,000,000 maximum for the first time ever and remained for this in 10 consecutive draws in Q2 and continues until today. So let's see what is happening today. Its average jackpot increased to €27,000,000 compared to €8,000,000 in the prior year period. Euro jackpot reached its €120,000,000 maximum in May and remained there for two draws.

3:03 The average level was €43,000,000 and is slightly below last year's numbers. Overall, the extended Lotto 6,049 rollover sequence more than offsets the slightly lower average jackpot euro jackpot levels. And we added an additional slide this time in because it's the first time we had a €50,000,000 lotto jackpot on €50,000,000 and we wanted to illustrate how this jackpot drives customer activity and billings and how this also compares to euro jackpot here. And that's not only for ZEAL but for the overall market. So for Lotto, six out 49, the €50,000,000 jackpot remains in place with a wide range of draws, as I told you already.

3:52 And compared to low jackpot reference draws, the billings increased by 33%, with a strong uplift in Wednesdays with 45 and on Saturdays with 26%. On the other hand, we have Euro jackpot. And if the Euro jackpot reaches its top maximum at €120,000,000 we see that billings increased by 149% in the market above the normal minimum jackpot reference. And this translated in Tuesday numbers of 171% and Friday's numbers of 134%. In summary, it's really important to see that both jackpots drive significant growth, but relatively increased. The euro jackpot is over 4x higher than Lotto six out of 49.

4:45 This is just that we wanted to share with you because it's for the first time happening, and I think it's important to put that for our results and also for Q3 results. Now let's turn into our P and L. So I want to share my highlights with you here. Of course, revenue growth by 20%, a great number. Lotteries grew by 20% and Games by 17%. On the other hand, the operating expenses increased, but with deliberate investment decisions that we are taking into growth. Mainly, the increase comes from our marketing expenses that rose by 37% that we really, yes, put the pressure on our customer acquisition and increased here significantly.

5:36 The personnel expense increase comes with the investments into our new business areas, especially. But despite these investments, EBITDA grew by 10% to €39,000,000 And we achieved an EBITDA margin in the first half year of 31.9%, well above our guided 30% target. The key message here is that we deliver strong top line growth and increase absolute profitability while we still continue significantly investing in our future. Now let's see on the underlying operational KPIs that drive this growth. So first of all, our lottery billings for H1.

6:24 Lottery billings increased by 13%, and the main driver here is the larger and more active customer base. Average monthly active users increased by 9%. And as expected in such a jackpot environment, the average billings per user increased by 4%. Based on the billings growth of 13% and in combination with the improved gross margin, our revenue increased by 20% year over year. Our gross margin improved from 17.3% to 18.2. And this margin improvement comes based on favorable product mix due to the jackpot environment, as we have seen that in Q2, and of course, impact of our diversification strategy in our product portfolio.

7:17 So overall, really great product margins in the Lottery business and the strong top line growth.

7:28 The long term growth driver is our customer acquisition. So we really focus on this, and we reached new record levels for in H1 in ZEAL. We acquired 659,000 new customers, 32% more than first half year of last year. And this is a huge success. I really want to point this out. It is achieved considering our clear boundary conditions that we set our teams for the marketing investments. You see how this translate in the cost per lead. They increased only by 7% despite this much higher volume in customer acquisition that we put in, despite rising media costs and all the tests that we are doing to

8:19 target new audiences and also to support our diversification strategy. So yes, a real success. If you compare the core brokerage business CPLs, I think that's important, we saw in CPL of €44.86 And like I say, that demonstrates really a strong discipline on our side to invest in unique economics that are scalable and really generate significant growth for ZEAL's future.

8:54 Now to the other operations segment in Germany, and that's Games. Our Games business continues to grow, and we are broadening our Games portfolio and our product features. So and that really resonates with our customers, as you see in these numbers. Monthly active users grow by 34%. As expected, through that strong growth of monthly active users, this resulted in a more diversified player mix, and we see that the High Roller have a smaller proportion now, and therefore, the ARPU slightly declines. Overall, this increase of active users is our goal and drives the revenue growth of 17%. And with that, I hand over to Stefan for some great updates on our own lottery products.

9:45 Andrea, thank you for these exciting updates on games and lottery business. As you know, one of the strategic pillars of ZEAL is to diversify, away from the dependency of, the German lottery business, and thus, we've set up social lotteries, to compensate and even out, that effect. Thomas Volozyn is one of these businesses, and it's really on track. We have the ninth, raffle currently running. Already, three houses have been drawn in 2026, and we've been able to thus continue scale during that first half of the year. The house on Lake Kiemsee reached the draw after only thirty sixty three days, the shortest, draw period

10:31 that we can show here. It also delivers the highest customer retention rate and the highest billing per day to date. Billings have reached €9,300,000, and the very important direct to consumer share in that business, was almost 60%. Currently, the ninth raffle on Unrum is underway demonstrating the repeatability and the growing maturity of this product. Speaking about, social lotteries, and how we create, those businesses to get independent, from the chatbot situation, it's important to also mention that we have successfully launched another social lottery in Germany at Traum Auto for Lawson, and Traum Auto for Lawson has also been an a very initial success.

11:20 We had the first lottery started in April. The product expands our own lottery portfolio from dream homes into premium vehicles and gives us another attractive format for customer engagement. The first draw was completed successfully with more than 217,000 tickets sold and more than €2,000,000 in billings. This early performance gives us the confidence that the potential of this business, is really there to be scaled, and makes us confident, that our strategy with social lotteries and new product formats really is a very solid one. With that, I hand back to Andrea for strategic progress and financial guidance. Thanks, Stephane.

12:06 So let's turn to our strategic progress. We made tangible progress in H1 with our three strategic categories, and we added a new one to elevate our growth ambition. First, we strengthened our customer acquisition effectiveness, and you have seen that we achieved a record six and fifty nine thousand new customers in the first half year. Secondly, we continue to scale our own lottery products. We completed three house draws in Traumhausfallosung and launched the ninth raffle already. And we successfully introduced our new product, Traumhausfallosung. Third, we continue to grow gains by expanding the portfolio and achieving monthly active users increased by 34% and revenues of 17%.

12:59 And after the reporting period, as you already know, we added the acquisition of Seven Canyon as an important strategic milestone by giving us immediately access to The U. K. Priced home market and a meaningful second home market for ZEAL. And with that, I would like to share a little bit more details about the transactions. Although some of you, for sure, have dialed in into our update on the July 9, I really like to take this opportunity to give an update and share some more details that we already discussed, but I think that's the right audience. So beginning of July, we announced the acquisition of the remaining 96.5% of Seven Canyon Limited.

13:44 Seven Canyon is an established, profitable and cash generative multi brand platform in The U. K. Price store market, with the brands seven Days Performance, UKCC and Redline. This transaction really gives us immediately access to the European largest priced home market and creates this second home, like I told you. It reduces our dependency on German jackpot environments and fits so perfectly into our diversification strategy. The cash purchase price for the remaining share was approximately £33,800,000 plus an earn out payment of £4,800,000 To finance the acquisition and also really to remain flexible with our capital return measurements, we arranged a €40,000,000 long term loan with Deutsche Bank for this transaction.

14:42 Seven Canyon is already a scaled, profitable and cash generative business with an EBITDA from last year of more than £10,000,000 And it's already built, and you don't have a build risk, and we acquire a proven and profitable business. We see clear value creation opportunities in this kind of transaction with our capabilities at ZEAL with CRM, data and marketing steering. And we also see cross functional transfer of expertise in houses and cars. On the other hand, we have our valuable assets of the platform scalability and all the compliance and regulatory experience that ZEAL has that we can bring to the table.

15:32 The acquisition is expected to be EBITDA accretive for the first full consolidated year, and the purchase price allocation and the IFRS transition is still being completed. And with that leads me to the update of our guidance that we shared with you beginning of July. Our previous revenue guidance was €250,000,000 to €260,000,000 and that does not yet include the contribution of Seven Canyon. We will update this revenue guidance once we have an exact revenue contribution under ZEAL IFRS standards finalized, and we'll give you an update there. This is regarding the technical translation of Seven Canyons' current revenue presentation into ZEAL's group reporting.

16:21 So we ask a little bit of patience from you. On the other hand, we confirm our EBITDA guidance of 70,000,000 to €75,000,000 assuming a normal jackpot environment in Germany for the rest of the year. This range includes both: a, the expected positive Seven Canyon EBITDA contribution as well as the M and A related one off expenses in the mid single digit million euro range. For Germany, we continue to plan marketing investments around €85,000,000 to €95,000,000 if we see clear attractive investment opportunities within our boundary conditions.

17:02 And also midterm, nothing changes. We stay with our unchanged guidance of mid teens annual revenue growth and an EBITDA margin of above 30%. And back to you, Stephan.

17:28 Stefan, otherwise, I take over. Oh, sorry. My connection. Andrea, thank you for giving us the deep dive into the numbers and updating our financial guidance. I'm I'm super happy to summarize the key takeaways of this presentation. First, ZEAL has achieved a record number of revenues, and we are super happy that we grew 20% up to one in €22,000,000. Second, we translated this growth into higher profitability. EBITDA has increased by 10% and net profits rose by 12. Third, the successful launch of tramAutofilosung broadened our own lottery product portfolio. And fourth, the post, acquisition period of Seven Canyon gives us a meaningful presence in The UK and further diversifies our geographic footprint. We enter the second half with a very strong momentum, a broader product portfolio, and the clear path for continued profitable growth.

18:30 With this, I, thank you all for your attendance and give the voice to you for the q and a. Yes. Thank you very much for your presentation. Ladies and gentlemen, now it is your turn. We are opening the q and a session via audio line. Take, please take the raise your hand button. And if you're dialing in by phone, you can press star key 9 to raise your hand and star key 6 to unmute yourself. Please make sure we can see your clear

19:03 name. Introduce yourself with your full name and your institution. And mister Tim the stage is yours. Yeah. Tim Cusse from Montega. Thanks for taking my question. Two questions. So the first one will be on the town out of a low zone. Stefan, maybe you could I I think you didn't reach the maximum number of of tickets for for that lottery. Yeah. Maybe you could elaborate if that was sort of in line with your expectations and and how you expect that to to pan out in the next in the next draws. And then one question to Andrea on the personal costs, which were quite a bit lower than in q one. Is there anything we have to factor in here in in q two, or is that the runway we should look at for the rest of the year? Thank you.

19:59 Tim, thank you very much for your question. Happy to take the first one. Defining the maximum number of tickets, obviously, is a learning process, and we're happy that we hit the sweet spot where we'd still have tickets to sell, but have, at the same time been able to create a meaningful FOMO phase, to drive sell out as much as possible. If we would have reached sell out too early, then we would have not, utilized the full potential of the market. If we would have been even further away that would not have created the FOMO. So it's really that balance that we need to find, and that's going to continue going forward for the now running first season and all seasons to follow. So we are very happy with the the number of tickets that we sold also in relation to the maximum tickets that we defined.

20:47 Okay. Makes sense. Thank you. Thanks, Tim. And on the personal costs, so I would recommend you to take the not q two as a baseline, but rather q four or q one because we had some special one off effects in the q two regarding variable bonus accruals.

21:07 Okay. Thank you. Understood. Okay. Mister, if you don't have any follow-up questions, we will move on to the next person. And I'm holding the room for a moment. Oh, that's fine. Please continue. Okay. Thank you. So the next person in line is Jack Cummings. You should be able to speak now, mister Cummings. Brilliant. Thank you. Jack Cummings from Berenberg. I've got a couple of questions. The first one, just on that personnel cost point. I think you grew FTEs 25% year over year in in q two because of the expansion into new products. Should we anticipate that there is more investment that needs to go into into new FTEs?

22:02 I will take that. Thanks, Zig. So we are, of course, looking into expanding further our offering and also having the geographical expansion, as you heard, from Seven Canyon. So this, of course, will trigger that the team from Seven Canyon will be included in these numbers in the future.

22:24 On the baseline that, let's say, on the core business in Germany, we don't expect any growth. Okay. Understood. And my second question is on the DreamHouse raffle and DreamCar raffle business. I think in the financial report, it looks as though that business grew revenues 52% in the first half of the year. How should we think about the growth rate in in revenue terms in in in h two? And is the business contributing positively to EBITDA yet? And and if not, when should we expect that? I will take that. So we you have significant growth, of course, in H1 because we launched also TraumAutofalozung that wasn't included in these numbers before.

23:13 We assume, of course, a scaling there. We on the guidance for the Social Lottery area, we still assume significant double digit growth for the future, and that should continue. Both products are still investment products based on our conscious decision to scale these products significantly. So yes, I hope that answers your question. Yep. That answers the question. Thank you very much. And then just my final question. There's obviously been a change in legislation in in Germany to allow for higher stakes on slot games. Two questions. One, is this something you have already implemented across your business? And, part two, would you expect this to drive an acceleration in games revenue growth in in h two?

24:04 Thank you. So, thank you for that question, Jack. We have implemented parts of the increase, but we also try to strike a very delicate balance with player protection when it comes to our games business. So we take these steps very, very deliberately and very consciously on of the impact that higher stakes will have on responsible gaming and and player protection.

24:34 So whilst we see and further expect an increase in in gaming revenues, the main driver is, as Andrea pointed out, an increase in MAUs and a balanced growth in, average billings per user. We not so much depend on increased stakes to drive the game's revenue. Understood. Thank you very much. Thank you for your questions, Jack. And we move on to Abbott Jarad. You may be able to speak now, Abbott. Hi. Good morning. This is Abid from MVP Research. I have one question regarding games. Can you maybe explain why growth in monthly active user is stagnating, like, quarter on quarter, at least in the last three quarters?

25:22 And, also, monetization is lagging behind. What what is the explanation for this? I will take that. So first of all, on the monetization, I think I explained that to you in this presentation today. So it's really about that you have these early adopters who are rather games fiend and have a higher spending volume within the customer base. And the more we scale and grow the customer base, and actually, I have to look up the number, but over 30%, our mouse grow, you will get more standard games player compared to these high rollers. And therefore, the average revenues per user goes down, but that's what we expect. So that's the dynamic. We rather want to grow the overall customer base than focusing on high rollers here.

26:23 And on the growth rates, I'm not fully understanding your question. So we grow the customer base, but of course, not as quickly as possible. I think you probably all know about the restrictions we have in the German regulation regarding, yeah, cross selling and driving that growth. So we are very happy with the growth numbers that we are seeing and will excel exaggerate accelerate here. Okay. Fair enough. I I meant, like, gross quarter on quarter. So in q four, you had 35,000,000, q one thirty five, q two thirty thirty six.

27:12 So quarter on quarter, it's decelerating. That's what I meant with gross in monthly active users. Yeah. Yeah. So like I said, I think in the first phases, of course, we have we were a small business and growing on on small on big scale percentage wise on the growth. Now the growth is more our customer base knows that there's games. So of course, growth is slowing down quarter over quarter. So but we will see what new product portfolio and product features and also the stake increase will deliver here for us in the future. Okay. Maybe one last question regarding Seven Canyon.

28:03 Have you communicated at least a comparable in term of revenue, like, on what you are expecting and what range? If I'm not mistaken, it was around 40,000,000? There are exactly, are two numbers. Maybe my team can search it out, and we will give it to you in a minute. We shared that already in the presentation of the M and A deal exactly. So there's just a question between if it's GGR or NGR view. We will share both numbers in a minute with you when we have it there. Give us a moment, please. But we can continue with questions, meanwhile. So if you may have any follow-up questions, Abbott, this is the space to place them already.

29:00 And to everybody else, oh, yeah. Ahmed, I see your hand has risen, and I give you the allowance to speak again. No, sir. I just wanted to say I have no further question. Thanks. Okay. Thank you. And to everybody else attending the call, you are very welcome to also raise your hand if there are some questions left. Which doesn't seem to be the case in that moment, and we will hold the room for a bit. So there are no other questions, Abbott. We will call you afterwards. We are just getting the numbers ready for you. Sure.

29:58 Thank you. Yeah. Thank you for your questions, Abbed. With no further questions, we have come to the earnings end of the earnings call today. Thank you very much for your interest in ZEAL Network SE. A big thank you also to you, Stefan and Andrea, for your presentation and your time. Should you, ladies and gentlemen, have any further questions at a later date, please feel free to contact senior investor relations manager, Frank Hoffman. I wish you all a successful day around the world and handing back over to Andrea for some closing remarks. Yeah. Exciting h one. Looking forward for a strong second half of the year. So thank you a lot for your questions and for joining us this morning. We really appreciate your time and your interest in ZEAL, and speak soon with great new results.

30:49 Thanks a lot.