Zeal Records Earnings Growth Despite Increased Marketing Spends
Zeal Network, the Hamburg-based online lottery group, recently announced its income and earnings for the first nine months of 2023. Despite a significant increase in marketing expenses, the group has recorded growth in its earnings over the last three quarters of 2023, effectively absorbing the high-volume marketing exercises it undertook over the year. A substantial margin raised its marketing costs by 27% between the start of the year and 30 September. With the increased marketing budget amounting to €30.7 million, the intensified marketing was attributed to the Eurojackpot and the Lotto 6aus49 draws hitting the maximum jackpot on five separate occasions.
Zeal timed its marketing activities according to a busy lottery period
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Zeal operates by broking customer tickets to state lottery companies through its portals LOTTO24 and Tipp24, both of which are part of the subsidiary LOTTO24. Additionally, Zeal has several other brands under its portfolio, including LOTTO 6aus49, Spiel 77, and Super 6. Eurojackpot, GlücksSpirale, Keno, lottery clubs, the Deutsche Fernsehlotterie, Scratch Games, the Deutsche Traumhauslotterie and freiheit+. Zeal was founded in 1999 and operated under the name Tipp24. Five years later, Zeal went live on the Frankfurt Stock Exchange and was among the most successful IPOs in Germany at the time. Zeal took over LOTTO24 AG in 2019. Currently, Zeal Network is the leading online provider of lottery products in Germany. In 2023, the group’s marketing activities yielded returns as it recorded the acquisition of more customers than in the previous year.
The increased number of customers will serve as a foundation for further revenue growth in the future. Zeal’s marketing investments and earnings in the first three quarters of 2023 grew by 16 percent to €633.2 million. A significant portion of these billings came in the third quarter, thanks to the group’s large-scale marketing activities. Zeal Group’s revenue also increased by 16% to €86 million, an increase of €11.5 million year-on-year (YoY) compared to 2022, when its recorded revenue for the year stood at €74.5 million.
Sebastian Bielski, CFO of Zeal, issued a statement in a recent press release. “The strong growth in our billings and revenue proves that we continue to expand our market leadership. The publication of the first figures for our online games business also shows that ZEAL has made the right decision to enter this new line of business. The initial success in the online games segment also makes us confident that we are on track for further growth with our attractive and growing games offering.”
Big Jackpots Drive Sales for Zeal
The first nine months of 2023 saw Zeal capitalizing on the frequent lottery jackpots that were grabbing headlines across Germany. With the jackpots won in January, March, June, and September, Zeal successfully implemented well-timed marketing pushes to acquire new customers and expand overall business volume. Among the various marketing initiatives carried out at the time, the company especially focused on TV advertising to reach a wide audience and capture future sales growth.
Despite the significant spending on customer acquisition, Zeal posted a strong EBITDA in the first nine months of the year. In this period, the group acquired 518 thousand new registrations – an increase of 17 thousand new customers YoY compared to 2022. Despite ongoing media cost inflation and stronger competition for new customers on online channels, Zeal invested in brand building strategically, primarily targeting TV advertising.
These factors combined resulted in an increased acquisition cost per new customer, which was €10 higher than the previous year at €46.81 compared to €36.42 in 2022. Marketing expenses, on the whole, were 27% higher, with €30.7 million spent in 2023, compared to €24.1 million spent in 2022. Despite the increased spending, Zeal’s EBITDA recorded an increase of 5 percent to be recorded at €23.2 million in 2023, in comparison to €22 million in 2022. Earnings before interest and taxes(EBIT) amounted to €16.7 million in 2023, while EBIT for 2022 came in at €15.5 million. Upon deducting taxes, the earnings were recorded at €10.1 million, recording a slight drop when compared to 2022, where the earnings stood at €12.1 million. This €1.1 million drop in earnings has been attributed to a significant increase in tax deductions compared to the previous year.
For the first time, Zeal has shared its earnings from the online gaming venture, which was launched in June 2023. Since its launch, Zeal has steadily grown its portfolio of games. Online Gaming revenue for the third quarter of 2023 stood at €1.2 million. Since Zeal was issued the license to operate online games by GGL in early 2023, there are no figures from the previous year to draw comparisons. For the remainder of FY 2023, Zeal will continue to focus on the expansion of market leadership in the online lottery space. It will also diversify its online game portfolio by adding new games. In Germany alone, Zeal anticipates billings in the range of €800 to €830 million in a typical jackpot development scenario. Zeal has made no revisions to tits EBITDA projections, which remain in the range of €30 million to €35 million. Compared to last year, Zeal will continue to invest in customer acquisition, anticipating marketing spending of €34 million to €39 million.
Zeal Continues Expansion into Online Gaming
Earlier this year, Zeal secured licenses for virtual slot machines and games in retail locations in Germany. The licenses issued by the Gemeinsame Glücksspielbehörde der Länder (GGL) allowed Zeal to offer iGaming services across all 16 federal states in Germany. Additionally, Zeal has also received licenses for its subsidiary, LOTTO24AG, to provide German players with online gaming services. Zeal’s application for licensing was one among 78 received by the GGL. Of these requests, only 25 were approved. Upon the successful approval of Zeal’s application, Helmut Becket, CEO, issued a statement to commemorate the occasion.
“We are very pleased about the license and are looking forward to being able to offer our online games to new customers very soon. With the license, we are reaching an important milestone in our business growth, for which we have long fought. We believe in our virtual slots strategy and are proud to offer players a whole new gaming experience very soon.”
