ZEAL records notable growth in the opening quarter of the year
After enjoying a successful year in 2022, online lottery broker ZEAL has managed to keep its growth consistent, as the revenue in the first quarter of this year has spiked a little over six percent. The quarterly revenue has surpassed the €25 million-mark in the first quarter for the second successive year. Additionally, also secured an iGaming license in Germany, enabling the operator to offer virtual slot games across the 16 federal states.
After enjoying a successful year in 2022, online lottery broker ZEAL has managed to keep its growth consistent.
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ZEAL was established 24 years ago, in 1999, when it was known as Tipp24. Since then, its growth has been relatively steady. Five years into existence, the German-based operator already had a customer base of over a million, and just a year later, it became one of the most successful Initial Public Offerings (IPO) on the Frankfurt Stock Exchange. The operator had to improvise and adapt in 2009 after regulatory changes forced it to cease online lottery offerings in Germany. As a result, the operator switched from online lottery brokerage to lottery betting. Three years later, when the ban was revoked, lottery operator LOTTO24 became Germany’s first official online lottery broker. This caught the attention of ZEAL, as it was looking to expand its operations with partnerships and acquisitions. The brand name officially changed from Tipp24 to ZEAL in 2014, and the operator decided to move its headquarters to London. After noticing the growth and profitability of LOTTO24 over several years, ZEAL announced its plan of a complete acquisition of Germany’s official online lottery broker in 2018.
In 2019, the takeover was complete, and the headquarters of the German operator moved back to its home nation from the capital of England. Three years ago, the LOTTO24 integration was finalized, and in the same year, ZEAL’s market share expanded to 41 percent. Being a full-fledged subsidiary of ZEAL, LOTTO24 was delisted from the Frankfurt Stock Exchange two years after the takeover. Last year, the Germany-based operator focused on several aspects, and one of them was customer acquisition. In the first quarter of 2022, ZEAL successfully acquired about 154,000 new customers on its platforms. However, this figure was lower than the 156,000 customers the operator acquired in 2021. Despite that, the cost per lead increased from about €33 to €38. ZEAL confirmed that the increase in customer acquisition costs was only due to a special promotion that was running for the operator’s charity lottery freiheit+ that was launched in 2020. If the promotion was not running, the costs would have increased only by about €1 per lead.
Two years after launching freiheit+, ZEAL established the German Dream House Lottery under its subsidiary LOTTO24. Unlike the freiheit+ social lottery, which comprises a lucrative prize of €250,000 and a monthly payout of €5,000 for 15 years, the German Dream House Lottery’s grand prize is a house worth €1 million, including ancillary construction costs and budget for a plot of land. As things stand, ZEAL is the leading digital provider of all lottery products and services in Germany. That operator’s stature in the regulated German gambling market is reflected in the constant revenue spurts in almost every quarter for the past couple of years. In the first quarter of this year, ZEAL reached another milestone when it obtained an iGaming license from the German Gambling Authority, Gemeinsame Glücksspielbehörde der Länder (GGL), in April this year. In the same month, the operator also became a member of the World Lottery Association (WLA), which comprises licensed lottery and sports betting operators and providers who are active in several regulated jurisdictions worldwide.
The Chief Financial Officer (CFO) of ZEAL, Jonas Mattsson, commented on how the company started the new fiscal year on the front foot.
“We are pleased with the strong start of the year and are proud of the milestones achieved and the positive development of our key figures. In particular, receiving the long-awaited permission to offer virtual slot games opens up new opportunities for us to further expand our business.”
ZEAL’s Q1 2023 performance in numbers
In the first quarter of 2022, ZEAL’s revenue surpassed the €25 million-mark for the first time. The quarterly revenue in the opening three months of last year was €25.1 million. In the corresponding period this year, a 6.4 percent spike drove the quarterly revenue to €26.7 million. The transaction volume was also up 11 percent year-on-year (YoY), increasing from €181.2 million to €201.2 million. Due to a product mix, a slight decrease was noted in the gross margin as it reduced from 12.9 percent to 12.4 percent in the first quarter of this year.
The EBITDA was up 4.5 percent YoY as it rose from €8.9 million last year to €9.3 million in the corresponding period this year. EBIT increased from €6.8 million to €7.1 million, marking a 4.2 percent YoY increase. Tax expenses increased this year by around €800,000, because of which the net profit was 12 percent lower at €4.4 million this quarter, compared to the €5 million net profit recorded in the corresponding quarter last year. ZEAL’s customer base is broadening as 143,000 new customers were secured with a cost-per-lead (CPL) valuation of €36.77, which was €1.32 less than last year’s first quarter.
A significant change in the supervisory board earlier this year
The annual general meeting of ZEAL is scheduled to take place later this year. Changes in the supervisory board are one of the aspects that are discussed in this meeting. However, the German lottery operator has been forced to replace co-founder Marc Peters with Kenneth Chan on an interim basis. Chan is a Yale University graduate and is the Managing Director of Working Capital. He also owns 4.46 percent of ZEAL stock.
Peters co-founded Tipp24, which was spun off from ZEAL in 2012. He vociferously backed ZEAL’s acquisition of Tipp24 almost four years ago. The completion of the acquisition marked Peters’ return to ZEAL. However, four years after his return, the co-founder of ZEAL resigned in February this year. Chan will take his place for now as the operator looks for a proper replacement and announces their addition during the annual general meeting.
