Topic: Q1 results are due May 8th 2024 and we expect ZEAL to show a remarkable top-line thanks to a superb jackpot environment, leading to elevated user activity. In detail:

Thanks to the EuroJackpot peaking 4x at the start of Q1, the nationwide stakes amounted to € 2.07bn in Q1 (EuroJackot and Lotto 6aus49 together), which are 16% above the quarterly average of € 1.79bn and 12% higher than Q1’23  (see p. 2). For ZEAL, this should translate into increased user activity with 1.26m MAUs (+15% yoy) and an ABPU of € 62.00 (+2% yoy), thus elevating Lottery billings to € 234m (+17% yoy), according to our estimates.

Lottery sales are seen at € 31m (+24% yoy) thanks to the elevated billings, but also driven by our estimate of an improving billings margin of 13.2% (eNuW; +0.8pp yoy), as during high jackpot environments, ZEAL’s product mix usually shifts towards higher margin products like lottery clubs.

For Games, we conservatively expect a slight pick-up in MAUs to 20k (Q4’24: 18k), as the roll-out should have remained slightly burdened by later than expected regulatory approvals of each new game. Also, assuming a constant pay-in to billings ratio of 4.9x and a constant billings-margin of 7.5%, billings from Games are hence expected at € 25m and sales at € 1.9m respectively.

In sum, Q1 sales should arrive at € 34.8m (+30% yoy), showing a remarkable top-line dynamic. On the other hand, we expect a significant marketing push of € 14m (vs. € 7m in Q1’23 with no peak jackpot) to burden profitability with an EBITDA of € 5.1m (15% margin; -20pp yoy).

In return, this should have led to a strongly increased user base, as ZEAL usually gains c. 100k new registrations per peak jackpot. We hence expect c. 300-400k new registrations and c. 75-100k new MAUs (25% conversion rate) for the Lottery business, adding some € 47-63m in CLTVs to ZEAL’s total Lottery user base; CLTV of € 726m as of Y/E’23. This looks set to more than compensate the € 14m expected marketing expense, showing the value-accretive nature of ZEAL's customer acquisition strategy.

Against this backdrop, we expect ZEAL to capitalize strongly from Q1’s jackpot environment as the company’s value accretive performance marketing drives user intake and market share gains. Reiterate BUY with unchanged PT of € 51.00, based on DCF.