Yesterday, ZEAL released final Q3 results, in line with preliminary sales and EBITDA figures, announced a € 25m share buyback offer and showed improved KPIs.

Share repurchase at a premium: From 18th - 29th Nov.'24, ZEAL offers to buy back c. 568k shares at € 44 per share, which implies a solid 10% premium on yesterday's closing price. Through that, € 25m (i.e. 3% yield on Tuesday's market cap) are being returned to shareholders, which comes on top of dividends (€ 23.8m for FY'23; eNuW: € 26m for FY'24e), showing that management not only focuses on value creation but also on its distribution to shareholders.

Reduction of shares: as of today, ZEAL owns 3.2% in treasury shares, which will be subsequently be canceled. Following the share buy back (assuming 568k shares are tendered), another 2.5% of future treasury shares are to be cancelled. In sum, this should reduce the share count by 5.7% to 21.09m (from now: 22.4m) by Nov. 29th (end of acceptance period), positively affecting EPS and DPS.

Superb start of new product: Following the launch of "Traumhausverlosung" (eng.: Dream House Raffle) in mid-Q3, 417k customers (334k cross-sold from Lotto24 & 83k new customers acquired via D2C) have spent some € 8.6m in billings on the first draw (ABPU: € 20), which ended on Nov. 4th. With a stellar billings margin of c. 43% (vs. 15-17% in lottery brokerage), the first draw should have generated some € 3.7m in sales (eNuW, thereof c. 50% in Q3, i.e. € 1.9m). Mind you, the sales figure is seen as net sales, meaning after costs for prizes (c. € 1.3m this draw), charities (€ 1.7m, 20% of billings), lottery taxes (€ 1m, 11% of billings) and VAT (€ 0.43m; 5% of billings).

Further improvement an all fronts: In Q3, MAU grew by 10% yoy to 1.33m MAU, while the ARPU climbed by a staggering 30% following the price increases in the lottery brokerage business, which was visible in a strong billings margin of 16.8% (+ 4.1pp yoy). Moreover, the strong user intake of H1 was largely maintained at 215k new registrations in Q3 (thereof c. 40-50k from "Traumhausverlosung", eNuW), despite the absence of peak jackpots. This should stem from ZEAL's marketing shift towards brand awareness and reduces jackpot dependencies. (see p.2 for details)

All in all, ZEAL clearly shows the positive effects of compounding and operating leverage. Therefore, we reiterate our BUY recommendation with unchanged PT of € 57.00, based on DCF.