Topic: Following an unprecedented jackpot situation in Q4, ZEAL captured extreme growth in all aspects, with Sales, EBITDA, FCF, user base and intake reaching new heights. Moreover, the company issued a solid FY’25 guidance, confirming the growth beyond the recent records.

Unprecedented billings hike. Nationwide lottery spending of the two main lottery products rose by 28% yoy to € 2.4bn (EJ: +64% yoy, peaking 7x; 6aus49: -8% yoy) in Q4. Consequently, ZEAL generated lottery billings of € 337m (eNuW: € 327m), up 60% yoy. This hike is further supported by the new product “Traumhausverlosung”. Games also showed a solid development with € 40m in Q4 billings, up 62% yoy (eNuW: € 32m).

Q4 results above expectations. Sales grew by 124% yoy to € 67m (eNuW: € 60m), mainly driven by the increased lottery billings margin (+5.5pp yoy) and the simultaneous hike in billings. EBITDA expanded disproportionately by 178% yoy to € 27m (eNuW: € 22m) despite a strong marketing push (+ 275% yoy), showing the increasing fix cost coverage. - see p. 2 for details

Marketing engine running hot. Q4’24 marked the quarter with the highest marketing efficiency in ZEAL’s history with a user intake of 450k (+472% yoy; FY’24: 1.26m) at a highly efficient CPL of only € 32 (-13% yoy). While this is largely attributable to the strong jackpot environment, it nevertheless shows that ZEAL can outperform the state lottery’s online presence in terms of customer acquisition during these crucial times. Consequently, the average MAUs stood at 1.44m during FY’24 (+25% yoy) which implies average MAUs 1.7m of in Q4 (+52% yoy), which bodes well for future growth.

Solid guidance out. The new FY’25 guidance of € 195-205m in sales (eNuW old: € 194m) and € 55-60m EBITDA (eNuW old: € 52m) came in ahead of our old estimates, as we have modeled with too conservative user KPIs (MAUs and ARPUs). The guidance implies a top line growth of 6% yoy and EBITDA decline by 7% at mid-point, as ZEAL increases its marketing budget by +14% yoy at mid-point to € 60-70m in FY’25. As always, ZEAL’s guidance is based on an average jackpot environment, which could be overachieved in times of strong jackpots, which are however unpredictable.

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Upbeat cash generation. ZEAL reported a strong FCF growth of 197% yoy to € 75m in FY’24 (121% EBITDA cash conversion, 40% of sales), partially supported by a positive, jackpot-dependent working capital swing (eNuW: € 25m), but also thanks to the capital light business model with almost no CAPEX. As this figure is already afer marketing expenses and more than covers the upcoming dividend payment (€ 52m), there is still room for future shareholder return measures, in our view. The net cash position stood at € 16m at Y/E’24, despite a net increase in debt of € 71m to cover the Lotto24 squeeze out and optimize capital structure.

Increasing shareholder return. Following a share buyback in Nov’24 for € 25m, the company canceled 733k shares in Q1’25 and aims to cancel the remaining 588k shares in Q2’25e. ZEAL further announced a DPS of € 2.40 for FY’24 (5.6% current yield), totaling a € 52m payout, consisting of a base dividend of € 1.30 and a special dividend of € 1.10, the latter to let shareholders partake in the extraordinarily successful FY’24. In sum, this returns a total of € 77m to shareholders, which implies a yield of 8%.

Agains this backdrop, we highly reiterate our BUY recommendation, add ZEAL back to our NuWays AlphaList and increase our PT to € 61.00 (old: € 60.00), based on DCF.