Zeal raises FY guidance again amid expected Q3 growth

Billings – all customer stakes, including brokerage stakes and associated VAT, net of bets – in the nine months to 30 September are expected to come to €471.8m (£427.5m/$552.1m), which would represent a year-on-year increase of 42% on the same period last year.

The business said its Germany segment should contribute €470.9m to this total, but noted that last year’s figures did not include Lotto24 billings up to 14 May, as this only became part of the business from this date after being acquired by Zeal.

Zeal added that growth in its core German segment was primarily down to strong jackpot development of the Lotto 6aus49 lottery, as well as higher marketing investments to boost new customer numbers.

Zeal spent €25.3m on marketing in the nine-month period, up 41% year-on-year, which helped to bring in 787,000 new customers across its German business – meaning it has already reached its full-year guidance for this vertical.

In terms of revenue, this is expected to fall 31% year-on-year to €63.9m, due its shift away from lottery betting to focus on brokerage, following the Lott24 acquisition.

Revenue last year also included the secondary lottery business, but not the Lotto24 online lottery brokerage business up to 14 May 2019. Revenue in the German segment is expected to reach €57.8m for this year’s nine-month period.

Zeal said that dis-synergies associated with the business model change will also mean that adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) will also take a hit, with this set to fall to €6.9m.

However, despite these expected declines, Zeal said that such is the anticipated growth in Q4 – including increasing its new customer count to 900,000 for the year – that it has increased its full-year billings guidance from between €590m and €610m to between €610m and €630m.

Revenue forecasts have also been raised from between €76m and €79m to a range of €80m to €83m, with an unchanged gross margin in the German segment of slightly above 12%.

Depending on general market conditions, in particular higher marketing spend to bring in new customers within the attractive market environment, and the implementation of the synergy effects, adjusted EBITDA is now set to amount to between €8m and €10m, up from the previous range of €7m to €10m.

This marks the second time Zeal has increase its guidance this year, having in July upped its forecasts following a significant increase in billings in the first half of the year.

For the six months to 30 June, Zeal achieved billings of €314.4m compared to €179.4m in H1 2019.

Zeal plans to publish its full results for the third quarter on 12 November.