^
Original-Research: ZEAL Network SE - from NuWays AG

27.03.2025 / 09:01 CET/CEST
Dissemination of a Research, transmitted by EQS News - a service of EQS
Group.
The issuer is solely responsible for the content of this research. The
result of this research does not constitute investment advice or an
invitation to conclude certain stock exchange transactions.

---------------------------------------------------------------------------

Classification of NuWays AG to ZEAL Network SE

Company Name: ZEAL Network SE
ISIN: DE000ZEAL241

Reason for the research: Update
Recommendation: BUY
from: 27.03.2025
Target price: EUR 61.00
Target price on sight of: 12 months
Last rating change:
Analyst: Henry Wendisch

Q4 beating all odds and strong shareholder returns; chg. PT

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 EUR 2.4bn (EJ: +64% yoy, peaking 7x;
6aus49: -8% yoy) in Q4. Consequently, ZEAL generated lottery billings of EUR
337m (eNuW: EUR 327m), up 60% yoy. This hike is further supported by the new
product
"Traumhausverlosung". Games also showed a solid development with EUR 40m in Q4
billings, up 62% yoy (eNuW: EUR 32m).

Q4 results above expectations. Sales grew by 124% yoy to EUR 67m (eNuW: EUR
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 EUR 27m (eNuW: EUR 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 EUR 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 EUR 195-205m in sales (eNuW old:
EUR 194m) and EUR 55-60m EBITDA (eNuW old: EUR 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 EUR 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.

Upbeat cash generation. ZEAL reported a strong FCF growth of 197% yoy to EUR
75m in FY'24 (121% EBITDA cash conversion, 40% of sales), partially
supported by a positive, jackpot-dependent working capital swing (eNuW: EUR
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 (EUR 52m), there is still room for future
shareholder return measures, in our view. The net cash position stood at EUR
16m at Y/E'24, despite a net increase in debt of EUR 71m to cover the Lotto24
squeeze out and optimize capital structure.

Increasing shareholder return. Following a share buyback in Nov'24 for EUR
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 EUR 2.40 for
FY'24 (5.6% current yield), totaling a EUR 52m payout, consisting of a base
dividend of EUR 1.30 and a special dividend of EUR 1.10, the latter to let
shareholders partake in the extraordinarily successful FY'24. In sum, this
returns a total of EUR 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 EUR 61.00 (old: EUR 60.00),
based on DCF.

You can download the research here: http://www.more-ir.de/d/32074.pdf
For additional information visit our website:
https://www.nuways-ag.com/research-feed

Contact for questions:
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
++++++++++
Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss
bestimmter Börsengeschäfte.
Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben
analysierten Unternehmen befinden sich in der vollständigen Analyse.
++++++++++

---------------------------------------------------------------------------

The EQS Distribution Services include Regulatory Announcements,
Financial/Corporate News and Press Releases.
Archive at www.eqs-news.com

---------------------------------------------------------------------------

2107206 27.03.2025 CET/CEST

°