Hello, and welcome to the ZEAL Network SE Q3 results 2022. My name is Sharon, and I will be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen-only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your questions. If you require assistance at any point, please press star zero and you will be connected to an Operator. I will now hand you over to your host, Mr. Jonas Mattsson, to begin today's conference. Thank you. Thank you so much, Sharon. Good morning and welcome everyone to ZEAL's earnings call. I hope you all have access to the presentation. If you don't, please tune in to the IR section on our webpage. Let's move to the content slide, and there you'll find today's agenda. We will start off with a summary of the first nine months, followed by a financial update. I would like to elaborate on our recently launched share buyback offer. We will move on to our guidance before we finish off with the key takeaways. After the presentation, we will give you the opportunity, as we always do, to ask questions. I will now hand over to our CEO, Helmut Becker. Thanks, Jonas, and good morning, everybody. Let me summarize the first three quarters of 2022. We had a record 120 million EUR jackpot in July, and we used that, like we always do, to invest in customer acquisition. In the last quarter, we achieved more than 200,000 new registered customers, creating another big customer cohort with stable and high customer lifetime value. We're happy that the highest financial court in Germany confirmed our position that certain services that we provided until the business model change, that was in 2019, that they were not subject to VAT in Germany. That means that 54 million EUR VAT that we paid in the past, plus interest, will be refunded to us in the near future. In August, we expanded our B2B partner portfolio and entered into a cooperation with the German news portal ntv. ntv users can now buy our lottery products on the ntv website. This is a part of our growth strategy. Besides acquiring customers directly into Lotto24 and Tipp24, we wanna go where the customers are. Our portfolio now includes ntv, in addition to the 1&1 portals, Web.de and GMX, which are very big portals in Germany. Overall, we achieved further growth in the first nine months. Unlike many other e-commerce and customer businesses, we have so far not seen major negative impacts from inflation effects or reduced consumer confidence. We see that online lottery continues to be popular, and we see strong customer loyalty. Apparently, people want to dream or need to dream even in tough times. In the first nine months, we grew billings by 10%. We grew EBITDA by 25% compared to 2021. Last but not least, we expanded our games business internationally. We're now cooperating with the American full-service lottery provider, Pollard Banknote, and they will integrate our online games into their video lottery terminals in Argentina and their online platforms in Peru. Let's go to the next page. That's page five. Let me take you through the current regulatory situation. I will go straight to the games license or the virtual slot machine license, which is probably the most interesting topic for you. Unfortunately, that procedure has still not been completed. Let me just explain what's happened. In July 2021, at the beginning of the application phase, we applied for a permit to operate virtual slot machines. The application is still being reviewed by the authorities. According to our information, the reason for the delay is that there is uncertainty among some federal states as to if and how state lotteries, not us, but state lotteries, may also offer virtual slot machine games on the same website. Unfortunately, this is also currently slowing down our application process. We assume that this issue will be resolved by the gambling supervision or gambling regulatory authority within the next few months, and that the corresponding permits will be issued. The legal situation is clear, and there is no reason not to grant us, Lotto24 AG, such a permit. Back to you, Jonas, for the financial updates. Thanks, Helmut. Let's now move to the next page, and I will start describing the jackpot situation for the year. On this jackpot slide, you can see the development for our two main products, Lotto 6aus49 on top and Eurojackpot below. For Lotto 6aus49, the jackpot remained at low level in the third quarter and did not exceed EUR 25 million once, which is, of course, not what we hoped for. If you include the full nine months, it was better compared to the very weak jackpot situation we had last year. We actually, in the nine months, reached the EUR 45 million mark that triggers the mandatory payout twice, which happened in January and April. For those two times, also two consecutive draws, while in 2021 we had none. For Eurojackpot, we reached a record level of EUR 120 million in July, but it didn't roll over a single time, which is statistically not what it should. It should roll over. For the Eurojackpot has reached its maximum also only once, compared to three times in 2021, so it's clearly worse than last year. In summary, slightly better jackpot than last year, but more in line with an average year. I also just want to mention, until recently, Eurojackpot has been below expectation, but with the nice development we had in late October and the beginning of November, with EJ reaching its maximum of three times, we are now closer to a statistical average year for this product. Let's now move to the income statement, and you will find it on next slide, which is slide eight. We grow revenues by 21%, but if you include the jackpot insurance income from the last year, and you should, because it gives you a fair view, we still grow revenues by 14%. This was supported by the slightly better jackpot situation, but also the highest share of high-margin products. At the same time, we have continued to be very careful with our spending, and I deliberately now exclude marketing that I will come back to in a moment. Personal costs are slightly lower than last year with almost the same number of people, and the driver here is the weaker share price that in turn reduced the long-term incentive scheme provisions. Now coming back to marketing expenses. Our big discretionary spending are more than EUR 5 million above last year and more than EUR 3 million more than the second quarter. This is entirely driven by the push we did when EJ, Eurojackpot, hit EUR 120 million in July. As we mentioned already last year, this shows the correlation between jackpot, marketing investment, and then consequently, the earnings we are reporting. Direct operating expenses are positively impacted by the lower credit losses and efficiency in the entire payment process. Despite the 10% increase in transaction volume, direct expenses only increased by 3% versus last year. Indirect operating expenses are up 24%, but it's mainly due to one effect in the same period of the previous year, as well as an increase in insurance costs by EUR 300,000. Nothing really to be worried about going forward. Just to complete the picture, we also had slight travel and training costs this quarter. Combined, this has led to an EBITDA that is up 25% from last year and now at EUR 22 million. This equals to a 30% EBITDA margin. Finally, EBIT is up 40% and net profit after tax is up 65% and is now standing at EUR 12.1 million. In the coming three slides, we'll look closer at some of the KPIs that we are tracking and would like to report on. So let's move to slide nine. Our billings grow to EUR 544 million or by 10%, with even strong growth in revenues, as I just mentioned. The growth is fueled by the strong July, but partly offset by two comparable weak months in August and September. Interesting is that if you would look only at these two main products, Lotto 6aus49 and Eurojackpot, we grow them by 14%, while the state lottery, the DLTB, grow them, now I'm talking about offline and online, only by 5.8%. This shows that we are indeed gaining market share versus the total market, especially with high jackpot phases. Even if the jackpot for the first three quarter were just average, we continue to develop business strongly. This should also be viewed in the light of the changes in the geopolitical and economic environment, which negatively impact customer confidence, not only for us, but for the entire retail sector. This shows the real resilience of the lottery offerings despite these uncertain times we're all facing. Gross margin of 12.8% is in line with previous quarter, but have improved 0.6 percentage points versus last year, and that's thanks to comparable more sales of high margin products like our famous lottery clubs. On the next slide, we have highlighted net cash and new registered customers. Let's first talk about net cash, which is up 45% since last year and now standing at EUR 95 million. The main drivers are the strong cash generation coupled with the inclusion of the EUR 56 million VAT receivable that is now certain as we won the case. This has been offset by the EUR 48 million dividend payment we made in July. I do appreciate that this triggered a question what we will do with the high amount of net cash, which is clearly more than we need for normal operations. We are currently assessing to what extent it makes sense to use part of these funds in the coming years for operation purchases, including business expansion. We will get back to you early next year together with the earnings call at the latest, both on ordinary dividend policy and how to deal with this excess cash. Let's now talk about acquisition of new customers. In July, we had an extraordinarily high jackpot when Eurojackpot reached its peak at EUR 220 million. This quarter alone, we acquired 208,000 new registered customers, leading to an increase in the first nine months by 12% compared to last year. For the full year, we have now acquired 501,000. As I already said, in this quarter, we invested more than EUR 10 million in marketing to capitalize on this favorable situation we had in July. Moving on to slide 11. The reported CPL, cost per lead, is showing almost EUR 9, a 32% increase. However, this increase is to a large extent due to two special campaigns. Firstly, the vaccination campaign of last year that generated some fee-free traffic and suppressed the comparison number. Secondly, the additional media rental marketing investment for Tipp24 early this year. If you exclude both these effects from last year and this year, a fair comparison would be EUR 31.2 in 2022 versus EUR 34.6 last year, leading to an 11% increase year-over-year. This increase is fully explained by the higher cost of social media as well as some for the marketing push in July. The MAU, the monthly active users, have improved and continues to be above 1 million for the year. The driver is once again the jackpot situation that is better than last year. Average billing per user is still very high and slightly higher than last year. We're now above EUR 58, a 4% increase in average spend per customer. The last quarter is slightly strong compared to the previous two quarters. Let me now give you some information on the recently launched share buyback program. Let's move to slide 13. As you probably have seen in the news flow, we've just launched a share buyback offer to our shareholders. Why are we doing this? As explained throughout the year, we want to improve our capital structure and return value to our shareholders. This has been done both by the special dividend we made in July and by this share repurchase offer. Clearly, the current share price makes also the timing suitable for such a scheme. We announced the program on November second and just issued an offer document that is available on our website. The offer period started on November ninth, meaning yesterday, and continues for three weeks until November twenty-ninth. To make the offer attractive, we do offer a premium of close to 10% on the average price, which results in an offer price of 28 EUR per share tender. The total amount we have allocated for this is EUR 20 million, which is equal to approximately 714,000 shares or 3.2% of the share capital. Even if we hope that our long-term shareholders continue to support us throughout our journey, this liquidity event gives you the opportunity to sell your seed shares without having the issue with the low liquidity on the stock exchange. Let me also touch on the outlook for this year that you will find on slide 15. Despite the turbulent and uncertain environment we're all facing, we are generally quite optimistic and still expect double-digit growth in this year. The resilience of our business model is robust. That's why we reconfirm our guidance for 2022, which is billings of at least EUR 750 million, revenues of at least EUR 105 million, EBITDA of at least EUR 30 million. We do acknowledge the guidance looks somewhat ambitious, but we still believe this is possible depending on how the jackpot develops and the marketing investment develops in the coming two months. As you know, high jackpots lead to high marketing investments, and this guidance was based on approximately EUR 30 million in marketing, and we invested around EUR 25 million in the first nine months. Over to you, Helmut, to bring this home. Thank you, Jonas. Let me take all of us through the key takeaways from this presentation. Profitability remains at a very high level, with EBITDA up 25% and EBIT up 40%. That we've seen strong customer acquisition, particularly in July. In economically difficult times, our business is remarkably resilient and we continue to pursue our goal to grow the business and to gain market share. We've won the VAT case. Supported by the VAT repayment, we are in a strong position with a strong balance sheet, which is providing us with great flexibility. The acceptance period for the share buyback tender offer started yesterday. Thank you. I think we give it back to the Operator for questions and answers. Certainly. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We will now take our first question from Marius Fuhrberg from Warburg Research. Your line is open. Please go ahead. Yeah. Hi, everybody. A couple of questions from my side. First one, I mean, the customer acquisition was quite satisfying with over 200,000 new customers. However, we saw the record jackpot of EUR 120 million and the monthly active users, yeah, barely increased compared to the first half of the year. Is this due to the weak jackpot situation in 6aus 49, or can you give us a little bit more color on that? Second question on your marketing expenses. You just mentioned that in the guidance, there's included that you will spend EUR 30 million on marketing, as you already spent a chunk of that in, after 9M. Now looking at the Eurojackpot again, which reached EUR 120 million and which was just drawn during this week, do you still believe that these EUR 30 million marketing will be sufficient or would you consider expanding that? The third one on the CPL, which used to be a little bit lower in past times, do you expect for like the next years CPL to come closer to like EUR 30 again or should we expect it to remain rather high? Thank you for the questions, and I hope I can answer them. For the customer acquisition, I think you're absolutely right, but also one additional effect. Yes, the six out of forty-nine has been weak. That is the offsetting despite Eurojackpot then having this push in July with EUR 120 million, which was really, really nice to have. But you also have to remember that this was July, and then we had two very weak months, so August, September. Even if we calculate the average throughout the quarters, if you looked at July alone, we had higher monthly active users, and you had lower in August, September. The average will be around the 1 million mark that I reported on. Second question, guidance. Yes, we had a guidance included at EUR 30 million in marketing investment for throughout the year. We spent, like I said, EUR 24 million for the first nine months. We can, of course, I mean, tell you that we spend more than the average in October because the Eurojackpot build up, but it's too early to say how the coming two months. The coming two months could be very weak, and then we save the powder, so to say, and then or if the months are very strong, then we will increase the marketing spend. Now, both products are reasonably low as of today, and I can't predict how they develop. And then lastly, the CPL. As you say, we have had this quarter and this year slightly higher CPL. I think it's reasonable, but that we come to somewhere higher than EUR 30. I can't give you a precise number, but considering the higher social media costs that we are facing or have so far been facing, and that would be true for the entire retail or e-commerce sector, I think it's assuming slightly higher than EUR 30 going forward. Okay. Thank you very much. Next up, we have Henry Wendisch from NuWays AG. Your line is open. Please go ahead. Hi, this is Henry from NuWays. Basically all my questions have already been answered. Thank you. Ladies and gentlemen, once again, if you would like to ask a question, please press star one on your telephone keypad. We will now take the next question from Marie-Therese Grübner from HAIB. Your line is open. Please go ahead. Yes. Good morning, ladies and gentlemen. Thanks, Tom, for taking my question. I'm not sure the twelve point eight percent gross margin is that something which we should consider as being on average, let's put it this way, a sustainable level? I mean, in terms of mix, or is this? Do you need maybe some more time, some more track record to kind of say, "Okay, it's gonna be moving toward the thirteen percent now"? Thank you, Marie-Therese, for this question. I think it's safe to say that 12.8% is a good margin considering all the add-on product that we are selling. I think for the time being, the 12.8% is a solid number that we will continue to generate going forward. I think there are rooms for improvement. The two or three things that are actually increasing the margin going forward is when the jackpot is high, we sell more lottery clubs that comes with a much higher margin. When we sell more charity products, they also come with a higher margin. Then lastly, we of course waiting for the gaming license. Of course. When that product comes, also coming with a higher margin. If we exclude charities, we exclude games, this year have been a statistical average year from jackpot. We have probably statistically sold lottery clubs and other products in average. I would say considering where we are, 12%, 12.8% is a good starting point, but we hope to slightly increase that over the years to come. Okay. If I may, I had also another question. I'm sorry, I have to take another call briefly. Was the question regarding NTV asked, the NTV partnership or not? If not, basically my question is the NTV sort of direct customer acquisition, indirect customer acquisition route now that where you're adding the NTV website, you have 1&1, Web.de, GMX. How are we to understand the economics of this distribution versus your own direct access to customers? Is this today something significant, let's put it this way, or in terms of your overall margin? I'm talking about presumably the 12%, or is there any significant, you know, revenue share coming from those and other subscribers you are getting through these routes included in your, in your ads, in your new ads figure, which is above 200K for the quarter? I think we both will comment on this question, me and Jonas. The reason we do this is that we wanna go where the customers are. It gives us another channel or approach to acquiring customers. Like you pointed out, the economics are different because we don't pay for customer acquisition, but we do pay a revenue share. It has a different sort of spend return profile also over time. It's nevertheless a very attractive commercially attractive acquisition channel for us. It gives us access to incremental customer growth. Jonas, maybe you can comment a little bit on how significant a contribution it is. All I can say right now is NTV. It's early days. We've just started this with 1&1, that's United Internet, GMX and Web.de. We've been doing this for quite a while. It is, you know, a very useful part of the business. Jonas, maybe you can comment on that. Sure. Like Helmut said, this is important for us, and we think there are growth potential to find other similar Operators that we can follow the customers where we don't reach them ourselves. From our total business point of view, they are in the low digits, single digits numbers of the total volumes, and obviously provide slightly less margin because of course, we do so to say, share the revenues with these Operators. On the other side, we don't do the acquisition. It's still a very good business for us. It's a small but growing business, and especially NTV will be smaller than the other one, but growing over time, and hopefully we'll find similar channels or media companies that we can work with. Okay. Jonas, just when you say low single-digit volumes, what are we talking about? I mean, are we talking about thousands, therefore anything between 1 and 10,000 subscribers? What I was saying, as the total volume that we have, a couple of percentage point is related to this 1&1 and NTV. The rest is what we acquire ourselves. Okay. Volume of billings, you mean then? Volume of billings, correct. Okay. Understood. Last but not least, I just had one comment regarding, you know, what you said with respect to the. Or a question rather, what you said with respect to the use of cash from the windfall relating to the VAT. I mean, as you can see, the share is a bit selling off today, even though, you know, you're largely kept your guidance and you're largely operating in an increasingly favorable environment when it comes to jackpots. Operationally, things are rather looking on the bright side. I think the market is a bit disappointed, if I may use this word, as to the communication with respect to the use of proceeds. I just wanted to relay that. I mean, you announced the 3.2% share buyback. I'm saying I have the feeling the market is telling us that they would have maybe like to see a larger buy, you know, buyback program or something like that. Or even, you know, of course, a special dividend. I think you said that you would communicate on that with your figures early next year. Are we talking about the preliminaries or the final figures? We said that the latest with the final figures, if we go out with preliminaries, I think it's safe to say that we will communicate all also this one, how we're gonna handle this. Clearly, we fully appreciate what you say, Marie-Therese, and we appreciate that. We want to take this thoroughly, assess how much we should keep of the excess cash. Mm-hmm. We don't rule out anything, whether that is future share buyback program, dividends or anything else. We don't rule out anything. All right. It's too early to commit to this already today. Of course. It's still sitting there. Of course. Okay. Excellent. All right. Thank you very much for all this, Jonas. No worries. Next up we have Henrik Paganetty from Jefferies. Your line is open. Please go ahead. Yeah. Hi, it's Henrik from Jefferies. I have a couple of questions. I would take them one by one if possible. The VAT lawsuit, when should we expect the cash inflow from that, in Q4 or rather Q1 next year? I would hope it comes in Q4. We are waiting for the court's reasoning. They have, of course, informed us as we announced to the market that we won the case. We have not got the reasoning from the court. My expectation is that the tax authority that lost will read the reasoning and then once that is done, they will hand back the cash. There is, to my understanding, no reason for them to withhold the money, so I expect it to be in Q4, but I cannot guarantee this. I just see no reason for any delay further. Okay, perfect. That makes a lot of sense. Then in terms of the guidance for 2022, as you said before, it looks kind of ambitious. Like from my point of view, either jackpot development will be good and then you are able to reach your revenue guidance, but then you might spend more on marketing and then you have a problem on the EBITDA guidance or jackpot development will be like not favorable and then you won't reach the revenue guidance but will be able to reach your EBITDA guidance. Is that a fair way to look at that or how do you think about that? I think it's a very fair way to look at it. We have a middle scenario as well, which is that we continue with reasonable jackpot, not low, but not super high. We will come very, very close, if not above the billings and revenues and still keeping the EBITDA. But the way you're thinking of it is absolutely right. The way we do it is that if there is an opportunity to invest more, we do it because we know that we create long-term value for the shareholder. Okay, perfect. Maybe quickly on 2023 in terms of revenues and EBITDA, how should we think about that given that you have a delay in the gaming license? Is that significantly hurting like 2023 or how should we think about that? I will come back to the guidance for 2023 when we present our numbers for the full year, so in March at the latest. Yes, it's disappointing. We were assuming when we started all this that we should be up and running already and scaling up the product. That is disappointing for us. Clearly we don't have the license as Helmut explained it in the beginning of this call. Once we get it, we will scale up. It will not come first of January. It's disappointing. It will obviously not affect the long term, but the short term may be impacted. I will come back to the full guidance and explain what we have had, what kind of assumptions we have for games when I present the guidance for 2023. All right. Super helpful. Thank you very much. Next up we have Marius Fuhrberg from Warburg Research. Your line is open. Please go ahead. Yeah. One follow-up question from me. On the personnel expenses which year-to-year the incentive programs developed rather low in the current year. But looking forward, how should we think of this also in terms of operating leverage? And also assuming that you will be granted the gaming license in 2023, how would you expect in such a scenario also then when you're growing your business, personnel expenses should develop, for like the next year? Personnel expenses have been stable for quite some time. Like you said, if we launch and scale up games, we may need a few more people. Generally we have the organization that can deliver this one. Should we then develop other businesses, then of course that will come. If we talk about the current scope, I think the personnel expenses are quite stable, but you have to take into account inflation that we're all facing and that people are expecting high salaries for next year, that you need to take into account. The big variance is the share price because we do have long-term incentives for a lot of senior employees in the company. When the share price goes up, obviously the share incentive plan goes up and vice versa. Okay. Thank you very much. Once again, ladies and gentlemen, please press star one to ask a question. It appears that there are no further questions at this time. I would like to turn the conference back to Mr. Mattsson for any additional or closing remarks. Thank you so much, Sharon, and thanks for organizing this. First, and foremost to everyone that listened, thank you so much. I'm very glad that there was many questions and that you're interested in the business and you keep following on this one. Should you have any further questions, just reach out to Frank Hoffmann or myself. We're more than happy to give you insights in any of the numbers throughout the day or in the coming weeks to go. Thank you very much for taking the time to listen to this earnings call, and I wish you a great rest of the day and week. Thank you. That concludes today's conference. Thank you everyone for your participation. You may now disconnect.