€54.3M Revenue. €8.3M Profit – ZEAL Network Is Building Through the Cycle Under Stefan Tweraser
ZEAL reported Q1 revenue of €54.3m (+6% YoY), driven primarily by its core lottery brokerage business and supported by early-stage growth in Games.
Profitability, however, deteriorated. EBITDA declined 13% to €15.5m, with margin compressing from 34.7% to 28.5%, while net profit fell 16% to €8.3m.
The shift is strategic, not incidental. Marketing intensity and headcount expansion are now scaling faster than revenue, reversing operating leverage.
Jackpot softness exposes structural dependency
The quarter was defined by a weaker jackpot environment, particularly in Eurojackpot, where average jackpots fell to €34.1m from €49.2m YoY.
Customer activity still grew (+5% MAU), but monetisation weakened. ABPU declined 3% and billings growth slowed to just 1%.
This reinforces a core structural risk: revenue remains directly exposed to jackpot cycles, limiting predictability while the cost base becomes increasingly fixed.
Customer growth comes at rising cost
ZEAL added 274,000 new customers (+11%), but acquisition efficiency deteriorated. Cost per lead rose 11% to €53.80, while marketing spend increased 13% to €17.6m.
This is clear CAC inflation in a softer demand environment. Crucially, there is no evidence that higher acquisition costs are being offset by stronger lifetime value or faster payback, raising questions about the sustainability of current growth economics.
At the same time, cost pressure is compounding operationally. Payment processing costs rose 24% and KYC costs increased 79%, both scaling materially faster than revenue as the customer base expands.
Margin improvement fails to reach EBITDA
Lottery gross margin improved to 17.8% (+0.8pp), supported by pricing and product mix.
However, this gain is being absorbed by structural cost expansion. Headcount increased 27%, marketing intensity stepped up, and investment into proprietary products accelerated.
As a result, gross margin expansion is no longer translating into EBITDA stability – indicating weakening cost discipline at scale.
Proprietary lotteries: strategic shift with near-term drag
ZEAL continues to push into owned products, including “Dream House” and the upcoming “Dream Car” charity lottery.
This marks a move beyond brokerage into product ownership. While strategically logical, the model is currently dilutive to EBITDA, introduces higher fixed and marketing costs, and remains operationally unproven at scale.
More importantly, it shifts ZEAL’s profile from a low-capex intermediary to a more capital-involved operator, where execution risk is tied to product performance rather than distribution efficiency.
Games: scaling users, not value
The Games segment continues to grow, with revenue up 14% and MAU increasing 34%. However, monetisation is weakening. ARPU declined 15%, gross margin remains low at 7.6%, and EBITDA is flat.
The segment is scaling volume without establishing pricing power or meaningful profitability, limiting its near-term contribution to group earnings.
Cash flow deterioration highlights earnings quality risk
Despite €15.5m EBITDA, operating cash flow was negative (€-0.96m), with cash declining by €3.6m in the quarter.
The primary drivers were working capital outflows, tax payments, and bonus-related cash movements, consistent with disclosures in the Q1 statement .
The implication is clear: earnings quality is weakening. EBITDA is increasingly disconnected from cash generation as operating intensity rises.
Balance sheet stable, but returns under pressure
Equity increased to €239.3m (53.8% equity ratio), and debt declined modestly, reducing financing pressure.
However, the business has clearly entered an investment phase. Elevated CAC, product expansion, and rising operating costs are likely to weigh on near-term returns, with margin recovery dependent on execution rather than market tailwinds.
Source: ZEAL Network SE
