GAME CHANGER WE DRIVE CHANGE IN THE LOTTERY INDUSTRY. ANNUAL REPORT 2020 NEW NORMAL A VERY SUCCESSFUL YEAR 918k +235% NEW REGISTERED CUSTOMERS 100% GERMANY SEGMENT COST SYNERGIES (2019¹: 274k) REALISED €87.0m REVENUE (2019: €113.5m) -23% €652.8m BILLINGS €246m (2019: €466.7m) +40% FOR GOOD CAUSES (2019: €94m) +162% €12.7m ADJUSTED EBITDA (2019: €29.4m) -57% OTHER HIGHLIGHTS ■ Exceptionally good jackpot development €27.79 ■ COST PER LEAD, CPL High marketing investments drive growth GERMANY SEGMENT ■ Targeted cost synergies completely implemented (2019¹: €33.64) -17% ■ Market share expanded ■ €246 million for good causes ■ Return to SDAX ■ Market capitalisation more than doubled and exceeds one billion euros for first time ¹ The corresponding 2019 financial indicators have been restated to include only the business allocated to the Germany segment as explained in note 3 of the Consolidated Financial Statements. This only includes the brokerage business of the LOTTO24 brand from its acquisition on 14 May 2019 and the Tipp24 brand from 15 October 2019 onwards (since the Business Model Change). The definitions of the financial measurements disclosed above can be found in the Management System section on page 35 of this Annual Report. ZEAL Network SE is the parent of an e-commerce group of com- panies that create online lottery experiences for their customers. Founded in Germany in 1999, it was initially set up as a lottery broker and floated in 2005 – in one of Germany's most successful IPOs on the Frankfurt stock exchange at that time. In 2009, the Group changed its focus from lottery brokerage to lottery betting and later moved its registered office to London. In May 2019, ZEAL completed the takeover of LOTTO24 AG, tran- sitioned its former Tipp24 secondary lottery business to a German online lottery brokerage business in October 2019, relocated its registered office back to Germany and successfully finalised the integration in 2020. Today, we are the leading German online broker for state lottery and other permitted lottery products once again. Our aim is to innovate and drive change in the lottery sector while further expanding our market leadership! CONTENTS Executive Review 2 Group Management Report 30 Supervisory Board Report 6 Consolidated Financial Statements 60 About ZEAL 10 Notes to the Consolidated The ZEAL Share 18 Financial Statements 67 Corporate Governance Statement 21 Auditor's Report 116 Non-financial report 26 Key Consolidated Figures 122 EXECUTIVE REVIEW 2020 – A SUCCESS, DESPITE CORONA LADIES AND GENTLEMEN, In spite of corona (COVID-19), 2020 was a successful year for the ZEAL Group¹ in every way: thanks in particular to the exceptionally good jackpot development, billings rose strongly and with the highest marketing investments in our company history we gained 918 thousand new registered customers at an attractive CPL, thus further expand- ing our market share. At the same time, we not only implemented the targeted cost synergies in the course of the LOTTO24 takeover in full in the fourth quarter of 2020 – and even earlier than planned – but also launched a highly successful new product, the charity lottery 'freiheit+', provided €246 million for good causes and thrilled 83 customers with wins of €100,000 or more. FURTHER ON GROWTH COURSE Our billings rose by 40% to €652.8 million (2019: €466.7 million). In addition to the first full consolidation of LOTTO24 the positive jackpot development and the associated strong acquisition of new registered customers contributed to this. The Germany segment accounted for €651.8 million of this total. For contractual reasons, the billings of our ONCE business in Spain are not included in the total. When comparing with the previous year, it should be noted however that in 2019 offered additional products (incl. Instant Win Games), the European lottery 'EuroMillions' and the US lottery 'Powerball') as part of our secondary lottery business, which were discontinued following the Business Model Change² in October 2019. Moreover, in the previous year the online lottery brokerage business of LOTTO24 was only part of the ZEAL Group as of 14 May 2019. LOTTO24 billings up to 14 May 2019 were therefore not included in the prior-year figures. In 2020, the jackpot development of the individual lotteries was exceptionally favourable for us: the average jackpot of the German lottery 'LOTTO 6aus49', for example, was significantly higher in 2020 than in the previous year and exceeded the €20 million mark a total of five times (2019: four times). The product change introduced by the Ger- man Association of State Lottery Companies (DLTB) in September 2020 – among other things, by raising the first prize category to €45 million and the billings-increasing price rise – had a positive impact, especially in the fourth quarter. The average jackpot of the European lottery 'Eurojackpot' was also up on the previous year and reached the €90 million mark a total of six times (2019: four times), although not once in the fourth quarter (2019: twice). Largely due to the expected dis-synergies in the course of the WITH OUR COMBINATION OF COM­ Business Model Change, our revenue fell year-on-year by 23% to €87.0 million (2019: €113.5 million). As with billings, revenue in MERCIALLY SENSIBLE MARKETING IN­ 2019 still included the secondary lottery business but not the VESTMENTS, HIGH NEW CUSTOMER online lottery brokerage business of LOTTO24 up to 14 May GROWTH, POWERFUL TECHNOLOGY AND 2019. In 2020, revenue in the Germany segment reached €80.0 million. EXCITING PRODUCT INNOVATIONS, WE HAVE SET THE COURSE FOR A HIGHLY At 12.3%, our gross margin in the Germany segment was above the prior-year level (2019³: 11.7%). As the Spanish ONCE business PROMISING FUTURE. is not included in billings but only in revenue, our margin trend Dr Helmut Becker, CEO, ZEAL is better reflected by the Germany segment than at Group level. ¹ The ZEAL Group is comprised of ZEAL Network SE and its subsidiaries. ² The Business Model Change refers to the LOTTO24 takeover and the conversion of the former Tipp24 secondary lottery to the German online lottery brokerage business. ³ The corresponding 2019 financial indicators have been restated to include only the business allocated to the Germany segment as explained in note 3 of the Consolidated Financial Statements. This only includes the brokerage business of the LOTTO24 brand from its acquisition on 14 May 2019 and the Tipp24 brand from 15 October 2019 onwards (since the Business Model Change). 2 . Executive Review CEO Dr Helmut Becker TARGETED COST SYNERGIES FULLY IMPLEMENTED We also succeeded in further reducing our cost base: our personnel expenses and other operating expenses together fell by €13.8 million to €78.2 million in 2020 (2019: €91.9 million) – despite significantly higher marketing investments. It should also be noted here that the costs of LOTTO24 AG up to 14 May 2019 were not included and consequently the year-on-year cost savings would have been correspondingly higher. Despite an increase in marketing expenses of €10.5 million to €32.2 million in order to take advantage of the favourable market and jackpot environment (2019: €21.7 million), other operating expenses alone decreased by €12.7 million to €56.3 million (2019: €69.0 million). The planned annual synergies of at least €57.0 million played a major role in achieving these cost savings. Our aim was to reach 80% of these cost synergies within one year and 100% within two years of completing the LOTTO24 takeover – in other words, by May 2020 and May 2021. Due to the strict implementation of the planned measures, however, we achieved our target much earlier than planned: in May 2020, we had already generated 91% of the targeted cost synergies and are delighted to report that we also realised 100% for the first time in the fourth quarter of 2020. With total expenses incurred for achieving the planned cost synergies of €15.0 million, we are also at the lower end of the targeted range of €15.0 million to €20.0 million and expect no further relevant costs. As our recent performance demonstrates, the German online lottery brokerage market offers tremendous growth potential for the ZEAL Group: in our Germany segment, we gained 918 thousand new registered customers in 2020 (2019: 274 thousand) at acquisition costs per new registered customer (cost per lead, CPL) of €27.79 (2019: €33.64). EBITDA WELL ABOVE ALREADY UPGRADED GUIDANCE As a result of revenue dis-synergies caused by the Business Model Change, there was an anticipated year-on-year decline in adjusted EBITDA to €12.7 million (2019: €29.4 million). However, this figure was above the already upgrad- ed guidance for the year. Despite significantly increased marketing expenses, the Germany segment accounted for €11.8 million of this total. At €5.4 million, EBIT was also down on the previous year (2019: €9.1 million). Increased depreciation and amortisation of €12.0 million in total (2019: €8.8 million) resulting from the LOTTO24 takeover was offset by non-recurring income of €4.6 million (2019: non-recurring expenses of €11.4 million) relating mainly to the repayment of stamp duty reserve tax from the UK tax authority HMRC. Due to the € 3.4 million increase in the financial result and the € 6.6 million reduction in tax charges, our net profit of €7.9 million was well above the prior-year figure of €1.7 million. Executive Review ZEAL Network SE Annual Report 2020 3 MARKET SHARE EXPANDED According to information published by DLTB and the German Lottery Association (DLV), online revenue of the 16 state lottery companies and private lottery brokers with permits rose to €1,587 million in the fiscal year 2020 (2019: €1,035 million).