Super Group (SGHC) Limited Price & Performance (SGHC)

Subaru recommends that investors refer to its supplementary presentation posted to their website. On this call, I'm joined by Neil Manashi, Chief Executive Officer. And during the Q and A, session, we'll also be joined by Linda Benwick, Chief Financial Officer and Richard Hasson, President and Chief Commercial Officer. And now I'd like to call over turn the call over to Neil. Thank you, Fred. Good morning, everyone, and welcome to Supergroup's fourth quarter and full year 2024 earnings call. 2024 was an out [indiscernible] A year ago, we set out to refine our global footprint increased our focus on key growth markets fine tune our product and technology and realize OpEx and marketing efficiencies. I'm proud to say that we have achieved all of this while delivery meaningful shareholder returns.

Turning to our numbers. We comfortably beat our ex U. S. Guidance targets for both total revenue and adjusted EBITDA for 2024. Total revenue ex The U. S. Was at four times high for a full year growing 18% year over year to €1,660,000,000 Adjusted EBITDA ex The U. S. Was also a full year record growing 53% year over year to €391,000,000 a margin of 24%. Well above 18% at our initial 2024 guidance [indiscernible] For the fourth quarter, total revenue ex The U. S. Was another all time high. Growing 58% year over year to €487,000,000 Adjusted EBITDA ex The U. S. Also set a quarterly record growing 152% year over year to €129,000,000 a phenomenal margin of 26% Super. We set new customer records during the quarter, including a new daily record of just under 2,200,000 customers across all our products. And a new high on average unique monthly active customers of 5,300,000. Dollars And to top it all off, we closed out the quarter with our best month ever, December set new highs for monthly deposits and total revenue. The inherent operating leverage in our business is having a direct impact on our financial results. As our existing markets reach scale, incremental revenue becomes more profitable.

Continued investment in revenue growth coupled with a laser focus on a leaner more efficient cost base are driving this margin expansion. We expect this trend to continue and we're increasing our ex U. S. Long term margin target to greater than 24%. In The U. S, while the business is still relatively small and developing, we continue to see green shoots since transitioning to an iGaming only strategy. Including new highs in Q4. The quarter started with a record revenue in October which was then surpassed in both November and December. As a result, Q4 was our best ever U. S. Revenue quarter, growing by 64% year over year to €14,000,000 The total investment for the quarter was €11,000,000 taking our full year spend to €61,000,000 With our focus now solely on high gain, we expect this investment to reduce materially over the coming year and we remain focused on finding a path to profitability. Moving on to the balance sheet. We finished the quarter with unrestricted cash of €356,000,000 and no debt. In December, we announced a special cash dividend of $0.15 per share taking our total dividend for the year to $0.25 per share. Well above our minimum annual target of $0.1 per share.

This resulted in over $125,000,000 being paid to our shareholders. Looking ahead, are pleased to announce that we secured Board approval increase our minimum quarterly dividend target to $0.04 per share up from $0.025 The first payment will be made in March and the Board will assess on a quarterly basis moving forward. Turning to guidance, we are off to a brilliant start in 2025 and are confident that we will achieve another year of robust growth. For the ex U. S. Business, we expect 2025 total revenue to grow above 10% year over year to at least €1,830,000,000 and adjusted EBITDA to grow to greater than €435,000,000 a margin of 24%. In The U. S, this will be our first full year running an iGaming only footprint And on that basis, we expect total revenue of around €85,000,000 and our total investment to reduce considerably from 2024 to between €30,000,000 and €35,000,000 When combining the ex U. S. And U. S. Numbers, this amounts to total revenue of over €1,900,000,000 and adjusted EBITDA of at least €400,000,000 a combined margin of 21% higher than our 2024 margin of 19.5% calculated on the same basis. The progress and changes that we have made to our business over the past twelve months have created a solid foundation for continued sustainable growth supported by a substantial and ongoing investment into marketing.

Supergroup is well positioned as a major profitable player in the world of online gaming and sports betting and the outlook for our fourth year as a NYSE listed company is We are excited about the year ahead and look forward to updating you along the way. I'll now turn the call over to the operator to open the call up for questions. Operator?

We will now begin the question and answer session. Our first question comes from Mike Yeehi with The Bench Mark Company. Please go ahead. [indiscernible] Great quarter guys and fantastic year. Congratulations.

Just two questions. From us, Neil. Great to see strong guidance for 2025.

In 2024, it looked like your marketing spend was around 23% revenue Do we assume sort of a similar level of spend here as it factored into your 2025 guidance, Neal? [indiscernible] That's right. The 23% that's what we're budgeted for moving forward. It's a bigger number because of 23% of a higher revenue number. But we're seeing good return and we continue to track our marketing efficiencies that way. That's how you get continued growth.

Thanks.

Also nice to see the big increase here in your quarterly dividend. I guess that speaks to confidence in your business. Love to hear that, your decision there. And also, should we expect another special dividend you think in 2025, Neal?

Yes.

So obviously, we go back and forth on the dividend We obviously are Super happy that we've increased it to $0.04 a quarter. And of course, we always want to return money back to our shareholders. If we return $0.25 loss, our aim would be to try and exceed that. But if the acquisitions or stuff come out come along, then that obviously would have an impact on that. But we still aim to get a good dividend policy going here, which you can see now with the increased dividend to $0.04 a quarter.

Nice.

Great job, guys.

Your next question comes from Jason Tilton with Canaccord Genuity. Please go ahead.

Good morning and thanks for taking the questions.

I think to start, I'm just wondering if you could share a little bit more about the opportunity you see within some of the key growth markets They talked a little bit about the press release. How much of that is coming from underlying market growth versus new markets entering and also from share gains in existing markets?

Okay. So firstly, all the growth is coming from existing markets. And remember, we said we become laser focused on the countries we're in. We picked our country. If it's on African countries in Europe, Canada, etcetera, New Zealand, And we are honing in on those. And of course, we are opening up some new markets along the way. But the new markets that we opened it's all about how we can get sustained profitability in those markets. And we had a big effort in the latter part of last year of closing down markets that we do not see a path to profitability And I think all of that is showing in our numbers moving forward.

And Jaeson, just to add there, is also the focus on what Mil just made reference to is the marketing spend. We stay at a higher percentage so we invest to have that ability to increase the market share to your question. In that specific market.

Okay, great. That's really helpful. And you talked a little bit about the pipeline of of additional markets in Africa that you see you just maybe share a little bit more about what the timeline looks like there? And what the level of investment that you talked about sort of having some marketing spend that sort of you're ready to sort of deploy in sort of compelling opportunities Does that mean Africa? And sort of what are the markets that you see as really interesting growth opportunities there? [indiscernible] And so there are opportunities. There are new markets We've opened up a long way. I think it will do it in news. We opened up Botswana recently. So they are more coming. It's all about each market and it's the software being being efficient in those markets. And I think we can't be in all the markets and that's why we've taken back some of the markets where we see the no fault. Path to profitability, but we've got a few more coming this year. And again, the existing ones, it's all about the product enhancements in the existing ones and the marketing spend in the existing ones. And especially in some of the European markets, we are seeing good growth there.

Just for the one that's probably the one that haven't seen good growth is in Germany. But I think the whole industry as a whole hasn't seen good growth in Germany just based on how the regulation has gone there. But the other markets we are seeing good growth. And like I'll just mention, something like Brazil, we applied for a license and at the last minute we decided not to go for it. We don't see our product ready to be competitive in Brazil where we're rather fixative for the rest of the world. And as you see, we're super focused on the markets we are in. And that's coming down to the customer numbers you can see in our systems, etcetera.

Great. Thank you very much.

Our next question comes from Bernie MacChernan with Needham and Company. Please go ahead.

Great. Thanks for taking the questions. Just to start, just wanted to touch on the 2025 revenue guidance. [indiscernible] big step down from what you achieved in 2024. So just maybe any comments in terms of 4Q one timers or beneficiaries and And maybe just taking a step back on guidance methodology where some of the outperformance came in 2024 versus the original guidance? Sorry, Dhanik. Just to repeat your question, are you making reference to a step down from guidance because it's actually increased double digit increase in guidance for Ex U. S. Business for both revenue and adjusted EBITDA. So we Sorry, I was just saying that the year over year growth a step down in '25 versus '24. Versus the exit rate in 4Q. [indiscernible] I think we've just for the first time, we actually combined our ex U. S. And U. S. Revenue which then gives you the number of total of over €400,000 €400,000,000 combined. But if you look at issues, it's [indiscernible] to $455,000,000 adjusted EBITDA or above that and €1,830,000,000 So buzz is double digit growth top and bottom line.

And I think from my point, it's greater than these numbers. Obviously, this is what we want to And we also have a good start, but remember, we've also got sports results along the way. So obviously, they were favorable to us in the last quarter. But we just obviously are always cognizant of that fact. But our business is, let's say, still about 75% to 80% casino. So these numbers, we we think we could be greater than that, but we just have to eye a bit on cautious. Okay, understood. Thank you.

And also just wanted to touch on Apricot, the deal closed last day. Day, so over six months of the asset being under your control. Anything that you could do now that you weren't doing before or just generally how is it contributing to performance?

Okay. No. So So two things. Remember in Africa, the sports book in Africa was always ours. Right? The PAM and then obviously they amused use our feeds, etcetera. So that we're seeing a direct benefit of being able to be the market leading product in the countries in which we operate in Africa. So I think that coupled with our marketing spend remember in our numbers which is super important, we're still keeping 23% marketing budget. Right? But so we've got like €440,000,000 of marketing. It's not saying we're going to deploy at all, but we only deploy it when we see the opportunities. And the same way is you need the enhanced product so that you get this super operating leverage. And I think that that for us is key. That we could easily and I say this every year, we could drop our marketing budget from 23% down to 20% and we could bring in another $100,000,000 of profit, but that's not really what we hear. We want a sustainable long term business. And it's all about the sustainability of our is what we're seeing and enhanced features that our products offer, especially in Africa, but remember in the rest of the world, we've got UK, Canada, Ontario, New Zealand, etcetera.

Understood. And just last one for me. Any update obviously The U. S. Is now included in guidance. Any updates in terms of the strategy and is '27 still the right way to think about the first profitable year?

Yes. Yes, I am sorry, it's been okay. Yes, I think so. And it's about us getting that revenue up and then of course the the operating margin there. Basically now in The U. S, we are covering all our costs except for the market. So now it's about then recovering more of their marketing costs as revenue increases.

Great. Thank you both.

Our next question comes from Jed Kelly with Oppenheimer. Please go ahead.

Hey, great, great. Thanks for taking my question.

Just as we kind of look at the balance above the year in the guidance, Are you contemplating Alberta becoming legal potentially And then what other regions should we be watching in terms of potential pitfalls, regulations? Or can you just talk about the regulatory environment? And I have a couple of follow ups. Okay. That's right. No. So we only expecting Alberta in the first half of twenty twenty six. In our numbers. And then there's been slight bit of increase in taxes coming in The UK. And so and that's factored in some levy there. That's a small it's a small amount. And then of course in our numbers, for from the second half of twenty twenty four was some additional tax in New Zealand. So that's included in our in our 2025 numbers.

But then we're hoping New Zealand regulates in 2026 and be far down the line there. With all the regulators there.

And then when we look at your cash balance obviously, you got plenty of capacity to do a dividend How should we think about potential acquisitions and what you would be looking to acquire? Would you be targeting regions and sort of Africa, Australia, New Zealand where some of the other competitors might not be? Or is it more tucking acquisitions? And then what would your 4Q sports book results have been if you had just normalized hold because I think you had favorable sports results last quarter, correct?

Hey, Ju, Richard, I'll answer the first part of your question. So in terms of opportunities, we're constantly assessing a number of them across the globe. I would say in complementary regions or existing regions. So probably more in the form of tuck in M and A opportunities across both sports betting and gaming across the regulated landscape. And then I'll just argue on the margin. So the sports margin actually was a normal [indiscernible] In quarter four, but then you had that plus casino both coming together. There wasn't it wasn't an extraordinary margin. In those months. It's just that in the rest of the quarters before, you had some outliers winning. So they were less.

So what I think quarter four shows when the two are going together, the sports and the casino, then you see the profits we live at. And I did say on the fourth, that December was our highest ever month. Of deposits, customers in anestormies, all about returning customers into our system and into our ecosystem. And then we had far point $3,000,000 on average. But for me, the big number is the $2,200,000 in one day. And that just shows we've come from. And we used to be 1.8 before that's about all the customers depositing and playing in our in our sportsbooks and casinos. Yes. Okay. And then I guess just circling back to The U. S. You guided today. I mean, the Governor of New Jersey, he's got his he's doing a budget address today at like three P. M. Some are speculating, he potentially could raise gaming taxes upwards to like 25%. How would you do how would that view how would that change would that change how you view off The U. S. If if New Jersey does go to a higher tax rate and would that one make you potentially want to pull out of those markets?

Just given the higher taxes? Thanks.

I think, Jed, any So is there any proposed increase in the tax rate? We just formed part of our macro question on those markets or any other is, is there a sustainable profitable path for us in those markets? And if the higher tax rate in theory meant that there wasn't, then we'd take a view at that point. For now, we continue doing what we're doing We're seeing good green shoots in those markets based on current tax rates and the current market.

And that means for now we continue doing what we're doing.

But also most importantly what we've done in the last year, right, is have have cost efficiencies. I think we've down like 1,000 people. And it's not because it's to get the cost efficiencies in it. It's all about cost efficiencies It's all about the systems we are putting in that can manage more as we increase volume increase staff counts, etcetera. So all of that is to make them operating efficient cost base. And that's what also helps you weather some of these increase in taxes.

Thank you. Great year and great job.

Thanks.

Thank you. Thank you.

This concludes our question and answer session. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.