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spk06: Good morning, everyone, and thank you for joining us today to discuss Supergroup's results for the fourth quarter and full year 2023. During this call, Supergroup may make comments of a forward-looking nature that are subject to risks, uncertainties, and other factors discussed further in its SEC filings that could cause its actual results to differ materially from historical results or from the company's forecast. Supergroup assumes no responsibility to update forward-looking statements other than as required by law. On today's call, Supergroup may refer to certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, and not a substitute for, measures of financial performance prepared in accordance with GAAP. Supergroup has provided a reconciliation of the non-GAAP financial measures to the most comparable GAAP measures or figures, excuse me, in the press release issued earlier today and available on the investor relations page of Supergroup's website. In addition, Supergroup will speak to its financial results and metrics in two parts, highlighting Supergroup's profitable and cash generative global business separately from its investment into the U.S. This aligns with the annual guidance that Supergroup has provided for both 2023 and 2024 and is consistent with both how Supergroup views its business internally and how Supergroup will report going forward. Supergroup recommends that investors refer to its supplementary presentation posted to their website. On this call, I am joined by Neil Menasche, Chief Executive Officer, and Alinda VanVyck, Chief Financial Officer. During the Q&A session, we will also be joined by Richard Hasson, President and Chief Operating Officer. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. And now, I would like to turn the call over to Neil.
spk04: thank you good morning everyone and welcome to supergroup's quarter four and year end 2023 earnings call we have made tremendous strides in 2023 we are cementing our position as a profitable and geographically diverse online sports betting and i gaming operator we have a clear and sustainable path to future long-term growth i'm so proud of what we achieved in the last year And I'm really excited about the outlook for 2024. We feel like we are just getting started as we head into our third year as a New York listed business. We are determined to deliver meaningful, long-term shareholder returns. Let's take a quick look at our 2023 numbers, excluding the U.S. For the full year, we set a new annual record for total revenue of 1.406 billion euros. And for operational EBITDA, we achieved a total of 255 million euros, meaning that we easily surpassed guidance on both fronts. Moving on to Q4, total revenue came in at 352 million euros, with operational EBITDA of €54 million. The fourth quarter had its challenges, with October's unprecedented low sports margin, driven by soccer results and the closure of the Indian market. However, we made a strong recovery and set some new records. Total revenue was the highest ever for a fourth quarter, and December was our best ever EBITDA month. The ability to navigate these bumps in the road is a testament to our diverse and loyal customer base. Our customers are active across both sports betting and casino. Over 85% of our net revenue in the fourth quarter came from casino, proving that even when the sports results go against us, we still have the ability to deliver record-breaking results. In the U.S., our net EBITDA loss for the quarter was €18 million, taking our full-year investment to €57 million. Worldwide, our customer growth is impressive. Even without India, our customer numbers grew to an average of 4.7 million unique active monthly customers. That is 1.2 million more customers than we had at the same point last year. and 700,000 more customers than last quarter. Our customer retention remains strong, and this, along with new customer acquisitions, drove us to new highs for daily customers and daily deposits. Each quarter this year, we set records on each of those fronts and consistently surpassed them. We are a technology-driven business with customers being at the center of our universe. And it's great to see continuous engagement from both new and existing customers, some of which have been playing with us for over 20 years. These strong metrics make us confident that we will achieve the double-digit top-line growth that we are projecting for 2024. Now to provide an update in some of our key jurisdictions. starting with Africa we had another quarter of strong revenue growth we accomplished this even though the African market was a key driver behind the negative sports margin for the business in October moving forward we continue to explore the introduction of new products and brands into both new and existing markets just last month we successfully launched our jackpot city brand into our first African market And we are super excited about the prospects that a Sina specific brand presents for us across the continent. In Europe, we're encouraged to see growth in markets, which we would typically define as more mature and established. In particular, Italy and Spain were standout performers. Both regions grew their casino segment significantly year on year by offering new localized gaming content. In the UK, Betway delivered strong growth. Jumpman delivered its most profitable quarter ever. And similar to Africa, we rolled out the Jackpot City brand. We are well positioned to handle the UK Gambling Commission's plan to introduce a cap per spin for online slot games later this year. We expect this to have a limited impact on revenue because of the nature of our UK business and the composition of the customer base. In Canada, casino grew well, and overall, this remains a strong market for us. In Ontario, industry regulation prompted an initial dip, but our customer retention is now exceeding what it was before the new rules took effect. Customer values are as good as they ever were, and revenues, which initially stabilized, are now growing. In the U.S., while we continue with our previously communicated technology migration and marketing plan, we are not pleased with the status quo. Given the size of the investment required, the competitive landscape, and the relatively small number of states that are currently regulated for iGaming, we are actively evaluating our U.S. strategy on a state-by-state basis and will make changes as required. We announced in February that we completed the sale of DGC's B2B assets to Games Global. The B2B division of DGC is in great hands, and we wish all the parties the best of luck moving forward. The completion of the transactions aligns with our goals, which is the growth of our worldwide B2C business. Finally, I'm pleased to let you know that we are very close to finalizing commercial terms and agreements with Apricot to assume full control of our Betway Global Sportsbook technology. This includes a favorable risk-sharing deal structure, which comprises an upfront consideration and an earn-out. Once completed, this will be a monumental milestone for our business and will allow the global rollout of the software to new and existing markets. whether both organically or through M&A. We look forward to getting this wrapped up and will provide an update before the end of the month. I will now hand the call over to Linda to discuss the financials in greater detail. Linda.
spk00: Thank you, Neil. Reflecting on 2023, I'm pleased with how the teams have navigated various challenges to deliver strong growth across both the top and the bottom line. our business model remains adaptable, resilient, and primed for future growth. Let's get straight into the numbers. For 2023, we set a new record for X years total revenue, which came in at 1.406 billion euro, up 8% year-on-year and 19% in constant currency, and therefore comfortably beating our total revenue guidance of 1.35 billion euro. We also delivered the highest ever total revenue for the fourth quarter of €352 million, up 7% year-on-year and 15% in constant currency. As we touched on the last earnings call, sportsbook revenue was impacted in the fourth quarter due to October's customer-friendly results in soccer. We rebounded in November and even performed better in December, but sportsbook revenue still declined for the quarter to 53 million euros, a decrease of 39% year-on-year and 34% in constant currency. This decline was further impacted by the closure of the Indian market, which of course is included in the comparative quarter. Moving on to casino, net revenue came in at 289 million euros, an increase of 22% year-on-year or 32% in constant currency. This growth was driven by strong performance in Africa, Canada, and some of our European markets. Despite the strong performance in this segment, growth was offset by the closure of India. I'm very pleased with the progress we've made in optimizing costs in the right areas. We are not about cutting costs for the sake of improved margins. Instead, we continuously analyze our costs and understand the areas where we can operate more efficiently. We are investing in technology, AI, and enhanced processes to drive long-term efficiencies and innovation. All of this allowed us to reduce our headcount over the year by more than 11%. This focus has led to our total operating costs as a percentage of net revenue in the fourth quarter falling to 19%. compared to 22% in the same quarter of last year. This is a huge saving of 3% of net revenue. Another area where we will continue to invest is our marketing. We spent 29% of net revenue on marketing during the fourth quarter. We scrutinized the return on investment per market and per channel to ensure optimal delivery of our revenue targets and to deliver top-line growth. we never want to sacrifice long-term growth for the sake of short-term margin improvements. Our operational EBITDA X years for the full year came in at €255 million, being 22% year-on-year growth, comfortably beating our 2023 guidance of at least €240 million. Our EBITDA margin for the year was 18%, an improvement of 200 basis points as compared to 2022. This is a positive step in the direction of our long-term target of maintaining EBITDA margins of above 20%. For the quarter, operational EBITDA grew 29% year-on-year to €54 million, resulting in a margin of 15%. The margin for the quarter was impacted by the COVID sports results, which actually resulted in negative EBITDA for the month. In December and November, we achieved EBITDA margin of around 24% and 22% respectively, demonstrating the strong end to the year and our operating leverage kicking in. The U.S. EBITDA loss for the year was 18 million euros, resulting in negative operation on EBITDA for 2023 of 57 million euros, being slightly less than our forecasted spend of 16 to 65 million euros. Moving to 2024 ex-US guidance. We estimate that our top line will continue to grow strongly, with year-on-year growth of just over 10% to €1.55 billion. Going forward, and to ensure that we are aligned with best practice, we will now report on adjusted EBITDA instead of operational EBITDA. The difference in 2023 between these two metrics was immaterial. Our 2024 guidance for ex-U.S. adjusted EBITDA is a minimum of €280 million. In the U.S., we have started the year's spending at a similar rate to last year. As expected, we are constantly evaluating the spend and the returns being generated. And while we are still in the process of assessing various options for the U.S. market, I do not think that it is likely that our 2024 adjusted EBITDA loss will exceed what we spent last year. Lastly, we ended the year with a strong balance sheet, which includes unrestricted cash of €242 million and no debt. I will now turn the call back to Neil. Thank you.
spk04: Thanks, Linda. Despite customer-friendly results in October, we recovered extremely well to set the highest ever total revenue for fourth quarter and for a full year. I thank our entire Supergroup team for their dedication and commitment this past year. Our business model puts us in a good position to overcome adversity. When sports betting results go against us, we can rely on our casino segment. Casino proved to be a great anchor. Over 78% of our net revenue came from casino in 2023, with the ratio in the fourth quarter growing to 85%. We are confident that this era of our business will continue to trend upwards. 2023 was a fantastic year for Supergroup. We are a customer-centric business, and our customer base continues to break records. This is very encouraging for future growth. We have a clear, very clear game plan for 2024. We are focused on a number of areas, including the continued optimization of our global footprint, including the U.S., ongoing investment into marketing channels which yield the highest return on investment, fine-tuning our product and technology, realization of further cost efficiencies in the right areas, the rollout of our Jackpot City Casino brand across new and existing markets. The delivery of these objectives will help us achieve our projections of double-digit growth on the top line, continued increase in our EBITDA, and meaningful free cash flow. We have high expectations for 2024 and look forward to continued success. I'll now turn the call over to the operator to open the call up for questions. Operator?
spk06: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Michael Graham with Canaccord. Please go ahead.
spk07: Hey, thanks very much. Thanks for all the detail. I just wanted to ask for a little more depth on, you know, your plans for the U.S. business in 2024. You mentioned assessing a range of options on a state-by-state basis. Could you just maybe comment on, I guess, number one, are there any states you're sort of happy with your competitive position? And number two, just, you know, What can you say about the range of options in each state? What can you say about the timing, you know, of some of these decisions?
spk03: Hey, Michael. Richard here. So, as Neil pointed out, we are looking at a number of options and obviously going through them all in extensive detail. At this point, you know, we are assessing them all, and they range from, you know, re-looking at our current geographic footprint to potentially looking just at casino states and, of course, alongside that also any possibility of M&A. But this is very much front of mind and getting a lot of focus. And, of course, we'll update you with more details as soon as we can.
spk07: Okay. Thank you. And then maybe just a quick one on Brazil. Just wondering how you're thinking about your strategy in Brazil. and any updates you can give us on your thinking there.
spk04: Hi, this is Neil here. Brazil, like all other countries, we operate there currently, so we are waiting for the regulated regime with what it means for our products, for the taxes, et cetera. So, of course, it's an important market, and we are waiting for the final regs to come out there.
spk08: Okay. Thanks, Neil and Richard.
spk06: The next question comes from Jed Kelly with Oppenheimer. Please go ahead.
spk05: Hey, great. Thanks for taking my question. Just given your outlook, can you talk about, you know, what regions, you know, you're baking in, you know, probably maybe like the most upside from, and then just can you talk about how your tech migration is coming and you know, what percentage of your technology, you know, is vertically integrated and do you own?
spk08: Thanks.
spk00: Jed, on tech migration, I think Richard will just... You're referring to the tech migration in the USA. I mean, you'll get an update on the acquisition of Apricot software. Can you just repeat your first question again? You want to know... Yeah, just...
spk05: Just on your outlook, like, can you tell us what regions, you know, your big, you know, where you're seeing the best growth?
spk00: Yeah. As we pulled out, you know, Neil also went into quite a few details on our countries that really stood out. But Africa is always on top of the list. It's really doing very well in a couple of African countries and also some of the Central European countries. You know, called out Spain and Italy is doing very well. And then rest of Canada has really lifted its head as well with really, really strong growth this year. And there was also a good overview of Ontario that we say is getting back to the standards we saw before.
spk03: Hey, Jen. Touching on the U.S., on the technology migration, seven of the nine states that we're alive in have currently migrated with the two last dates expected within the next month or so. But of course, that migration is being considered as part of our wider assessment of the various options that we're currently looking at.
spk08: Thank you.
spk06: The next question comes from Ernie McTernan with Needham & Company. Please go ahead.
spk01: Great. Thank you. Maybe just to start to stay on the U.S., you mentioned M&A. What kind of assets could be interesting in an M&A and then a follow-up there as well? Has iGaming legislation, has your outlook changed or has it just been slower than expected? You mentioned it on a state-by-state basis, assuming that has to do with iGaming legislation, but just interested in your thoughts there.
spk03: All right. So, yeah, on the iGaming point, as Neil mentioned, there's a relatively small number of states that are currently regulated. And I think, yeah, I think the pace that they run out of this regulation has been slower than the industry has expected. Within our global business, of course, a large number, a large amount of our revenue comes from gaming. So that's obviously important for us. In terms of M&A, we're looking at a range of options. And again, it's one of the numerous options as we assess the overall strategy for the U.S. And at risk of stating obvious, any M&A we look at has to be done at the right price for both parties and make sure that it makes sense for our shareholders.
spk01: Got it. Makes sense. If I just look at slide 16 and the constant currency growth, and I appreciate that you guys are providing it, but just the difference in performance between sports betting that happened in 23 versus online casino, should we expect them to kind of meet in the middle in 24 to get to about the 10% revenue growth, or how should we be thinking about each product? Thank you.
spk04: I mean, listen, just from my side, Neil here, just from my side is obviously sports betting over time. You've got to set margin that can be a bit volatile, as we saw in October, but then obviously November, December was great. So, yes, based on that, I would say still 75%, 80% casinos where I probably would set your targets on.
spk08: Got it. Thank you.
spk06: Again, if you have a question, Please press star, then 1 on a touch-tone phone.
spk08: And we have a question from Mike Hickey from the Benchmark Company.
spk06: Please go ahead.
spk02: Hey, Neil, Richard. Good morning, guys. Thanks for taking our questions. Sorry I got on the call late, guys, but just curious – Latin America obviously looks like it's getting some heat here. Just curious the opportunity you see there in terms of your longer-term growth. And then just on the U.S., obviously you put a lot of energy and capital into the market, and maybe the share hasn't spread as we thought it would. But just curious, I know it's a challenging environment for But your motivation here, you need to try to drive a business because it seems like you put the right pieces of the puzzle together. The optionality in the U.S. market alone seems to be of value, but maybe that's not the case anymore. But thanks, guys, for any color there.
spk04: Okay. Hello, my house. Neil here. Because it's all about LATAM. Listen, we obviously LATAM is starting to regulate. So from our point of view, we see it very similar to the African continent. We've been there a long time. We are waiting to see what the regs mean in each of the countries, if it's Chile, Brazil, Peru, et cetera. So for us, it's, of course, an important market. And the software we use is very similar to Africa. So it all bodes well for that. And we've just got to see how the regs fall. And that's part of our journey. And Richard will address your U.S.
spk03: Hey, Mike. Yeah, so as you point out, and as it's becoming clear, the U.S. is proving tough. And while we have spent time and put investment to work in the market, similar to all of the other markets around the world, it's important to us that we are constantly evaluating and re-evaluating what we've invested in the market and ultimately how we can get to a profitable, sustainable business. And that's what we're currently doing in the U.S. It's getting a lot of attention internally. We very much on top of it and assessing these options in detail. That's what we're going through now very actively and we will update as soon as we have a response to that.
spk04: And then I just wanted to update, one of the questions was asked on our tech, on our new tech stack. So this is obviously with Apricot almost there. It means the sportsbook is simple. We've got our one sportsbook that we can use across the globe, including Africa. Jumpman has its own proprietary tech stack. Pekka Global and Africa will then own it from beginning to end. And it means that we can then deliver all our product and all our pricing, et cetera, across the globe. So we're super excited about that. Has taken long, but we're almost there now.
spk02: One quick follow-up, gentlemen. When you look at the U.S. market, I mean, does it make sense – to sort of narrow your approach in terms of focus. You know, I think some of the smaller operators that have also kind of suffered near term from share sort of focus more on states that offer both iGaming and sports betting. And I think they found that to be a profitable business. And so obviously you guys are respected operators, you have the brand, the tech. I mean, you know, how far off the mark do you feel you are at this point? Does it have to be something transformative in your mind to sort of get the business? You know, we obviously saw Penn do their deal with ESPN TVD, but maybe not the result they wanted out of the gate. But needless to say, does it have to be something transformative, Neil or Richard, or is it something you can kind of just narrow your focus on states that matter in terms of the combined LTV and then just sort of innovate and build from there? Thanks, guys.
spk03: So it's very much a work in progress. And the type of option that you're speaking to there, those are exactly the type of options that we're assessing across a broad spectrum. One of those is looking at the geographic footprint. It's called inclusive of sports betting and gaming. Another one of those potentially is just looking at the iGaming states. And as I said earlier, there's also always the possibility of M&A. So we really are going through the full range of options and going to work out what is best for the business and for the shareholders.
spk06: This concludes our question and answer session and Supergroup's results for the fourth quarter and full year 2023 conference call. Thank you for attending today's presentation. You may now disconnect.
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