Super Group (SGHC) Ltd

I would now like to turn the conference over to Brett Milot from ICR. Please go ahead.

Good morning, everyone, and thank you for joining us today to discuss Supergroup's results for the fourth quarter and full year of 2024. During this call, Supergroup made 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 from the company's forecast. Supergroup presumes no responsibility to update forward-looking statements other than 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 are a substitute for measures for financial performance prepared in accordance with GAAP. Supergroup has provided a reconciliation of these non-GAAP financial measures to the most comparable GAAP measures 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 investments into the U.S., This aligns with the annual guidance that Supergroup has provided for 2024 and 2025, and it's consistent with 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'm joined by Neil Manashi, Chief Executive Officer, and during the Q&A session, we'll also be joined by Linda Van Wick, Chief Financial Officer, and Richard Hassan, President and Chief Commercial Officer. And now, I'd like to turn the call over to Neil.

Thank you, Brent.

Good morning, everyone, and welcome to Supergroup's fourth quarter and full year 2024 earnings call. 2024 was an outstanding year for Supergroup, and we are very proud of everything that we have achieved. A year ago, we set out to refine our global footprint, increase 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 delivering meaningful shareholder returns. Turning to our numbers, we comfortably beat our ex-US guidance targets for both total revenue and adjusted EBITDA for 2024. Total revenue ex-US was an all-time high for a full year, growing 18% year-over-year to 1.66 billion euros. Adjusted EBITDA X the US was also a full-year record, growing 53% year-over-year to €391 million, a margin of 24%, well above the 18% that our initial 2024 guidance reflected. For the fourth quarter, total revenue X the US was another all-time high, growing 58% year-over-year to €487 million. Adjusted EBITDA XUS also set a quarterly record, growing 152% year-over-year to €129 million, a phenomenal margin of 26%. We set new customer records during the quarter, including... A new daily record of just under 2.2 million customers across all our products. And a new high for an average unique monthly active customers of 5.3 million. And to top it all off, we close out the quarter with our best month ever. December set new highs for monthly deposits and total revenues. 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 and 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-US long-term margin target to greater than 24%. In the US, 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 record revenue in October, which was then surpassed in both November and December. As a result, Q4 was our best ever US revenue quarter, growing by 64% year over year to 14 million euros. The total investment for the quarter was 11 million euros, taking our full year spend to 61 million euros. With our focus now solely on high gaming and the business developing in line with target KPIs, 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 million and no debt. In December, we announced a special cash dividend of 15 cents per share, taking our total dividend for the year to 25 cents per share, well above our minimum annual target of 10 cents per share. This resulted in over $125 million being paid to our shareholders. Looking ahead, we are pleased to announce that we secured board approval to 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-US business, we expect 2025 total revenue to grow above 10% year-over-year to at least €1.830 billion and adjusted EBITDA to grow to greater than €435 million, 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 million euros and our total investment to reduce considerably from 2024 to between 30 and 35 million euros. When combining the ex-U.S. and U.S. numbers, this amounts to total revenue of over 1.9 billion euros, and adjusted EBITDA of at least 400 million euros, 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 12 months have created a solid foundation for continued sustainable growth supported by a substantial and ongoing investment into marketing. Super Group is well-possessioned 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 bright. 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. To ask a question, you may press star then 1 on your telephone keypad. If you were 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.

Our first question comes from Mike Yackey with the Benchmark Company.

Please go ahead.

Hey, Neil, Richard, Alinda, great quarter, guys, and fantastic year. Congratulations. Just two questions from us, Neil. Great to see strong guidance for 25. In 24, it looked like your marketing spend was around 23% of revenue. Did we assume sort of a similar level of spend here as in factored into your 25 guidance, Neil? I have a follow-up.

Yes, that's right. 23%, that's what we're budgeted for moving forward. Obviously, it's a bigger number because the 23% of a higher revenue number, but we've seen good return and we continue to track our marketing efficiencies that way. And that's how you get continued growth.

Also nice to see the big increase here in your quarterly dividend. I guess that speaks to confidence in business. Love to hear that, your decision there. And also, should we expect another special dividend, you think, in 25, Neil?

Yes. So obviously, you know, we go back and forth on the dividends. 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. So if we return $0.25 last year, our aim would be to try and exceed that. But if acquisitions or stuff come up, 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. Good luck. Thank you.

Our next question comes from Jason Tilchen 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've picked out countries, whether it's on African countries, in Europe, Canada, et cetera, 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're opening, it's all about how we can get sustained profitability in those markets. And, you know, 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, Jason, just to add there, that is also the focus on what Neil just made reference to is the marketing spend. We stay at a higher percentage so that 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 additional markets in Africa that you see. Can 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?

Yeah. So there are opportunities. There are new markets we've opened up along the way. I think in the news we opened up Botswana recently. So they are all coming. It's all about each market, and it's the software 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 there's no 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 the one that's probably the one that we 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 I'll just mention, you know, 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'd rather fix it for the rest of the world. And as you see, we're super focused on the market we are in. And that's coming down to the customer numbers you can see in our systems, et cetera.

Great. Thank you very much.

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

Great. Thanks for taking the questions. Maybe just to start, just want to touch on the 2025 revenue guidance. You know, it probably is a pretty big step down from what you achieved in 2024. So just maybe any comments in terms of, you know, 4Q one-timers that are beneficiaries and And maybe just taking a step back on guidance methodology where some of the outperformance came in 24 versus the original guidance.

Sorry, Bernie. Just to repeat your question, are you making reference to a step down from guidance because it's actually an increase, double-digit increase in guidance for XUX business for both revenue and adjusted EBITDA? So we...

Sorry, I was just saying that the year-over-year growth is a step down in 25 versus 24, or versus the exit rate in 4Q.

So you – yeah, 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 – thousand euros 400 million euros combined um but if you look at x years it's a increase to 435 million adjusted ebitda or above that and 1.83 billion euros so both is double digit growth top and bottom line

And I think from my point, you know, it's greater than these numbers. Obviously, this is what we want to achieve. And we also could start, but remember, you'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 still about 75 to 80% casino. So these numbers, we think we could be greater than that, but we just have to put on caution. That's all.

Okay, understood. Thank you. And also, just want to touch on Apricot. The deal closed last May, 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, I know. So two things. Remember in Africa, the sports book in Africa was always ours, right? The PAM and then obviously they use our feeds, et cetera. 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 budgets, right? So we've got like 440 million euros 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 for us is key. That, you know, 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 million of profit, but that's not really what we have. We want a sustainable long-term business, and it's all about the sustainability of our customer base, which is what we're seeing in the enhanced features that our products offer, especially in Africa, but remembering the rest of the world. We've got UK, Canada, Ontario, New Zealand, etc.,

Understood. And this last one for me, any update? Obviously, the U.S. is now included in guidance. Any updates in terms of the strategy? And is 2027 still the right way to think about the first profitable year?

Yes. Yes, I am. Sorry, it's Neil here.

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

Great. Thank you both.

Again, if you have a question, please press star, then one.

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 and the guidance, you know, are you contemplating Alberta, you know, 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. So we're only expecting Alberta in the first half of 2026 in our numbers. And then, you know, there's been a slight bit of increase in taxes coming in the U.K., And that's factored in some levy there. It's a small amount. And then, of course, in our numbers from the second half of 2024 was some additional tax in New Zealand. So that's included in our 2025 numbers. But then we hope 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've got plenty of capacity to do a dividend. How should we think about, you know, potential acquisitions and what you would be looking to acquire? Would you be targeting, you know, regions and sort of, you know, 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 sportsbook be? results had been if you had just normalized holes? Because I think you had favorable sports results last quarter, correct? Hey, Jim.

Richard here. 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 tucking M&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 margin in quarter four, but then you had that plus casino both coming together. So 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 delivered. And I did say on the call that December was our highest ever month of deposits customers in. And that for me is all about our returning customers into our system and into our ecosystem. And then we had 5.3 million on average. But for me, the big number is the 2.2 million in one day. And that just shows where we've come from. It used to be 1.8 before, and that's about all the customers depositing and playing in our sportsbooks and casinos.

Yeah, okay. And then, you know, I guess just circling back to the U.S., you guided today. I mean, the governor of New Jersey, you know, he's got his, you know, he's doing a budget address today at like 3 p.m., Some are speculating he potentially could raise gaming taxes upwards to like 25%. How would that change how you view the U.S. if New Jersey does go to a higher tax rate? Would that make you potentially want to pull out of those markets just given the higher taxes? Thanks.

I think, Jed, any – So any proposed increase in the tax rate would just form part of our macro question on those markets or any other. 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. But for now, we continue doing what we're doing. They're seeing good green shoots in those markets based on current tax rates in the current market. And that means for now we continue doing what we're doing.

But, of course, most importantly, what we've done in the last year, right, is 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's all about cost efficiencies. It's all about the systems we are putting in that can manage more as we increase volumes. We don't have to increase staff counts, et cetera. So all of that is to make an 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.