Super Group (SGHC) Ltd

SUPERGROUP JOINING US TODAY TO DISCUSS SUPERGROUP'S RESULTS FOR THE SECOND QUARTER OF 2025. DURING THIS CALL, SUPERGROUP MAY MAKE COMMENTS OF A FOREIGN-LOOKING NATURE THAT IS SUBJECT TO RISK, UNCERTAINTIES, AND OTHER FACTORS DISCUSSED FURTHER IN THIS SECTION OF VIOLENCE THAT WOULD CAUSE THE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE HISTORICAL RESULTS OF THE ACCOMPLISHED FORECAST. SUPERGROUP ASSUMES NO RECENT On today's call, Super Group 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. Super Group has provided reconciliation of the non-GAAP financial measures to the most comparable GAAP figures in the press release issued yesterday and available on the Investor Relations page of Super Group's website. Super Group recommends that investors refer to a supplementary presentation posted to the company's website. Today, I'm joined by Neil Munashi, Chief Executive Officer, and Linda von Weit, Chief Financial Officer. With our prepared remarks, we'll open the call for questions. And now, I'd like to turn the call over to Neil.

Thank you, Inc. Good morning, everyone, and welcome to Supergroup's second quarter 2025 earnings call. Today, we are thrilled to report another landmark quarter. Our success stems from our continued focus on product and cost. as well as momentum in key regions. We are reshaping our global presence by exiting the U.S. while growing in our full market. In addition, we are scaling our tech platforms and delivering top-tier products. Before we jump into the financial results, we'd like to share some important updates. First, we are excited to have hired Superview's first Group Chief Technology Officer. This appointment reflects our commitment to innovation, operating efficiencies, and synergies across all platforms. Second, on May the 13th, we announced the appointment of Deloitte as external auditor, a Big Four auditor that we expect Wollaston to produce through continued growth. Third, on July the 8th, we announced our intention to exit the US iGaming market. This move supports our ongoing focus on capital discipline and long-term profitability. We thank all Digital Gaming Corporation employees for their contributions over the past few years and for the professionalism throughout this transition. Turning now to our numbers for Q2, we exceeded our own expectations for both total revenue and adjusted EBITDA for Q2 2025, setting new quarterly records for SuperZoom. The group generated a record total revenue of $579 million, up 50% year-over-year. Group-adjusted EBITDA also reached an all-time high of $157 million, representing 78% year-over-year growth and a robust margin of approximately 27%. This demonstrates our significant operating leverage at scale. The exceptional quarter was driven by strong sports outcomes, smarter pricing, and continued traction of BetBuilder, our innocent parlay product, and robust casino acquisition and retention. Growth was further supported by strong wagering activity, with sports betting wages up 15% and casino wages up 24% year over year, largely due to prioritizing more profitable markets. Let's now explore our territories. Europe's revenue surged 53% year over year, with the UK leading the charge, up 83%. This incredible growth was supported by regulatory clarity, enhanced product and marketing experience, and solid contributions from both Bentway and Spin brands. Spain and Ireland also saw solid growth. In Spain, we expect the momentum to continue with the implementation of our new loyalty program, SuperClub. Germany was the primary headwind, with the revenue down due to tighter regulatory restrictions and our strategic pullback in marketing spend. Despite this, we successfully viewed Germany EBITDA year over year, reflecting our rigorous cost management and operating resilience. Moving on to Africa, we saw growth of 59% year over year, with broad-based strength across all markets except for Nigeria. Ghana stood out, growing a massive 63% year over year, thanks in part to our blessed influence of products and currency tales. South Africa grew 51% year-over-year. Botswana, which only launched in February, also delivered remarkable growth. Its contribution to Africa's revenue rose tenfold to 4.5% in the current quarter. Super Group maintains podium position in seven of the eight African markets that we are in. North America grew 23% year-over-year. Canada, not including Ontario, increased 22%. Growth was supported by an increase in the profit and strong customer retention, but the performance in June was negatively affected by gaming server consolidation. Ontario delivered 5% year-over-year growth, despite ongoing elevated marketing spend from competitors. Growth in the province, while still below expectations, was the result of better digital marketing and continued customer engagement. In the U.S., revenue was up 112% year-over-year. We will address our U.S. exit in a moment. APAC faced a challenging quarter, revenue down 6% year-over-year, but this was still an improvement from last quarter's 13% year-over-year decline. New Zealand was down 13% due to currency and broader macroeconomic headwinds. We also consolidated technology in May, which contributed negatively, but we believe we will ultimately save costs here. We are working to mitigate the impact of various marketing restrictions to position this business for long-term success. Zooming back out, we achieved the highest quarterly EBITDA in Superglue's history, underscoring our powerful operating leverage. As we scale in more markets, we are capturing greater margins on every bit of revenue, hence the record margin of 27%. This margin expansion is a direct result of our gameplay, aggressively reinvesting in high-performing markets, maintaining a disciplined cost base, improving our product and process efficiency, including the strategic implementation of AI, and driving marketing effectiveness. You can see this in our lower marketing ratio in the quarter, despite higher waging activity and customer growth. We expect these dynamics to continue into the second half of the year, reinforcing our ability to deliver super growth at scale. As part of our high-return investment philosophy, we have made the difficult but necessary decision to proactively exit the U.S. high gaming market. We are doing this despite delivering a record quarter, with EBITDA improving to a $5 million loss dollar loss in 2-2-2025 compared to nearly twice that in Q1-2025. Changing dynamics in the U.S. market, including the recent tax increase in New Jersey, led us to this decision. As part of this exit, we anticipate a one-pound restructuring cash spot of approximately $15 million, and we're actively working to reduce the cash in. We are incredibly pleased with the operating matrix performance this quarter. we hit a record $5.5 million average unique monthly active customers, representing 21% year-over-year growth. Total sports wagering was also exceptional, hitting $958 million for the quarter, up 15% year-over-year. Our sportsbook margin also improved from 12.6% in Q2 2024 to 13.9% in Q2 2025. Even more impressive, wages grew even though the Football Club World Cup was not expected to be as big a draw as last year's Euro and Copper America event. Our balance sheet remains strong. We ended the quarter with $393 million in unrestricted cash and no debt. As a reminder, we declared a regular cash dividend of $0.04 per share in June. bringing our total shareholder dividend for the first half of 2025 to $0.08 per share. In the last 12 months, we have returned $166 million to shareholders, including $20 million paid out in the past quarter, once again demonstrating our robust free cash flow generation and stringent capital allocation. Today, we are raising the full year 2025 ex-U.S. adjusted EBITDA guidance to between $500 to $510 million from our previous expectations of greater than $480 million. This $25 million midpoint uplift reflects focused cultivation of our market. Subject to the final date of U.S. closure, we expect group adjusted EBITDA of between $470 million and $480 million, inclusive of the U.S. adjusted EBITDA loss of $13 million. Looking ahead, we see several compelling drivers for future upside, including a full calendar of global sporting events and a focus on enhanced trading and pricing, increased traction from our best-builder products, calculated marketing efficiency, further strengthening casino, and a revenue mix designed to support long-term margin expansion. We're also investing in our technology platform, particularly in South Africa and Nigeria, and we're preparing to roll out Jackpot City in several markets. We're also actively implementing and seeking new opportunities in the crypto space. These initiatives aim to position us for long-term success as alternative payment methods and digital asset frameworks become more integrated into regulated gaming ecosystems. With a strong balance sheet, consistently cash flow, and in addition of a good CTR role to spearhead our technology initiatives, we remain confident that we are well positioned to reinvest in growth and pursue strategic opportunities across key areas of the business. In closing, Supergroup is powered by disciplined execution, scalable infrastructure, and a data-driven, customer-centric strategy. With strong financial, a clear plan, and an exciting second half ahead, we believe that Supergroup will be able to generate further profitable growth and deliver long-term value for our shareholders. All of this is made possible by our super employees. I want to thank everyone, all of them, for a superb Q2 achievement. I will now turn the call over to the operator to open the call up for questions. Operator?

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove your question, press star followed by two. Again, to ask a question, press star. And as a reminder, you're only allowed... If you are using a speakerphone, please remember to pick up your handset before asking a question. We'll pause here briefly as questions are registered. Our first question comes from Ryan Zigdo. with Craig Helen Capital Group.