Super Group (SGHC) 7 Aug 24 2024 Q2 Earnings call transcript

Super Group's Second Quarter 2024 Earnings Call

In a recent earnings call, Super Group, a leading global gaming company, reported exceptional performance for the second quarter of 2024, achieving record revenue and EBITDA ex-U.S. numbers. The call, led by CEO Neal Menashe, provided insights into the company's strategic moves, financial health, and future growth prospects.

Record-Breaking Performance and Operational Efficiencies

Super Group's Q2 performance was marked by a quarterly record of EUR 408 million in revenue ex-U.S., representing a 9% year-on-year growth. Adjusted EBITDA ex-U.S. also hit a record of EUR 98 million, with a strong margin of 24%. The company has been focusing on operational efficiencies, including the successful integration of Apricot sportsbook, which has contributed to this impressive growth. Despite incurring redundancy costs of EUR 3.3 million, Super Group's strategy of nimble and decisive decision-making is paying off, setting the stage for consistent EBITDA margins of over 20%.

Strategic Exit from U.S. Sports Betting Market

One of the most significant developments discussed during the call was Super Group's decision to exit the U.S. sports betting market. The company plans to divest from the market entirely, maintaining a high gaming presence in New Jersey and Pennsylvania, where it will operate two brands, including Jackpot City. This move aligns with Super Group's focus on high-gaming markets, as about 80% of its revenue is generated from high gaming. The company estimates the cash costs of shutting down its U.S. sportsbook business will not exceed EUR 45 million, a figure easily manageable within its existing financial resources.

Capital Allocation and Future Growth

Super Group's capital allocation strategy is focused on optimizing its footprint and investing in markets that generate the highest returns. The company is currently assessing new markets in Africa, while eliminating those with no profitability. It is also looking at opportunities for acquisitions across markets, with a focus on iGaming in the U.S., where it expects to incur an adjusted EBITDA loss of EUR 20 million for the rest of the year. The company has recently announced two new brand marketing deals, including Betway's partnership with South Africa's Premier Soccer League and Manchester City, solidifying Betway's global recognition. Super Group's marketing strategy is a key driver of growth, with 23% of net revenue spent on marketing this quarter, higher than the industry average.

Competitive Environment and Regulatory Landscape

The competitive environment in the gaming industry is a constant concern for Super Group, with regulatory changes in markets like the U.K., Canada, and the Netherlands impacting the company's operations. Super Group's strategy of focusing on high-gaming markets and optimizing its marketing spend has allowed it to navigate these challenges effectively. The company is also exploring opportunities in markets like Mexico and Brazil, carefully assessing the regulatory landscape to ensure sustainable profitability.

Looking Ahead

Super Group's strong performance in the first half of 2024, coupled with its strategic moves and future growth prospects, bodes well for the company's future. With a focus on operational efficiencies, strategic exits, and smart capital allocation, Super Group is poised to maintain its competitive edge in the global gaming market. Investors and analysts will be closely watching the company's performance in the second half of the year, particularly in light of its plans for the U.S. market and its expansion into new markets.