Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Super Group (SGHC, Financial) Ltd (SGHC) reported its strongest quarter ever with total revenue ex-US hitting a record EUR408 million, reflecting 9% year-on-year growth.
- Adjusted EBITDA ex-US also set a record at EUR98 million, representing an 11% year-on-year growth and a strong margin of 24%.
- The company successfully integrated the Apricot sportsbook, contributing to operational efficiencies.
- Super Group (SGHC) Ltd (SGHC) announced its first cash dividend of $0.10 per share, paid in July, and intends to maintain or potentially increase this dividend.
- The company raised its 2023-2024 ex-US adjusted EBITDA guidance to greater than EUR300 million, representing a margin of over 19%.
Negative Points
- Super Group (SGHC) Ltd (SGHC) incurred redundancy costs of EUR3.3 million during the quarter.
- The company is exiting the US sports betting market, which will incur cash costs of shutting down the US sportsbook business estimated not to exceed EUR45 million.
- The US business has incurred an adjusted EBITDA loss of EUR39 million year-to-date across both sports and iGaming.
- Looking ahead, the company expects to incur an adjusted EBITDA loss of EUR20 million by iGaming-only operations in the US for the rest of the year.
- The competitive environment remains challenging, particularly in mature markets like the UK, Canada, and the Netherlands, with regulatory changes impacting operations.
Q & A Highlights
Q: Can you talk about where you are globally with sports betting and the impact of exiting India? Also, what are your thoughts on Alberta potentially legalizing sports betting?
A: Sports betting is performing well globally, with 80% of our business still in iGaming. We are prepared for Alberta's regulation, leveraging our experience in Ontario. We are optimizing our operations across all markets, including Canada and Africa.
Q: Can you provide an update on your capital allocation strategy, including potential acquisitions and dividend policies?
A: We are constantly evaluating acquisition opportunities in new and existing markets. We intend to maintain our dividend and will consider returning more capital to shareholders if no better opportunities arise.
Q: What should we consider for the second half of the year in terms of market openings, closings, and comps?
A: We incurred redundancy costs in Q2, which are one-offs. We expect good optimization in the second half. Our marketing budget is EUR400 million, and we are optimizing it to ensure effective returns.
Q: Can you discuss the decision to keep your iGaming presence in the US and the potential for expanding to more states?
A: We decided to maintain our iGaming operations in New Jersey and Pennsylvania after an extensive review. We will consider expanding to other states if we see appropriate opportunities and returns.
Q: How is the competitive environment evolving in mature markets like the UK, Canada, and the Netherlands?
A: The competitive environment remains challenging. We focus on marketing and product optimization. Regulatory changes impact our operations, with the UK easing up and the Netherlands becoming more stringent. Germany's onerous regulations have driven customers to the black market.
Q: Can you clarify the expected annualized investment in the US and the rationale for running two brands in iGaming?
A: We expect a maximum annual investment of EUR40 million in the US for 2025. Running two brands is not significantly more expensive and helps optimize CPAs. We aim to achieve profitability in each market.
Q: Does it make sense to buy back stock given your current trading levels and cash flow generation?
A: We considered a buyback but opted for dividends due to our relatively low float. We will continue to evaluate the best use of our cash.
Q: Can you provide a medium-term perspective on your growth opportunities and margin progression?
A: We are consistently achieving EBITDA margins over 20%. We are optimizing our marketing spend and expect to maintain or exceed this margin target.
Q: Are there opportunities to sell OSB licenses in the US?
A: We are considering selling OSB licenses on a state-by-state basis. We will update on this in our Q3 report.
Q: What are your expectations for Latin American markets?
A: We are active in markets like Mexico and are applying for licenses in Brazil. We continuously assess market opportunities and focus on sustainable profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
