Earnings call transcript: SGHC Limited sees strong Q4 2024 growth

SGHC Limited reported impressive growth in its Q4 2024 earnings call, driven by strong performance outside the U.S. The company achieved significant year-over-year increases in both revenue and adjusted EBITDA, with notable margin expansion. With a market capitalization of $4.12 billion and an Altman Z-Score of 7.94 indicating strong financial health, SGHC’s stock showed resilience, reflecting investor confidence in its strategic direction and market leadership. According to InvestingPro, the company maintains robust financial metrics with a current ratio of 1.41, suggesting solid operational efficiency.

Key Takeaways

• SGHC’s Q4 2024 revenue ex-U.S. rose 58% year-over-year to €487 million.
• Adjusted EBITDA ex-U.S. surged 152% year-over-year to €129 million.
• The company maintained a strong cash position with €356 million and no debt.
• SGHC’s stock price increased by 3.42% to $8.25 in pre-market trading.
• The company targets over €1.9 billion in total group revenue for 2025.

Company Performance

SGHC Limited demonstrated robust growth in Q4 2024, with its revenue outside the U.S. increasing by 58% year-over-year. The company’s strategic focus on expanding its iGaming presence and strengthening its position in key markets like Africa, Europe, and Canada contributed to this performance. Despite regulatory challenges in Germany, SGHC’s selective market entry strategy has proven effective.

Financial Highlights

• Revenue ex-U.S.: €487 million (up 58% YoY)
• Adjusted EBITDA ex-U.S.: €129 million (up 152% YoY)
• Margin: Expanded to 24% from an initial guidance of 18%
• Unrestricted cash: €356 million
• No debt

Market Reaction

SGHC’s stock price experienced a 3.42% increase to $8.25 in pre-market trading, reflecting positive investor sentiment. The stock remains near its 52-week high of $8.51, with an impressive 169.76% return over the past year. InvestingPro analysis suggests the stock is currently fairly valued, trading at a high P/E multiple of 968x. For deeper insights into SGHC’s valuation and 8 additional exclusive ProTips, consider accessing the comprehensive Pro Research Report available on InvestingPro.

Outlook & Guidance

Looking ahead, SGHC projects over 10% growth in ex-U.S. revenue for 2025, reaching €1.83 billion. The company also anticipates a total group revenue exceeding €1.9 billion, with a combined margin target of 21%. SGHC plans to reduce its U.S. investment while focusing on profitable markets and exploring M&A opportunities in complementary regions.

Executive Commentary

CEO Neil Manashi emphasized the company’s strategic focus, stating, "We are super focused on the markets we are in." He also highlighted the importance of customer base sustainability, remarking, "It’s all about the sustainability of our customer base." Manashi reiterated SGHC’s disciplined marketing approach, saying, "We only deploy [marketing spend] when we see the opportunities."

Risks and Challenges

• Regulatory changes in key markets, particularly Germany, could impact growth.
• Market saturation in established regions may limit expansion opportunities.
• Macroeconomic pressures could affect consumer spending and profitability.
• The transition to an iGaming-only strategy in the U.S. presents execution risks.

Q&A

During the earnings call, analysts inquired about SGHC’s marketing spend, which the company confirmed would remain at 23% of revenue. Questions also focused on dividend policy, with SGHC announcing an increased quarterly dividend to $0.04 and the potential for a special dividend in 2025. Analysts expressed interest in the company’s M&A strategy and timeline for U.S. profitability, expected around 2027.

Full transcript - SGHC Limited (SGHC) Q4 2024:

Conference Moderator: Good day, and welcome to The Super Group’s Fourth Quarter and Full Year twenty twenty four Earnings Webcast and Conference Call. I would now like to turn the conference over to Brett Milot from ICR. Please go ahead.

Brett Milot, IR Representative, ICR: Good morning, everyone, and thank you for joining us today to discuss Supergroup’s results for the fourth quarter and full year 2024. 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 from the company’s forecast. Supergroup assumes 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 is 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 and A session, we’ll also be joined by Linda Van Wyck, Chief Financial Officer and Richard Hassan, President and Chief Commercial Officer. And now, I’d like to turn the call over to Neil.

Neil Manashi, Chief Executive Officer, Supergroup: Thank you, Brett. Good morning, everyone, and welcome to Supergroup’s fourth quarter and full year twenty twenty four earnings call. Twenty twenty four 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 products 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 U. S. Guidance targets for both total revenue and adjusted EBITDA for 2024. Total (EPA:TTEF) revenue ex The U. S.

Was an all time high for a full year, growing 18% year over year to EUR 1,660,000,000.00. Adjusted EBITDA ex The U. S. Was also a full year record, growing 53% year over year to EUR $391,000,000, a margin of 24%, well above the 18% that our initial 2024 guidance reflected. For the fourth quarter, total revenue ex The U.

S. Was another all time high, growing 58 year over year to EUR $487,000,000. Adjusted EBITDA ex The U. S. Also set a quarterly record growing 152% year over year to EUR 129,000,000, a phenomenal margin of 26%.

We set new customer records during the quarter, including a new daily record of just under 2,200,000 customers across all our products and a new high for an average unique monthly active customers of 5,300,000. And to top it all off, we closed out the quarter with our best month ever. December set new highs for monthly deposits and total revenue. 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 in 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 U. S. Long term margin target to greater than 24%. In The U.

S, 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 U. S. Revenue quarter, growing by 64 year over year to EUR14 million.

The total investment for the quarter was EUR 11,000,000, taking our full year spend to EUR 61,000,000. 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 EUR $356,000,000 and no debt. In December, we announced a special cash dividend of $0.15 per share, taking our total dividend for the year to $0.25 per share, well above our minimum annual target of $0.1 per share. This resulted in over $125,000,000 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 set 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 U. S.

Business, we expect 2025 total revenue to grow above 10% year over year to at least EUR1.830 billion and adjusted EBITDA to grow to greater than EUR435 million, a margin of 24%. In The U. S, this will be our first full year running an high gaming only footprint. And on that basis, we expect total revenue of around million and our total investment to reduce considerably from 2024 to between EUR 30,000,000 and EUR 35,000,000. When combining the ex U.

S. And U. S. Numbers, this amounts to total revenue of over EUR 1,900,000,000.0 and adjusted EBITDA of at least EUR 400,000,000, 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 twelve months have created a solid foundation for continued sustainable growth supported by a substantial and ongoing investment into marketing.

Supergroup is well positioned 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?

Conference Moderator: We will now begin the question and answer session. Our first question comes from Mike Yahi with The Benchmark Company. Please go ahead.

Mike Yahi, Analyst, The Benchmark Company: Hey, Neil, Richard, Alinda. Great quarter guys and fantastic year. Congratulations. Just two questions from us, Neil. Great to see strong guidance for 2025.

In ’24, it looked like your marketing spend was around 23% of revenue. Did we assume sort of a similar level of spend here is impacted into your ’25 guidance, Neil? I have a follow-up.

Neil Manashi, Chief Executive Officer, Supergroup: Yes, Hamik, yes. That’s right. 23%, that’s what we’re focused on moving forward. Obviously, it’s a bigger number because the 23% of a high revenue number, but we’re seeing good returns and we continue to track our marketing efficiencies that way. And that’s how you get continued growth.

Mike Yahi, Analyst, The Benchmark Company: Thanks. Also nice to see the big increase here in your quarterly dividend. I guess that speaks to confidence in your business. I’d love to hear that, your decision there. And also should we expect another special dividend you think in 2025, Neil?

Neil Manashi, Chief Executive Officer, Supergroup: Yes. So obviously, 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 the acquisitions or stuff 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 increase dividend to $0.04 a quarter.

Mike Yahi, Analyst, The Benchmark Company: Nice. Great job guys.

Neil Manashi, Chief Executive Officer, Supergroup: Thank you.

Conference Moderator: Our next question comes from Jason Tilton with Canaccord Genuity. Please go ahead.

Jason Tilton, Analyst, Canaccord Genuity: 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?

Neil Manashi, Chief Executive Officer, Supergroup: Okay. So firstly, all the growth is coming from our existing markets. And remember, we said we become laser focused on the countries we’re in. We picked our countries, if it’s on the African countries in Europe, Canada, etcetera, 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 we had a big effort in the latter part of and last year of closing down market that we do not see a path to profitability. And I think all of that is showing in our numbers moving forward.

Linda Van Wyck, Chief Financial Officer, Supergroup: 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 we invest to have that ability to increase the market share to your question in that specific market.

Jason Tilton, Analyst, Canaccord Genuity: 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 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?

Neil Manashi, Chief Executive Officer, Supergroup: Yes. And so there are opportunities, there are new markets we’ve opened up along the way. I think I’m going to do it in news. We opened up Botswana recently. So they are more 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 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 in some of the European markets,

Bernie Macchurnan, Analyst, Needham and Company: we

Neil Manashi, Chief Executive Officer, Supergroup: 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 like I’ll just mention, 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’ll rather fix it for the rest of the world.

And as you see the we’re super focused on the markets we are in. And that’s coming down to the customer numbers you can see in our systems, etcetera.

Jason Tilton, Analyst, Canaccord Genuity: Great. Thank you very much.

Conference Moderator: Our next question comes from Bernie Macchurnan with Needham and Company. Please go ahead.

Bernie Macchurnan, Analyst, Needham and Company: Great. Thanks for taking the questions. Maybe just to start, just wanted to touch on the 2025 revenue guidance. It applies a pretty big step down from what you achieved in 2024. So just maybe any comments in terms of 4Q one timers that are beneficiaries and maybe just taking a step back on guidance methodology where some of the outperformance came in 2024 versus the original guidance?

Linda Van Wyck, Chief Financial Officer, Supergroup: Sorry, Bernie, just to repeat your question. Are you making reference to a step down from guidance because it’s actually increased double digit increase in guidance for ex U. S. Business for both revenues and adjusted EBITDA. So we

Bernie Macchurnan, Analyst, Needham and Company: Sorry, I was just saying that the year over year growth is a step down in 2025 versus 2024 versus the exit rate in 4Q.

Linda Van Wyck, Chief Financial Officer, Supergroup: So you 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 EUR 400,000 million combined.

But if you look at ex U. S, it’s an increase to EUR $455,000,000 adjusted EBITDA or above that and EUR €1,830,000,000 So Buzz is double digit growth top and bottom line.

Neil Manashi, Chief Executive Officer, Supergroup: And I think from my point, it’s greater than these numbers. Obviously, this is what we want to achieve and we also could start, but maybe you 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, let’s say, still about 75% to 80% casino. So these numbers we think we can be greater than that, but we just have to put on cautious.

Bernie Macchurnan, Analyst, Needham and Company: Okay, understood. Thank you. And also just wanted to touch on Apricot. The deal closed last day, 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

Neil Manashi, Chief Executive Officer, Supergroup: So two things. Remember in Africa, the sports book in Africa was always ours, right? The PAM and then obviously they use our feeds, etcetera. 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 that million of marketing. Not saying we’re going to deploy it 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. 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 $100,000,000 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 remember in the rest of the world, we’ve got UK, Canada, Ontario, New Zealand, etcetera.

Bernie Macchurnan, Analyst, Needham and Company: Understood. And just 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?

Neil Manashi, Chief Executive Officer, Supergroup: Yes. Yes, I am sorry. Yes, I think so. And it’s about us getting that 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 then recovering more of our marketing costs as the revenue increases.

Bernie Macchurnan, Analyst, Needham and Company: Great. Thank you both.

Conference Moderator: Our next question comes from Jed Kelly with Oppenheimer. Please go ahead.

Jed Kelly, Analyst, Oppenheimer: Hey, great, great. Thanks for taking my question. Just as we kind of look at the balance above the year and the guidance, are you contemplating Alberta 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

Neil Manashi, Chief Executive Officer, Supergroup: a couple of follow ups. Okay. So we are only expecting our birthday in the first half of twenty twenty six in our numbers. And then there’s been slight bit of increase in taxes coming in The UK. And so and that’s factored in some levy there.

But it’s a small it’s a small amount. And then of course in our numbers for from the second half of twenty twenty four was some additional tax in New Zealand. So that’s included in our 2025 numbers. But then we are hoping New Zealand regulates in 2026 and we fall down the line there with all the regulators there.

Jed Kelly, Analyst, Oppenheimer: And then when we look at your cash balance, obviously you got plenty of capacity to do a dividend. How should we think about potential acquisitions and what you would be looking to acquire? Would you be targeting regions and sort of 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 sports book results have been if you had just normalized polls? Because I think you had favorable sports results last quarter, correct?

Linda Van Wyck, Chief Financial Officer, Supergroup: Hey, Jay. Richard, 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 tuck in M and A opportunities across both sports betting and gaming across the regulated landscape.

Neil Manashi, Chief Executive Officer, Supergroup: 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 there wasn’t 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 casinos, then you see the profits we delivered. And I did say on the fourth 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 entire ecosystem. And then we had $5,300,000 on average. But for me, the big number is the $2,200,000 in one day.

And that just shows where we’ve come from and used to be 1.8 before and that’s about all the customers depositing and playing in our sportsbooks and casinos.

Jed Kelly, Analyst, Oppenheimer: Yes. Okay. And then, I guess just circling back to The U. S, you guided today. I mean, the Governor of New Jersey, he’s got his he’s doing a budget address today at like 3PM.

Some are speculating he potentially could raise gaming taxes upwards to like 25%. How would you how would that view how would that change would that change your how you view up The U. S. If New Jersey does go to a higher tax rate? And would that make you potentially want to pull out of those markets just given the higher taxes?

Thanks.

Linda Van Wyck, Chief Financial Officer, Supergroup: I think, Jed, so there any proposed increase in the tax rate, we just formed part of our macro question on those markets or any other is, is there a sustainable profitable path for us in those markets? And if the highest 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, seeing good green shoots in those markets based on current tax rates and the current market. And that means for now, we continue doing what we’re doing.

Neil Manashi, Chief Executive Officer, Supergroup: But also most importantly, what we’ve done in the last year, right, is have cost efficiencies. I think we’re down like a thousand 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, etcetera. So all of that is to make an operating efficient cost base and that’s what also helps you with some of these increase in taxes.

Jed Kelly, Analyst, Oppenheimer: Thank you. Great year and great job. Thanks.

Neil Manashi, Chief Executive Officer, Supergroup: Thank you. Thank you.

Conference Moderator: This concludes our question and answer session. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

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