SGHC Limited, a prominent player in the global online gaming industry, reported robust financial results for the third quarter of 2024. The company achieved significant growth in its ex-U.S. operations, with revenues increasing by 13% year-over-year to €395 million. Adjusted EBITDA also saw a substantial rise, growing 52% to €95 million, as the company maintained a strong margin of 24% for two consecutive quarters. Following the earnings announcement, SGHC's stock showed a slight uptick in aftermarket trading, reflecting investor confidence in its strategic direction and financial stability.
Key Takeaways
- Ex-U.S. revenues grew by 13% year-over-year in Q3 2024.
- Adjusted EBITDA increased by 52% year-over-year, achieving a 24% margin.
- SGHC Limited ended the quarter with €297 million in unrestricted cash and no debt.
- The company is focusing on expanding its presence in African markets.
- SGHC's stock price rose slightly in aftermarket trading, up 0.84%.
Company Performance
SGHC Limited's performance in Q3 2024 was marked by strong growth in its international markets, particularly outside the U.S. The company has successfully maintained a 24% margin, exceeding its target of 20%, thanks to its strategic focus on operational efficiencies and market expansion. SGHC's decision to shut down its U.S. sportsbook operations has allowed it to concentrate resources on more profitable ventures, such as its growing presence in Africa and Canada.
Financial Highlights
- Revenue: €395 million, up 13% year-over-year
- Adjusted EBITDA: €95 million, up 52% year-over-year
- Margin: 24%, consistent with the previous quarter
- Cash Position: €297 million in unrestricted cash, with no debt
Market Reaction
SGHC Limited's stock experienced a minor increase in aftermarket trading, rising by 0.84% to a price of $6.02. This movement reflects positive investor sentiment following the company's strong financial performance and strategic initiatives, despite the absence of significant earnings surprises. The stock remains within its 52-week range, with a high of $7.12 and a low of $2.63, indicating stable investor confidence.
Outlook & Guidance
Looking ahead, SGHC Limited has revised its ex-U.S. Adjusted EBITDA guidance to exceed €345 million, underscoring its confidence in continued growth. The company is targeting a margin of 22-24% in 2025 and is exploring further expansion in African markets, where it sees significant potential. SGHC is taking a cautious approach to the U.S. market, focusing on profitability rather than aggressive expansion.
Executive Commentary
CEO Neil Manashi expressed optimism about the company's trajectory, stating, "Quarter 3 was a super quarter. We are seeing the operating leverage in our business kick in." He emphasized the strength of SGHC's dedicated team, which has been instrumental in achieving these results.
Q&A
During the earnings call, analysts inquired about SGHC's strategy in the African market and its potential for growth. The company highlighted its strong competitive position, with podium placements in five out of seven African markets. Questions also addressed the company's cautious approach in the U.S. and its plans for Latin America, where SGHC is exploring new opportunities.
Risks and Challenges
- Regulatory challenges in emerging markets could impact expansion plans.
- Increased competition from global gaming operators may affect market share.
- Economic volatility in key markets could influence consumer spending.
- Dependence on technology infrastructure poses operational risks.
- Currency fluctuations may impact financial performance in international markets.
Full transcript - SGHC Limited (SGHC) Q3 2024:
Operator/Moderator: Mr. Milat, you may begin.
Investor Relations Representative, Supergroup: Thank you. Good morning, everyone, and thank you for joining us today to discuss Supergroup's results for the Q3 of 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 or the company's forecast. Sue Group assumes no responsibility to update forward looking statements other than required by law. On today's call, Sue 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. Sue Group has provided a reconciliation of the non GAAP financial measures to the most comparable GAAP figures in the press release issued earlier today and available on the Investor Relations page of Sue Group's website. In addition, Supergroup will speak to the financial results and metrics in 2 parts, highlighting Supergroup's profitable and cash generative global business separately from its investments into the U. S. This aligns with the annual guidance Supergroup has provided for 2024 and is consistent with both how Supergroup views its business internally and how Super Group will report going forward.
2, we recommend that investors refer to supplemental presentation posted on the 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. Now, I'll turn the call over to Neil.
Neil Manashi, Chief Executive Officer, Supergroup: Thank you. Good morning, everyone, and welcome to Supergroup's Q3 2024 Earnings Call. Quarter 3 was a super quarter. Total (EPA:TTEF) revenues ex the U. S.
Was an all time high for a 3rd quarter, growing 13% year over year to €395,000,000 Adjusted EBITDA ex the U. S. Also set the 3rd quarter record, growing 52% year over year to €95,000,000 We are successfully executing our strategy of growing key markets, while realizing cost efficiencies with a particular focus on optimizing our OpEx and marketing. These efforts are clearly reflected in our margin, 24% for the Q2 in a row, and that's well ahead of our 20% target. Our casino business is experiencing super growth.
Casino (EPA:CASP) represents 83% of overall net revenue for the quarter. We expect continued growth as we utilize our decades of expertise to expand in key markets. This includes rolling out our spin brand into existing markets, which aligns with our multi brand strategy. When it comes to key markets, we'd like to highlight the confidence of Africa where we see success and significant opportunity. For the 2nd quarter running, Africa provides the largest portion of our revenue.
We have operated in Africa for more than a decade and have built a super strong competitive moat. Our footprint spans 7 locally regulated markets and we hold podium positions in 5 of them. And there's more to come. We have a healthy pipeline of new markets that will be viable in the next 12 months. Beyond that, the continent is expected to grow by 1,000,000,000 people, reaching 2,500,000,000 people by 2,050.
We are well positioned to capitalize on this growth with our purposeful platform, local marketing expertise, fully dedicated teams and deep relationships with key stakeholders. We expect to perform very well in this growing market. 2nd to Africa is Canada. We are experiencing strong year over year growth across both sports and casino. And I want to note that Chatbots City continues to be a leading brand across the entire country.
While we plan to continue growing our presence in Africa and Canada, the U. S. Has proven to be trickier. We've completed the shutdown of our U. S.
Sports book operation. I'm pleased that the associated costs came in around €9,000,000 less than our previous estimate of €45,000,000 We continue to assess our iGaming business in New Jersey and Pennsylvania. We are closely tracking KPIs. And if we can't reach our goals, we will take decisive action. As we've always said, in order to continue operating in the U.
S. Or any market, we must be able to see a sustainable path to profitability. We expect our quarter 4 investment to be less than what we invested in quarter 3, and we are pleased to be seeing some green shoots. Moving on to the balance sheet. Our financial position is robust, and we finished the quarter with unrestricted cash of €297,000,000 and no debt.
This is after having paid the $0.10 per share initial dividend in July. We are exploring ways to return cash to our shareholders, including our plan to initiate a regular dividend of $0.025 per quarter to begin in the Q1 of 2025. In the meantime, an option we are considering in the near term is a further special dividend before the end of the year, a possibility we intend to discuss with our Board at our next meeting at the beginning of December and which may be assessed each year subject to performance and market conditions. Finally, given the strong performance to date, in particular, a spectacular October and assuming normalized sports results for November December, we are revising our ex U. S.
Adjusted EBITDA guidance to exceed €345,000,000 representing a margin of 22%. We are seeing the operating leverage in our business kick in and we are really pleased to be above our long term target margin of over 20%. We look forward to capitalizing on our momentum and closing out a super year for Supergroup. I'll now turn the call over to the operator to open the call up for questions. Operator?
Operator/Moderator: We will now begin the question and answer session. Our first question comes from Jed Kelly of Oppenheimer. Please go ahead.
Jed Kelly, Analyst, Oppenheimer: Thanks for taking my questions. Just following up on your just last comments, can you talk about sports results globally, how they're trending into 4Q? And then can you just give a view on how Supergroup is sort of viewing Latin America? And then I have a follow-up.
Neil Manashi, Chief Executive Officer, Supergroup: Okay. Hi, Jed. It's Neil here. So sports results, yes, October were really good. And for us, and I keep telling everyone, when all the favorites win, that's not good for us.
But we've had good results there. September, funnily enough, which was obviously the end of quarter 3, didn't have such good results. So we produced a really good Q3 without even having those. So for us is very important for us is that even with the sports, we are counteracting that with our casino, which now makes up 83% of the revenue.
Richard Hassan, President and Chief Commercial Officer, Supergroup: Hi, Jed. Richard here to come to your question on Latin America. As you know, we are live there in a number of markets at present. Brazil is obviously being spoken about a lot across the industry at the moment. That's a market where we are not currently proceeding in line with all markets that we look at.
We want to ensure that we can identify sustainable path to profitability once we go live. And as Neil mentioned earlier, we're currently focused on optimizing our existing footprint and building on our current revenues.
Jed Kelly, Analyst, Oppenheimer: And then just as a follow-up, you're obviously generating a fair bit of free cash flow. Can you just talk about how we should view your capital returns policy, another dividend or strategic M and A? Can you just give us an update there? Thank you.
Linda Van Wyck, Chief Financial Officer, Supergroup: Hi, Jade. Salinda here. Neil mentioned now that we're definitely considering a supplementary or special dividend into the last part of quarter 4 this year. And for the other uses of cash, we still maintain our strategy just to make sure we, a, invest into our technology and finalizing that project, returning money in the way of marketing spend. That's why, especially quarter 4, where sports is back, we're spending a bit more marketing.
And on M and A, I will let Richard also confirm. But there's always assessments being done all the time, but nothing firm for quarter 4.
Richard Hassan, President and Chief Commercial Officer, Supergroup: Yes. Jim, nothing that's worth mentioning on this call, but doesn't mean that there's constantly looking at potential strategic opportunities across the markets that make sense for us.
Operator/Moderator: Our next question comes from Bernie MacTiernan from Needham. Please go ahead.
Bernie MacTiernan, Analyst, Needham: Great. Thanks for taking the questions. Maybe just to start, Neil, you mentioned October really strong month, but it seems like sport outcome might have gone the wrong way. So just can you just detail what you're seeing exactly, whether it's on the cost efficiency side or just better kind of like engagement and retention with your customers?
Neil Manashi, Chief Executive Officer, Supergroup: So yes, I mean, obviously, September sports wasn't as good. But October that we had great volumes in our system, our customer base, etcetera. The same happened in October, so really was a spectacular month on all fronts, customer numbers, volumes, revenue, etcetera. So we're seeing it all come through. We're seeing the focus on the efficiencies in our marketing, the operating efficiencies within in our different companies coming together.
So it's all coming together really well. And also the focus, we can't be in every country. We're closing the countries we're in and the continents we are on and we are full on into those and becoming the best that we can in the markets in which we operate.
Bernie MacTiernan, Analyst, Needham: Understood. And then just thinking about the top line still, would love to just get any color in terms of what year to date growth has been excluding India. And the reason why I ask is because the growth guide for this year about 10%, there's some FX headwinds in there, you're comping the India shutdown. So as we start to sharpen our pencils on 25% more, I think there's some reasons why reported revenue could accelerate next year, but accelerate next year, but would love to get your thoughts.
Neil Manashi, Chief Executive Officer, Supergroup: Okay. So it's Neil again. Just to remind everyone, we shut we closed down India last the end of September last year. So you're under them right. So ex India, we're up 20
Bernie MacTiernan, Analyst, Needham: 4%. Wow. Okay. Really strong number. And then just 2 more for me.
Kind of same thing longer term, just all the cost efficiencies that are coming through, margins better than expected. Longer term margins is you mentioned the longer term target of 20% plus, but should we be thinking how much more of a plus should we be thinking about? And maybe how quickly can you get there?
Linda Van Wyck, Chief Financial Officer, Supergroup: Hi, Bernie, Alinda here. Like we've reported now, the 2 consecutive quarters, we had over 24% margin. The operating efficiencies is definitely now drilling down right to the bottom, which is a very good result for the 18 months we've been focusing on that. 2nd to that, we are really looking into our marketing efficiencies now. We're really unpacking every campaign and marketing investment to make sure there's a great return.
So on the long term, we when we put out that 20% target, we're happy to beat it. But now we feel comfortable that we probably will lift that to 22% to 24% during 2025% as a standard.
Bernie MacTiernan, Analyst, Needham: Got it. Perfect. That's great. And then lastly, just one quick modeling question. Should any of the U.
S. Shutdown costs bleed into the Q4? And also, just any color on in the reconciliation in the press release, there's U. S. Shutdown costs and then also just other market closures, just what that other market closure was, the €5,000,000?
Thank you.
Linda Van Wyck, Chief Financial Officer, Supergroup: Bernie, it's Alain Day. Happy to report there's nothing not no more to report in quarter 4. That's obviously also why there's an impact on the overall profitability that you see in the press release. But sports book closures now being accounted for in quarter 32, so nothing in quarter 4. And then the other market closure is a spillover from India that we just had to report on.
It was a processor investment that we just had to embed. But it is just based on last year's closure of India.
Bernie MacTiernan, Analyst, Needham: Understood. Thanks for taking the questions.
Operator/Moderator: Our next question comes from Michael Graham of Canaccord. Please go ahead.
Michael Graham, Analyst, Canaccord: Thank you and congrats on the improved profitability outlook. I wanted to ask about Africa. You have a podium position in 5 of the 7 markets that you're live in. And just wondering if you could talk about the difference between those top 5 versus the other 2 and just maybe share a little bit about durable you think your position is in Africa?
Neil Manashi, Chief Executive Officer, Supergroup: Yes. Cai, it's Anil here. So basically, as I said, we've been going for 10 years with a dedicated team of over 1,000 people. The brand, the Betfair brand in particular resonates particularly well in Africa, maybe because of all the branding we do on the football, etcetera. Remember football, soccer is the number one sport there.
So in all the podium countries, we I mean, in the 5 countries there, we're in podium positions. And South Africa, Zambia, Ghana, etcetera, we really, really performing well. I think the other ones, we aren't as performing as well as we should, but that's what we're on it. And we've got a pipeline of a few others to come. But again, we have to set each one and make sure we can get it.
And very exciting for us is in most of these countries where they offer online casino, we be rolling out jackpot cities. We rolled it out already in South Africa and we're going to be rolling it out in Ghana, etcetera. And that's been a whole such getting the double it's the spin approach and the Betway approach for Supergroup in these markets. So it's there. We are got big marketing spends there.
We've got big revenue there. So we are very comfortable with the growth opportunities that we see coming out of that continent.
Michael Graham, Analyst, Canaccord: And then I'd love to just get a little more color on iGaming in the U. S. Just maybe talk about the long term view on how you're thinking about online casino for you in the U. S?
Neil Manashi, Chief Executive Officer, Supergroup: Okay. Hi, it's Anil here. So yes, we tried sports. It didn't work. But casino, we're really good at.
So we are in New Jersey and Pennsylvania. We are seeing good revenue increase. We're seeing good green shoots. Again, we're not chasing revenue for revenue and never to make a profit. So we have to make sure we can get to the revenue target that we've set the business, which so far they are meeting.
And then we want to be able to turn this into a profitable business. But if we feel that it gets too far away from being able to achieve profitability, then we have to change stance. But remember, the casino business is easier for us and this is what our bread and butter is across the world. So, America is no different.
Operator/Moderator: Okay. Thank you, Neil. The next question comes from Mike Hickey of The Benchmark Company. Please go ahead.
Mike Hickey, Analyst, The Benchmark Company: Hey, Neil, Rich, Orlando. Good morning or afternoon for you guys or evening. Congrats on a great quarter. Fantastic, great year too. Kudos to all of you.
Just following up maybe on Michael's question on the U. S. Market. Neil, appreciate the color there. You've obviously sized up your losses here considerably exiting sports betting.
On the iGaming front, I mean, it's early days here. Obviously, 'twenty five is going to be interesting. Just getting a better sense your path to profitability, you said you're hitting your revenue targets into 'twenty 5. And thinking about sort of the political atmosphere and the change here, how you think that could impact potentially high gaming regulation in the U. S.
In 2025?
Neil Manashi, Chief Executive Officer, Supergroup: Yes. So from our point of view for in 2025, we are not aiming to invest more money than you've seen in the last two quarters, right? But what we have to see is can we grow the revenue, which it has been growing and make sure we do see a path to profitability. Listen, with the new government comes new regulations or not changing existing regulations. So, hopefully, the new Republican government sees that and understands that if you over tax, you get a worse result, right, which, for example, as you know, we even seen in Germany, they basically just created a black market in Germany and didn't regulate everyone out of business.
So from our point of view, let's see how it goes. I think they're probably business, so hopefully that should be good.
Mike Hickey, Analyst, The Benchmark Company: Looking, I guess, north here in Canada, you've got a great share position too. Can you just talk about your success in Canada, your market share position and the plus or minus of Alberta regulating here?
Neil Manashi, Chief Executive Officer, Supergroup: Okay. So Canada really compared year on year growth overall has been very good. Ontario is better. It's not where we need it to be, but we are still in a good position there. So we still have a decent share of the market.
Obviously, we learned the lessons on Ontario from going to the regulated regime. So all the lessons we learned there will come into Alberta. Alberta looking towards the end of 2025, maybe 2026. So we are all ready for that. Our brands resonate there.
Remember, we've got Betway, we've got Chatbot City, Spin. So we've learned, we know what we need to do. And I mean probably in Ontario, probably relatively we're under indexing in marketing wise relative to some of the bigger competitors, but we are now looking at that fixing that. And I think the rest of Canada, we've really dug deep and we've really sorted out where we were losing traffic, where people were cyber squatting on our brands, especially Chatbot City. We've had lots of dealings with Google (NASDAQ:GOOGL).
We sorted that out and we're sorting out every little bit along the way. And I think it's showing in our numbers. And I think the distraction of too many countries means that when we're all in on these countries and stuff, we can focus and get it right, which is what we're doing.
Mike Hickey, Analyst, The Benchmark Company: Yes. I guess moving to Africa, you touched on it a bit. Obviously, you got a huge head start. You've got a number one share position on the continent. Can you just frame for us maybe the market opportunity you see in Africa in terms of competition?
It seems like some of the more predominant online players aren't in Africa yet. Curious why? But obviously on your market share, I know you're number 1. Just curious how consolidated that share is, if you have a number in terms of what your total market share is in that market?
Neil Manashi, Chief Executive Officer, Supergroup: Yes. We don't have market share, but what I can say on that map we show, we're in podium position. So if you take the whole continent, we definitely are. Remember, we only opened in 7 of the countries, right? There's lots of countries we're not, which we're coming to.
I think it's been a long time coming. We've been there for 10 years. And remember, the population is exploding. And on top of that, the use of mobile phones is exploding. And we have had the micro bets.
We've got high value customers, small, small customers. So I think it's the product, it's the brand, it's everything. And as they open up more online casino, that obviously helps us tremendously. And we know the product from Europe, we know the from all the other markets we operate in. And I think our key here is that it's a great brand, great technology and a great unbelievable dedicated team that literally every ounce of every country that we're in, we are working towards making that product better.
And I think that's where we've got a huge head start. It's our marketing budget is our global marketing budget has the brand in it, which can obviously help resonate and then we can counter that with all the country marketing that we do. So now the question is which other markets we go in, is the regulation fair in those markets, how the tax rates are. So that's why we assess them. So we've got a team that can just do that and that's why as a ring fenced business, Africa is ring fenced.
It's on its own tech, obviously uses our feeds and certain stuff that we give them, but it can operate and grow by itself and that I think is the key. And the beautiful part is it's got the Betway brand, the Chatmord City brand, etcetera. So that's why we see good growth there. Do you
Mike Hickey, Analyst, The Benchmark Company: have a sense of how big the TAM is or potential TAM is
Bernie MacTiernan, Analyst, Needham: in Africa and what's
Mike Hickey, Analyst, The Benchmark Company: been the sort of market growth rate or
Neil Manashi, Chief Executive Officer, Supergroup: a little bit of the TAM is about 5,000,000,000 dollars And it's obviously been growing and growing. So again, as they open up more of the regulations, I mean, the countries like Rwanda, etcetera, that haven't even got the regs there. So there's Angola, there's lots of them and then there's Senegal, which has already and we're not even in. So there are lots of them that we can go to, but we got to find the one. Remember, everyone that we go to, Betway is already there.
It had a presence in the brand. So from us and of course, the most important part is the population. It really is a growing population and it's got access to the Internet through mobile devices. So we're super bullish on this.
Mike Hickey, Analyst, The Benchmark Company: The regulatory piece, like how do you sort of give comfort to U. S. Investors that the regulatory situation in Africa is how do you get comfortable there? I guess, Neil, would be the question. So,
Neil Manashi, Chief Executive Officer, Supergroup: I mean, we get this question all the time. We work with the regulators. We work with all the government bodies. We help draft the regulation. Actually, the question should be the other way is what happened in Germany?
What happened in the Netherlands? What happened in Belgium? They've gone the other way. Even what happens to the tax rates in New York. So we understand this, we work with them and that's the risk we have as a business all over the world.
But finally, I think in Africa, because we're working with them and we pay all the taxes in these markets. In some of these markets, we're one of the biggest taxpayers. And I think when you're doing that and we're giving our CSR, our BW cares back into the local communities, we are working with them and showing that we are helping.
Mike Hickey, Analyst, The Benchmark Company: Do you have any sense of when you think you'll see some of the bigger online players like Flutter, Bet365, some of the global players in online gaming start to look at the maybe they're there already. I don't think they are, but do you have a sense of when they might be coming in?
Neil Manashi, Chief Executive Officer, Supergroup: Yes. Okay. And the truth is none of them are really there at all. Maybe they're all focusing on Brazil. They're
Richard Hassan, President and Chief Commercial Officer, Supergroup: basically focusing
Neil Manashi, Chief Executive Officer, Supergroup: on Brazil, which is why we're not. So I think we picked our battle and that's what we do. I think the only one is there who's really small is 888, but there's no one else there really. Okay. It's all local operators that yes, it's local operators we find ourselves up against and different ones in different countries.
Mike Hickey, Analyst, The Benchmark Company: Okay. Appreciate the color guys. Thank you. Good luck.
Neil Manashi, Chief Executive Officer, Supergroup: Thank you.
Operator/Moderator: This concludes the question and answer session. The conference is adjourned. Thank you for attending today's presentation. You may now disconnect.
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