Super Group sets aside €70m for US losses in 2023 as CEO rejects “grow at all costs” strategy

Super Group has revealed details of its selective US expansion plan for 2023 after global revenue declined by 2% to €1.29bn in 2022.

Topline numbers

Super Group reported €329.1m in Q4 2022 revenue following an annual decline of 3.5%.

Sports betting revenue rose by 5% to €113m thanks to growth in Africa and Europe, although online casino revenue fell by 1% to €209m.

This was due to the firm’s regulatory transition in Ontario and a decline from Asia-Pacific markets.

So-called “Other” revenue fell by 65% to €7m, driven by lower brand licence fees.

Adjusted EBITDA also decreased in Q4, down by 74% to €18m. This was due to higher staff costs and an increase in costs associated with being a public company, Super Group said.

For full-year 2022, revenue came in at a slight decline of 2% to €1.29bn while adjusted EBITDA decreased by 31.2% year-on-year to €199.2m.

The full-year downturn in revenue was attributed to the Covid impact on 2021 and the fact consumers began to feel the effects of inflation in certain markets.

Additionally, some key markets introduced stricter regulations, while Super Group also incurred costs related to becoming a public company.

Online casino made up 65% of annual net revenue, compared to 35% for sports betting.

Monthly average customers came in at 3.4 million for Q4, outperforming the monthly average for the full year by some 17.2% (2.9 million).

The company holds €255m in unrestricted cash as of 31 December 2022, which “gives it material financial firepower to engage in M&A or potentially reward investors,” according to strategic advisory business Regulus Partners.

News nugget

In January, Super Group closed the acquisition of Digital Gaming Corporation (DGC), an online sports betting and iGaming company with market access in up to 13 US states, eight of which are live today.

The analyst team at Regulus Partners pondered whether the purchase of DGC, alongside a costly corporate listing in the US last year, could open the group up to regulator scrutiny.

“Super Group is an assembly of one of the most globally diverse and long-standing online gambling operations in the world, and it is also one of the most cash generative,” wrote Regulus Partners analyst Paul Leyland.

“888 has recently demonstrated the dangers of assuming that what goes on in grey markets stays in grey markets.

“The extent to which Super Group has learned this lesson and adapted commonplace dot com practices spanning over a generation of operations to its chosen new reality is an important question with regard to revenue and reputational sustainability,” he added.

The firm estimates that 50% of Super Group revenue is derived from regulated markets.

Best quote

Super Group CEO Neal Menashe on the US: “Keep in mind this is not a grow at all costs scenario. We have been disciplined in our spending since inception and we intend to manage this expansion in the same way.”

Super Group said the US was an attractive opportunity and would invest in the market while constantly re-evaluating the spend and return being generated on a state-by-state basis.

“From an investment perspective, the US is simply creating optionality for us,” added Menashe. He said the US could add potential upside to its cash-generative global business, which is driven by the Betway sports betting brand and the Spin online casino brand.

The operator is forecasting a further €70m in losses on investing in the US during 2023.

Best question

Oppenheimer equity research MD Jed Kelly requested more colour on the firm’s US expansion strategy against the backdrop that the two market leaders (FanDuel & DraftKings) currently account for 75% of sports betting market share by GGR.

“We are not going after states just for the sake of having a large footprint,” replied COO Richard Hasson. “We are looking to have the brand live in states that make sense.”

Current trading and outlook

Super Group is guiding to full-year 2023 revenue of €1.35bn, suggesting growth of 4%. It has also predicted operational EBITDA of €220m, compared to €208.5m for 2022.