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Betway and Spin operator Super Group grew its revenue by just 1% year-on-year in Q1 2023 as significant losses in several regions were offset by big gains in others.

Topline numbers

Total group revenue increased just 1.2% year-on-year to €338.5m, as declines in North America, Latam and Asia-Pacific were slightly more than offset by gains in Africa, the Middle East and Europe.

Total revenue for the Betway brand grew by 6% to €198.3m, while the group’s Spin online casino brand saw revenue decline by 4.9% to €140.2m.

Adjusted EBITDA for the quarter was €30.6m, down 50.2% from €61.5m in the prior year.

The business posted an overall loss for the period of €1.9m, down from a €163.2m loss in Q1 2022, which was negatively impacted by share listing expenses of €126.3m.

News nugget

The huge swings in Super Group’s diverse global operating regions – both positive and negative – were undoubtedly the news of the day, and raised questions about the future of the firm’s regional focus.

In a note sent to investors, Regulus Partners suggested that the 13% reduction in North American revenue was caused mostly by growing pains in Ontario – where Betway was a big name brand prior to the introduction of the regulated market, and where Super Group has since had to adapt to domestic regulation in a “significantly more competitive market.”

In the US, meanwhile, the group generated a miserly €6.5m in revenue (alongside €16.6m in EBITDA losses), despite having a presence in eight states, showing “just how little is being made per state and potentially how structurally inefficient the cost base of a tier-three (or lower) US operator is,” according to Regulus.

The group still expects to invest €70m into the US this year and €80m next year, which it described as “quite normal and exciting,” as well as “very manageable for us and easily funded by our existing cash flow.”

“This sort of expansion, on a market-by-market, state-by-state basis, is how we’ve grown this business for more than 20 years,” said COO Richard Hasson on today’s Q1 earnings call.

The operator is set to launch its Spin online casino brand in New Jersey and Pennsylvania later this year, which Regulus suggested may help it generate a return on its US investments.

While revenue dipped in North America, a 35% uplift in Africa and the Middle East saw Super Group flex its international muscles as “the only large listed gambling business with an African business of a scale which can shape group results.”

Growth in those regions does not come without its risks, however, with Regulus pointing to the fate of 888 in the Middle East, where the result of compliance failures saw CEO Itai Pazner forced out of the business, sending shares in the company into a downward spiral.

Elsewhere, European revenue was up by 71% to €55.8m, as the Spin brand in particular skyrocketed from just €2.5m in Q1 2022 to €21.3m in the latest quarter.

All things considered, Regulus said the performance “demonstrates the powerful portfolio effect of a global presence and long operational experience,” however adding the caveat that “outside of Africa the group has tended to be on the wrong side of regulatory change.”

The introduction of Ontario’s regulated market, as well as changing legislation in Germany and the Netherlands in the immediate aftermath of Super Group’s public listing, all conspired to plunge the operator into a world of regulatory difficulties.

Now, Regulus concluded, “the extent to which Super Group can generate greater secular growth from emerging markets greater than the sum of regulatory upheavals and mounting costs is an open question that is likely to be decided by the quality of operations management.”

Best quote

“Our US business is developing according to plan. It’s a marathon, not a sprint, and we’ve got the legs for it.”

– Super Group CEO Neal Menashe on adopting a long-term strategy in the US

Best question

Jed Kelly of Oppenheimer & Co. asked management for further clarity on how the business planned to compete with market leaders across several different US states.

“How do you think about competing against the players that can actually leverage brand advertising and amortise that span across the different states?” he asked.

In response, CEO Neal Menashe suggested that Super Group’s power lies in the global recognition of its Betway brand.

“The way we look at it is applying the same toolkit that we have applied to other markets across the world,” he said.

“We have the ability to spend for global eyeballs and actually amortise that spend across the world – not just in the US. Then of course similarly to other markets, we complement that global spend with very localised marketing.”

Current trading and outlook

The business has reaffirmed its previously issued earnings guidance of €1.35bn in full-year 2023 revenue, suggesting annual growth of 4%, as well as operational EBITDA of €220m, compared to €208.5m for 2022.

CEO Menashe said on today’s earnings call that March had been a record month for Super Group, “and April was even better. Key global markets such as Canada, African Europe are growing well in their local currencies,” he added.

CFO Alinda Van Wyk added that May is “not looking bad either,” before clarifying that at this point in the year it is still very early to make concrete predictions about full-year earnings. Still, she added, “it’s looking promising.”

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