Topline numbers

Super Group’s total revenue declined by 1.5% year-on-year to €307.8m in Q3 as sports betting growth failed to fully offset revenue reductions in online casino and brand licensing.

Sports betting revenue rose 14.5% to €104.6m (34% of total group revenue), while online casino slipped by 3.8% to €196.6m, or 63.9% of total revenue. 

Brand licensing revenue came in at €5.4m, or 1.8% of the total, down 67.3% year-on-year.

Super Group reported adjusted EBITDA of €56.1m for the quarter, down 26% year-on-year. The firm declared profit after taxes of €34.9m, down 30.9%.

As of the end of the period, Super Group held €904.3m in total assets including €266m in cash and cash equivalents.

News nugget

Super Group’s biggest Q3 move was the acquisition of a majority stake in UK-based online casino supplier Jumpman Gaming on 1 September.

For the month of September, the business contributed around €7m of net revenue to Super Group, as well as a positive contribution to Q3 EBITDA figures.

Those values were not included in Super Group’s Q3 financials so that investors could see a like-for-like comparison.

Following the end of the period, Super Group revealed that it is exploring the possible acquisition of its sportsbook supplier Apricot.

The operator said it is considering an arrangement that could materially increase the dedicated development resources made available by Apricot to Betway.

That would involve an increase in levels of spending and investment in software development for the next several quarters, a portion of which may be made as a loan by Super Group to the supplier of up to €43m.

In connection with the additional spending, Apricot and Super Group have opened discussions around the possibility of Super Group obtaining full ownership of its sportsbook through an option to purchase a copy of the underlying technology in the future.

Best quote

Super Group CFO Alinda Van Wyk: “[Sports betting] results fluctuate beyond our control, so we just have to make sure that we keep on engaging the customers, and luckily our customer base is strong so it marginalises the volatility in the results.”

Best question

When asked about the rationale behind the firm’s acquisition of Jumpman Gaming, Super Group president and COO Richard Hasson said: “Jumpman runs proprietary technology – it’s built a great platform over the last many years, and while it is a UK-focused business, it’s an opportunity for us to help them expand into additional markets.

“They appeal to a different segment of the market – a much more recreational segment – to our existing customers,” Hasson concluded.

Current trading & forecast

Following the release of its Q3 results, Super Group has reiterated previously issued guidance pointing to full-year 2022 revenue between €1.15bn and €1.28bn, with operational EBITDA of €200m-€215m.

CFO Alinda Van Wyk explained on the firm’s earnings call that one reason for the width of those ranges is the volatility of sports results.

“There is some volatility around sports as you all know, especially around parlay results, and we’ve seen some of those volatilities coming through in November already, but we have a very strong customer base and we keep on engaging those customers,” she said.

“[Sports betting] results fluctuate beyond our control, so we just have to make sure that we keep on engaging the customers, and luckily our customer base is strong so it marginalises the volatility in the results.”

The business reported 3.2 million customers using its brands following the end of the period in October. That represents a significant improvement over previously recorded numbers which usually see between 2.6 million and 2.7 million customers using the brands each month.

Super Group CEO Neal Menashe said that growth was driven by improved engagement on Super Group’s platforms across both sports betting and casino. A packed October sports calendar also helped re-engage customers during the month.

The business intends to retain those high-quality customers, it said, while working to improve profit margins across its operations.

Share performance

Shares in Super Group jumped around 3% following the release of the results. 

Looking at the firm’s share price since its public listing on the New York Stock Exchange in January, however, shares are down by more than 55%.

Having floated at an $8.25 share price, shares climbed as high as $10.99 in April before descending rapidly to where they sit now, well below the $4 per share mark.

Super Group has reiterated previously issued earnings guidance for 2022, pointing to full-year revenue of €1.15bn-€1.28bn and adjusted EBITDA of €200m-€215m.

In a business update provided to investors, the Betway owner revealed it was exploring the possible acquisition of its sportsbook supplier, Apricot.

Betway is Apricot’s exclusive sportsbook partner in several jurisdictions outside Africa. The operator is considering an arrangement that could materially increase the dedicated development resources available to Betway, it said. 

That would involve an increase in levels of spending and investment in software development for the next several quarters, a portion of which may be made as a loan made by Super Group to Apricot of up to €43m.

In connection with the additional spending, Apricot and Super Group have opened discussions around the possibility of Super Group obtaining full ownership of its sportsbook through an option to purchase a copy of the underlying technology in the future.

Super Group CEO Neal Menashe: “In relation to discussions regarding our sportsbook, we are exploring with our long-term partner the potential benefits of ownership of the technology.”

These discussions are in their early stages, Super Group said, and the operator cannot give any assurance on reaching binding terms.

“We are taking steps to strengthen Super Group, simplify the capital structure, and better position the company for growth,” said Super Group CEO Neal Menashe.

“In relation to discussions regarding our sportsbook, we are exploring with our long-term partner the potential benefits of ownership of the technology. I look forward to discussing our results and business updates in greater detail after we release third quarter results on November 22.”

Alongside the announcement, Super Group issued an update on its other activities during the second half of the year.

On 1 September, the business acquired a majority stake in UK-focused online casino developer Jumpman Gaming. For the month of September, the business contributed around €7m of net revenue to Super Group, as well as a positive EBITDA contribution to its Q3 results.

Guernsey-based Jumpman’s results are not included in Super Group’s previously stated earnings guidance.

Super Group also continues to make progress towards its acquisition of Digital Gaming Corporation, which is expected to close in January 2023. That deal will allow the group to expand its presence in US markets.

Away from the firm’s Q3 update and progress updates on its acquisitions, Super Group also announced on Friday (4 November) that it will commence an exchange offer relating to public and private placement warrants, originally issued by Sports Entertainment Acquisition Corp in its initial IPO of units in 2020.

Super Group will offer all holders of the public warrants the opportunity to receive 0.25 ordinary shares in exchange for each outstanding public warrant, while seeking consent from the holders of private placement warrants to cancel the outstanding warrants.

It is thought that the warrant exchange was the root cause behind a 13% nosedive in the price of Super Group shares.

$SGHC gave up almost $200M in market cap today on the warrant exchange offer. For < $50M they could have given every warrant holder $2 bucks and eliminated all the dilution.

The shares from the warrant exchange represent 2 months of volume.

Unfortunately this is going to 2s.

— 𝗧𝗵𝗲 𝗨𝗺𝗽𝗶𝗿𝗲 (@EricTheUmpire) November 5, 2022