Super Group cites inflation impact in Canada for Q2 woes

Super Group Q2 earnings call

The second quarter on the New York Stock Exchange (NYSE) was a solid one for Super Group (SGHC), the parent company of Betway and Spin, but like many reporting Q2 earnings this month, the effects of inflation and external market conditions impacted the bottom line.

“The current macro environment may provide near-term headwinds but Super Group’s balance sheet remains strong and our business remains fundamentally sound,” says Super Group CEO Neal Menashe in the Q2 press release. “By investing in our global business, we continue to focus on organic and strategic growth opportunities in pursuit of long-term sustainable profits.”

As CFO Alinda van Wyk noted:

“Super Group is a profitable and debt-free company with a continuing track record of consistent cash generation. Despite some current challenges, we have increased monthly active users, while focusing on financial discipline to maintain profitability and we continue to invest in the future growth of Super Group.”

Here is a look at the top line numbers:

  • Revenue was down 10% YoY at €320.8 million compared to €355.2 million in 2021.
  • Profit was up to €298.6 million compared to €63.9 million, however, this uptick was largely related to transactions beyond the scope of day-to-day business.
  • While EBITDA was up, Adjust EBITDA was down on the year at €63.6 million compared to €90.8 million, a dip of 30%.

The company also picked up 2.7 million new customers over the quarter.

Inflation and its impact on discretionary spending impacted results

On the company’s earnings call, Menashe was up front and direct about the economic factors impacting the company’s global gambling business. Moreover, he cautioned investors they do not expect these factors to change heading into the back half of the year.

“We expect that these effects will continue to be felt for the remainder of the year and I’ve updated our guidance accordingly,” he stated. “But I want to emphasize two things. First one, I believe that our year-on-year results do not properly reflect our achievement over the last 12 months. Our continued progress across the globe is better reflected by growing global and ongoing growth in active customer numbers. Two, ongoing regulatory change but post-COVID normalization will ultimately benefit Super Group because we have an efficient cost structure and over 20 years track record of trading profit profitably through thick and thin.”

Betway regulated launch in Ontario went smoothly

Last week Betway launched its regulated Ontario sports betting site after previously operating in the gray market. According to Menashe, the launch went smoothly so far. When it comes to the brand’s position in the market, the company actually cited the restrictive marketing rules as a reason why they like where they stand so far.

“Given the regulatory restrictions of public advertising of bonuses in Ontario, we don’t expect to see the same level of unsustainable price competition that happened in the United States. We remain confident from past experience that regulation will be favorable for us in the medium and long run and we hope to see regulation introduced to Canada’s other provinces in due course,” he stated.

As for the company’s operations outside of Ontario, the outlook is less optimistic. Van Wyk explained:

“We believe that the decline in Canada is due to a combination of two things. People are getting back to normal behaviors but COVID and inflation are putting pressure on spending. Similar factors can be seen in several of our markets across the globe, but the impact is felt most in Canada, as that is our largest market.”

As for the US, the deal with SPAC Sports Entertainment Acquisition Corp and the acquisition of Digital Gaming Corporation (DGC) is nearing completion but not done yet. Once done, the company will have market access to ten different online casino and sports betting markets.