EX-99.1 2 tsg-ex991_15.htm EX-99.1 tsg-ex991_15.htm

Exhibit 99.1

The Stars Group Reports First Quarter 2019 Results

TORONTO, May 15, 2019 – The Stars Group Inc. (NASDAQ: TSG) (TSX: TSGI) today reported its financial results for the first quarter ended March 31, 2019 and provided certain additional highlights and updates. Unless otherwise noted, all dollar ($) amounts are in U.S. dollars.

 

“During the quarter, we delivered on key components of our 2019 objectives,” said Rafi Ashkenazi, The Stars Group’s Chief Executive Officer. “As we continue to lay the foundations to deliver sustainable long-term growth across the group, we are also now focused on positioning our new FOX Bet brand as a market leader in the U.S.”

 

“We continued to see growth in most markets in our International segment on a constant currency basis during the quarter, despite challenging operational conditions, the cessation of operations in certain markets and foreign exchange headwinds having a significant impact on our reported results as compared to the first quarter in 2018. Our United Kingdom segment continues to exceed our expectations operationally with record levels of new depositing customers, and an acceleration of growth in QAUs, Stakes and gaming revenue, although this performance was masked in the reported results by a record low Betting Net Win Margin of 5%. In Australia, we are pleased with our performance and continue to build our platform for market share gains,” said Mr. Ashkenazi.

 

“Underlying trends were similar in April and into May across the three segments, but with a significantly higher Betting Net Win Margin in the United Kingdom segment that is above its historical average of 9%. As we look at the remainder of 2019, we see opportunities for improved revenue growth, with a deep pipeline of new products, content and offers, leveraging our talent and skills across segments. Our leading positions in attractive markets, strong brands, technology and operating expertise have been bolstered by the new partnership with FOX Sports and positions us well for long-term growth,” concluded Mr. Ashkenazi.


 

First Quarter 2019 Summary

 

Consolidated

 

 

Three Months Ended March 31,

 

In thousands of U.S. Dollars

(except percentages and per share amounts)

 

2019

 

 

2018

 

 

% Change

 

Total revenue

 

 

580,384

 

 

 

392,891

 

 

 

47.7

%

Gross profit (excluding depreciation and amortization)

 

 

417,748

 

 

 

312,627

 

 

 

33.6

%

Operating income

 

 

61,537

 

 

 

113,867

 

 

 

(46.0

%)

Net earnings

 

 

27,658

 

 

 

74,361

 

 

 

(62.8

%)

Adjusted Net Earnings¹

 

 

105,600

 

 

 

138,762

 

 

 

(23.9

%)

Adjusted EBITDA¹

 

 

195,355

 

 

 

175,022

 

 

 

11.6

%

Adjusted EBITDA Margin¹

 

 

33.7

%

 

 

44.5

%

 

 

(24.4

%)

Diluted earnings per Common Share ($/Share)

 

 

0.10

 

 

 

0.36

 

 

 

(71.6

%)

Adjusted Diluted Net Earnings per Share ($/Share)¹

 

 

0.38

 

 

 

0.67

 

 

 

(42.8

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash inflows from operating activities

 

 

110,385

 

 

 

132,069

 

 

 

(16.4

%)

Free Cash Flow¹

 

 

(37,513

)

 

 

82,259

 

 

 

(145.6

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

As at

 

March 31, 2019

 

 

December 31, 2018

 

 

% Change

 

Long-term debt - principal

 

 

5,439,072

 

 

 

5,566,075

 

 

 

(2.3

%)

Long-term debt - carrying value

 

 

5,323,705

 

 

 

5,446,958

 

 

 

(2.3

%)

Cash - operational

 

 

266,513

 

 

 

392,853

 

 

 

(32.2

%)

_____________________________

1 Non-IFRS measure. For important information on The Stars Group’s non-IFRS measures, see below under “Non-IFRS Measures” and the tables under “Reconciliation of Non-IFRS Measures to Nearest IFRS Measures”.

 

 

Revenue – Revenue for the quarter increased primarily as a result of the contribution of revenue from Sky Betting & Gaming and BetEasy, as described below.

 

 

U.S. Sports Betting – On May 8, 2019, The Stars Group and FOX Sports, a unit of Fox Corporation (Nasdaq: FOXA, FOX), announced plans to launch FOX Bet, the first-of-its-kind national media and sports wagering partnership in the United States. In addition to the commercial agreement of up to 25 years and associated product launches, exclusive trademark, advertising and editorial integration rights and licenses, Fox Corporation also acquired 14,352,331 newly issued common shares in The Stars Group, representing 4.99% of The Stars Group’s issued and outstanding common shares, at a price of $16.4408 per share, for aggregate proceeds of approximately $236 million. Prior to the tenth anniversary of the commercial agreement, and subject to certain conditions and applicable gaming regulatory approvals, FOX Sports has the right to acquire up to a 50% equity stake in The Stars Group’s U.S. business.

 

 

Debt and Cash – During the quarter, The Stars Group prepaid $100 million outstanding on its USD first lien term loan, ending the quarter with approximately $267 million in operational cash and $5.3 billion in of debt on its balance sheet, resulting in Net Debt of $5.1 billion. Following the end of the quarter, The Stars Group prepaid an additional $250 million outstanding on its first lien term loans using a combination of the proceeds from the issuance of common shares to Fox and cash on its balance sheet, which would have brought its Net Debt to below $4.9 billion.

 


International

 

 

Three Months Ended March 31,

 

In thousands of U.S. Dollars (except otherwise noted)

 

2019

 

 

2018

 

 

% Change

 

Stakes

 

 

275,259

 

 

 

222,985

 

 

 

23.4

%

Betting Net Win Margin (%)

 

 

7.3

%

 

 

7.5

%

 

 

(2.7

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Poker

 

 

214,149

 

 

 

245,870

 

 

 

(12.9

%)

   Poker Constant Currency Revenue

 

 

234,856

 

 

 

245,870

 

 

 

(4.5

%)

Gaming

 

 

98,908

 

 

 

106,710

 

 

 

(7.3

%)

   Gaming Constant Currency Revenue

 

 

108,112

 

 

 

106,710

 

 

 

1.3

%

Betting

 

 

20,049

 

 

 

16,686

 

 

 

20.2

%

   Betting Constant Currency Revenue

 

 

21,905

 

 

 

16,686

 

 

 

31.3

%

Other

 

 

7,507

 

 

 

12,500

 

 

 

(39.9

%)

   Other Constant Currency Revenue

 

 

8,173

 

 

 

12,500

 

 

 

(34.6

%)

Total revenue

 

 

340,613

 

 

 

381,766

 

 

 

(10.8

%)

      Constant Currency Revenue

 

 

373,046

 

 

 

381,766

 

 

 

(2.3

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

QAUs (millions)

 

 

2.2

 

 

 

2.2

 

 

 

(2.9

%)

QNY ($/QAU)

 

 

154

 

 

 

165

 

 

 

(6.7

%)

Constant Currency Revenue QNY

 

 

169

 

 

 

165

 

 

 

2.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit (excluding depreciation and amortization)

 

 

260,442

 

 

 

304,846

 

 

 

(14.6

%)

Gross profit margin (%)

 

 

76.5

%

 

 

79.9

%

 

 

(4.2

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

98,975

 

 

 

105,220

 

 

 

(5.9

%)

Sales and marketing2

 

 

40,282

 

 

 

44,969

 

 

 

(10.4

%)

Research and development

 

 

6,602

 

 

 

7,819

 

 

 

(15.6

%)

Operating income

 

 

114,583

 

 

 

146,838

 

 

 

(22.0

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA¹

 

 

159,340

 

 

 

186,407

 

 

 

(14.5

%)

Adjusted EBITDA Margin (%)¹

 

 

46.8

%

 

 

48.8

%

 

 

(4.2

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Deposits (millions)

 

 

317

 

 

 

353

 

 

 

(10.2

%)

____________________________

1 Non-IFRS measure. For important information on The Stars Group’s non-IFRS measures, see below under “Non-IFRS Measures” and the tables under “Reconciliation of Non-IFRS Measures to Nearest IFRS Measures”.

2 Sales and marketing includes $1.5 million for the quarter ended March 31, 2019 that the Corporation excluded from its consolidated results as it related to certain non-gaming related transactions with the United Kingdom segment.

 

 

Poker – Poker revenue decreased year-over-year, in-line with expectations, primarily driven by foreign exchange fluctuations. Constant Currency Revenue for Poker declined 5% year-over-year primarily as a result of continued headwinds in certain markets, including reduced deposits by customers as a result of local restrictions on some methods of payment processing and on certain methods of downloading The Stars Group’s poker applications, which was partially offset by continued organic growth in most other markets.

 

 

Gaming – Gaming revenue for the quarter decreased primarily as a result of foreign exchange fluctuations. Constant Currency Revenue for Gaming increased 1% year-over-year primarily driven by continued organic growth from product launches such as “Spin of the Day” and the continued rollout of new casino games. This more than offset the impact of the cessation of operations in certain markets in the first quarter, notably Switzerland (gaming and betting) and Slovakia (gaming, betting and poker) and operational challenges in certain markets, including local restrictions on some methods of payment processing.

 

 

Betting - Betting revenue increased 20% year-over-year, despite also facing foreign exchange headwinds (as Constant Currency Revenue for Betting increased 31% year-over-year) and the cessation of operations in certain markets as noted above. The growth was primarily the result of an increase in Stakes and customer engagement, driven by new markets and certain product launches, including “Request-A-Bet”, leveraging the strength of the equivalent innovative Sky Bet product. Betting Net Win Margin was relatively flat year-over-year.

 


 

Customers – QAUs decreased primarily due to reduced activity in certain markets and the closure of certain markets, each as noted above.

 

United Kingdom

  

 

Three Months Ended March 31,

 

In thousands of U.S. Dollars (except otherwise noted)

 

2019

 

 

2018

 

 

% Change

 

Stakes

 

 

1,504,972

 

 

 

 

 

 

 

Betting Net Win Margin (%)

 

 

5.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Poker

 

 

3,290

 

 

 

 

 

 

 

Gaming

 

 

90,303

 

 

 

 

 

 

 

Betting

 

 

74,497

 

 

 

 

 

 

 

Other2

 

 

11,007

 

 

 

 

 

 

 

Total revenue

 

 

179,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QAUs (millions)

 

 

2.1

 

 

 

 

 

 

 

QNY ($/QAU)

 

 

78

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit (excluding depreciation and amortization)

 

 

121,525

 

 

 

 

 

 

 

Gross profit margin (%)

 

 

67.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

108,587

 

 

 

 

 

 

 

Sales and marketing

 

 

34,594

 

 

 

 

 

 

 

Research and development

 

 

4,336

 

 

 

 

 

 

 

Operating loss

 

 

(25,992

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA¹

 

 

42,219

 

 

 

 

 

 

 

Adjusted EBITDA Margin (%)¹

 

 

23.6

%

 

 

 

 

 

 

____________________________

1 Non-IFRS measure. For important information on The Stars Group’s non-IFRS measures, see below under “Non-IFRS Measures” and the tables under “Reconciliation of Non-IFRS Measures to Nearest IFRS Measures”.

2 Other revenue includes $1.5 million for the quarter ended March 31, 2019, that the Corporation excluded from its consolidated results as it related to certain non-gaming related transactions with the International segment.

 

 

Revenue – Revenue for the quarter was negatively impacted by a record low Betting Net Win Margin due to a combination of operator-unfavorable sporting results and planned investment in promotional activity, primarily relating to the Cheltenham Festival, one of the U.K.’s most popular horse racing events. The promotional activity was particularly successful and contributed to the growth in QAUs and Stakes as noted below, accelerating the underlying performance of the segment during the quarter which, despite the short-term impact to Betting Net Win Margin and revenues, The Stars Group expects will support its expectations for the United Kingdom segment for the remainder of the year and into the medium-term.

 

 

Customers – Growth in QAUs and Stakes were very strong for the quarter primarily driven by Sky Bet as a result of the successful promotional activity noted above and continued product improvements. QAUs also benefited from the continued roll-out of personalized promotions and new and exclusive Gaming content across the Sky Betting & Gaming brands, including the launch of Sky Vegas Creations, which emphasizes exclusive gaming content.  


Australia

 

 

Three Months Ended March 31,

 

In thousands of U.S. Dollars (except otherwise noted)

 

2019

 

 

2018 1

 

 

% Change

 

Stakes

 

 

754,326

 

 

 

157,457

 

 

 

379

%

Betting Net Win Margin (%)

 

 

8.1

%

 

 

7.1

%

 

 

15

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Betting

 

 

61,120

 

 

 

11,125

 

 

 

449

%

Other

 

 

1,054

 

 

 

 

 

 

 

 

 

Total revenue

 

 

62,174

 

 

 

11,125

 

 

 

458.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

QAUs (millions)

 

 

0.21

 

 

 

 

 

 

 

QNY ($/QAU)

 

 

285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit (excluding depreciation and amortization)

 

 

37,281

 

 

 

7,636

 

 

 

388.2

%

Gross profit margin (%)

 

 

60.0

%

 

 

68.6

%

 

 

(12.6

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

26,082

 

 

 

4,337

 

 

 

501.4

%

Sales and marketing

 

 

10,764

 

 

 

4,211

 

 

 

155.6

%

Research and development

 

 

1,573

 

 

 

216

 

 

 

628.2

%

Operating loss

 

 

(1,138

)

 

 

(1,128

)

 

 

0.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA 2

 

 

8,630

 

 

 

(846

)

 

 

(1120.1

%)

Adjusted EBITDA Margin (%) 2

 

 

13.9

%

 

 

(7.6

%)

 

 

(282.5

%)

_____________________________

1 The acquisition of 62% of BetEasy occurred on February 27, 2018 with the acquisition of a further 18% of BetEasy and BetEasy’s acquisition of the William Hill Australia business occurring subsequent to the first quarter of 2018.

2 Non-IFRS measure. For important information on The Stars Group’s non-IFRS measures, see below under “Non-IFRS Measures” and the tables under “Reconciliation of Non-IFRS Measures to Nearest IFRS Measures”.

 

 

Revenue – Revenue for the quarter was marginally impacted by a lower Betting Net Win Margin as compared to the historical long-term average of approximately 8.5% primarily due to a combination of operator-unfavorable sports results as well as promotional spend as BetEasy maintained its position as one of the market leaders in Australia.

 

 

Customers – The successful migration of William Hill Australia customers to the rebranded BetEasy platform last year continued to drive growth in QAUs through further reactivation of customers with over 90% of the William Hill Australia customers subsequently becoming active on the BetEasy platform. The focus on improving the customer experience also continued, with the launch of MyRewards toward the end of the quarter, which allows for targeted, personalized promotions.

 

For additional information regarding The Stars Group’s reporting segments and major lines of operations, please see The Stars Group’s interim condensed consolidated financial statements for the quarter ended March 31, 2019 (the “Q1 2019 Financial Statements”), including note 5 therein, and management’s discussion and analysis thereon (the “Q1 2019 MD&A”).

Consolidated Financial Statements, Management’s Discussion and Analysis and Additional Information

The Stars Group’s Q1 2019 Financial Statements, Q1 2019 MD&A, and additional information relating to The Stars Group and its business, can be found on SEDAR at www.sedar.com, Edgar at www.sec.gov and The Stars Group’s website at www.starsgroup.com. The financial information presented in this news releases was derived from the 2018 Annual Financial Statements.

 

In addition to press releases, securities filings and public conference calls and webcasts, The Stars Group intends to use its investor relations page on its website as a means of disclosing material information to its investors and others and for complying with its disclosure obligations under applicable securities laws. Accordingly, investors and others should monitor the website in addition to following The Stars Group’s press releases, securities filings and public conference calls and webcasts. This list may be updated from time to time.


Conference Call and Webcast Details

The Stars Group will host a conference call today, May 15, 2019 at 8:30 a.m. ET to discuss its financial results for the first quarter 2019 and related matters, and provide additional detail with respect to the information in this news release, its webcast presentation, and related Q1 2019 filings. To access via tele-conference, please dial +1-877-451-6152 or +1-201-389-0879 ten minutes prior to the scheduled start of the call. The playback will be made available two hours after the event at +1-844-512-2921 or +1-412-317-6671. The Conference ID number is 13690431. To access the webcast please use the following link: http://public.viavid.com/index.php?id=134412.

Reconciliation of Non-IFRS Measures to Nearest IFRS Measures

The tables below present reconciliations of Adjusted EBITDA, Adjusted Net Earnings and Adjusted Diluted Net Earnings per Share to net earnings, which is the nearest IFRS measure. For additional information, see “Reconciliations” in the Q1 2019 MD&A.

 

 

 

Quarter Ended March 31, 2019

 

In thousands of U.S. Dollars (except per share amounts)

 

International

 

 

United Kingdom

 

 

Australia

 

 

Corporate

 

 

Consolidated

 

Net earnings (loss)

 

 

114,583

 

 

 

(25,992

)

 

 

(1,138

)

 

 

(59,795

)

 

 

27,658

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax recovery

 

 

 

 

 

 

 

 

 

 

 

13,098

 

 

 

13,098

 

Net financing charges

 

 

 

 

 

 

 

 

 

 

 

(46,977

)

 

 

(46,977

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

114,583

 

 

 

(25,992

)

 

 

(1,138

)

 

 

(25,916

)

 

 

61,537

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

37,979

 

 

 

61,671

 

 

 

9,442

 

 

 

202

 

 

 

109,294

 

Add (deduct) the impact of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

2,736

 

 

 

2,736

 

Gains from investments

 

 

(67

)

 

 

 

 

 

 

 

 

 

 

 

(67

)

Impairment of intangible assets

 

 

12

 

 

 

142

 

 

 

 

 

 

 

 

 

154

 

Other costs

 

 

6,833

 

 

 

6,398

 

 

 

326

 

 

 

8,144

 

 

 

21,701

 

Total adjusting items

 

 

6,778

 

 

 

6,540

 

 

 

326

 

 

 

10,880

 

 

 

24,524

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

159,340

 

 

 

42,219

 

 

 

8,630

 

 

 

(14,834

)

 

 

195,355

 

 

 

 

Quarter Ended March 31, 2018

 

In thousands of U.S. Dollars (except per share amounts)

 

International

 

 

United Kingdom

 

 

Australia

 

 

Corporate

 

 

Consolidated

 

Net earnings (loss)

 

 

146,838

 

 

 

 

 

 

(1,128

)

 

 

(71,349

)

 

 

74,361

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

(1,155

)

 

 

(1,155

)

Net financing charges

 

 

 

 

 

 

 

 

 

 

 

(38,351

)

 

 

(38,351

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

146,838

 

 

 

 

 

 

(1,128

)

 

 

(31,843

)

 

 

113,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

37,969

 

 

 

 

 

 

1,280

 

 

 

9

 

 

 

39,258

 

Add (deduct) the impact of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition-related costs and deal contingent forwards

 

 

 

 

 

 

 

 

 

 

 

 

15,191

 

 

 

15,191

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

2,383

 

 

 

2,383

 

Loss (gain) from investments

 

 

517

 

 

 

 

 

 

(5

)

 

 

 

 

 

512

 

Impairment of intangible assets

 

 

115

 

 

 

 

 

 

 

 

 

 

 

 

115

 

Other costs (income)

 

 

968

 

 

 

 

 

 

(993

)

 

 

3,721

 

 

 

3,696

 

Total adjusting items

 

 

1,600

 

 

 

 

 

 

(998

)

 

 

21,295

 

 

 

21,897

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

186,407

 

 

 

 

 

 

(846

)

 

 

(10,539

)

 

 

175,022

 

 


 

 

Three Months Ended March 31,

 

In thousands of U.S. Dollars (except per share amounts)

 

2019

 

 

2018

 

Net earnings

 

 

27,658

 

 

 

74,361

 

Income tax (recovery) expense

 

 

(13,098

)

 

 

1,155

 

Net earnings before tax

 

 

14,560

 

 

 

75,516

 

Add (deduct) the impact of the following:

 

 

 

 

 

 

 

 

Interest accretion

 

 

8,269

 

 

 

12,051

 

Re-measurement of contingent consideration

 

 

(9,378

)

 

 

 

Re-measurement of embedded derivative

 

 

(22,600

)

 

 

 

Unrealized foreign exchange loss on financial instruments

associated with financing activities

 

 

1,632

 

 

 

 

Ineffectiveness on cash flow hedges

 

 

1,856

 

 

 

 

Acquisition-related costs and deal contingent forwards

 

 

 

 

 

15,191

 

Amortization of acquisition intangibles

 

 

89,955

 

 

 

31,376

 

Stock-based compensation

 

 

2,736

 

 

 

2,383

 

Loss from investments

 

 

(67

)

 

 

512

 

Impairment of intangibles assets

 

 

154

 

 

 

115

 

Other costs

 

 

21,701

 

 

 

3,696

 

Adjust for income tax expense

 

 

(3,218

)

 

 

(2,078

)

Adjusted Net Earnings

 

 

105,600

 

 

 

138,762

 

Adjusted Net Earnings attributable to

 

 

 

 

 

 

 

 

Shareholders of The Stars Group Inc.

 

 

104,826

 

 

 

140,232

 

Non-controlling interest

 

 

774

 

 

 

(1,470

)

 

 

 

 

 

 

 

 

 

Diluted Shares

 

 

273,946,225

 

 

 

209,495,673

 

Adjusted Diluted Net Earnings per Share

 

 

0.38

 

 

 

0.67

 

 

 

 

 

 

 

 

 

 

The table below presents certain items comprising “Other costs” in the reconciliation tables above:

 

 

 

Quarter Ended March 31,

 

 

 

2019

 

 

2018

 

In thousands of U.S. Dollars

 

 

 

 

 

 

 

 

Integration costs of acquired businesses

 

 

8,023

 

 

 

 

Financial expenses (income)

 

 

1,030

 

 

 

(2,281

)

Restructuring expenses

 

 

3,909

 

 

 

632

 

AMF and other investigation professional fees

 

 

2,709

 

 

 

1,784

 

Lobbying (US and Non-US) and other legal expenses

 

 

3,272

 

 

 

2,993

 

Professional fees in connection with non-core activities

 

 

1,820

 

 

 

451

 

Retention bonuses

 

 

 

 

 

117

 

Other

 

 

938

 

 

 

 

Other costs

 

 

21,701

 

 

 

3,696

 

 

The table below presents a reconciliation of Free Cash Flow to net cash flows from operating activities, which is the nearest IFRS measure:

 

  

Quarter Ended March 31,

 

In thousands of U.S. Dollars

2019

 

 

2018

 

Net cash inflows from operating activities

 

110,385

 

 

 

132,069

 

Customer deposit liability movement

 

(15,341

)

 

 

189

 

 

 

95,044

 

 

 

132,258

 

Capital Expenditure:

 

 

 

 

 

 

 

Additions to deferred development costs

 

(20,146

)

 

 

(6,431

)

Additions to property and equipment

 

(4,047

)

 

 

(3,585

)

Additions to intangible assets

 

(4,534

)

 

 

(2,427

)

Interest paid

 

(91,761

)

 

 

(31,488

)

Debt servicing cash flows (excluding voluntary prepayments)

 

(12,069

)

 

 

(6,068

)

Free Cash Flow

 

(37,513

)

 

 

82,259

 

 


The table below presents a reconciliation of Net Debt:

 

 

 

 

In thousands of U.S. Dollars

As at March 31, 2019

 

Current portion of long-term debt

 

131,750

 

Long-term debt

 

5,191,955

 

Less: Cash and cash equivalents - operational

 

266,513

 

Net Debt

 

5,057,192

 

About The Stars Group

The Stars Group is a provider of technology-based product offerings in the global gaming and interactive entertainment industries. Its brands have millions of registered customers globally and collectively are leaders in online and mobile betting, poker, casino and other gaming-related offerings. The Stars Group owns or licenses gaming and related consumer businesses and brands, including PokerStars, PokerStars Casino, BetStars, Full Tilt, FOX Bet, BetEasy, Sky Bet, Sky Vegas, Sky Casino, Sky Bingo, Sky Poker, and Oddschecker, as well as live poker tour and events brands, including the PokerStars Players No Limit Hold’em Championship, European Poker Tour, PokerStars Caribbean Adventure, Latin American Poker Tour, Asia Pacific Poker Tour, PokerStars Festival and PokerStars MEGASTACK. The Stars Group is one of the world’s most licensed online gaming operators with its subsidiaries collectively holding licenses or approvals in 21 jurisdictions throughout the world, including in Europe, Australia, and the Americas. The Stars Group’s vision is to become the world’s favorite iGaming destination and its mission is to provide its customers with winning moments.

 

Cautionary Note Regarding Forward Looking Statements

 

This news release contains forward-looking statements and information within the meaning of the Private Securities Litigation Reform Act of 1995 and applicable securities laws, including, without limitation, certain financial and operational expectations and projections, such as certain future operational and growth plans and strategies, and certain financial items relating to the full year 2019 results, as well as the partnership between The Stars Group and FOX Sports, a unit of FOX Corporation, and rights and obligations related thereto. Forward-looking statements and information can, but may not always, be identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “would”, “should”, “believe”, “objective”, “ongoing”, “imply”, “assumes”, “goal”, “likely” and similar references to future periods or the negatives of these words or variations or synonyms of these words or comparable terminology and similar expressions. These statements and information, other than statements of historical fact, are based on management’s current expectations and are subject to a number of risks, uncertainties, and assumptions, including market and economic conditions, business prospects or opportunities, future plans and strategies, projections, technological developments, anticipated events and trends and regulatory changes that affect The Stars Group, its subsidiaries, and its and their respective customers and industries. Although The Stars Group and management believe the expectations reflected in such forward-looking statements and information are reasonable and are based on reasonable assumptions and estimates as of the date hereof, there can be no assurance that these assumptions or estimates are accurate or that any of these expectations will prove accurate. Forward-looking statements are inherently subject to significant business, regulatory, economic and competitive risks, uncertainties and contingencies that could cause actual events to differ materially from those expressed or implied in such statements. Specific risks and uncertainties include, but are not limited to: customer and operator preferences and changes in the economy; reputation and brand growth; competition and the competitive environment within addressable markets and industries; macroeconomic conditions and trends in the gaming and betting industry; ability to predict fluctuations in financial results from quarter to quarter; ability to mitigate tax risks and adverse tax consequences, including, without limitation, changes in tax laws or administrative policies relating to tax and the imposition of new or additional taxes, such as value-added and point of consumption taxes, and gaming duties; The Stars Group’s substantial indebtedness requires that it use a significant portion of its cash flow to make debt service payments; impact of inability to complete future or announced acquisitions or to integrate businesses successfully, including, without limitation, Sky Betting & Gaming and BetEasy; contractual relationships of The Stars Group or any of its subsidiaries with FOX Corporation, FOX Sports and Sky plc and/or their respective subsidiaries; an ability to realize all or any of The Stars Group’s estimated synergies and cost savings in connection with acquisitions, including, without limitation, the acquisition of Sky Betting & Gaming and the Australian acquisitions; ability to mitigate foreign exchange and currency risks; legal and regulatory requirements; potential changes to the gaming regulatory framework; the heavily regulated industry in which The Stars Group carries on its business; ability to obtain, maintain and comply with all applicable and required licenses, permits and certifications to offer, operate and market its product offerings, including difficulties or delays in the same; social responsibility concerns and public opinion; protection of proprietary technology and intellectual property rights; intellectual property infringement or invalidity claims; and systems, networks, telecommunications or service disruptions or failures or cyber-attacks and failure to protect customer data, including personal and financial information. These factors are not intended to represent a complete list of the factors that could affect The Stars Group; however, these factors as well as other applicable risks and uncertainties include, but are not limited to, those identified in its most recently filed annual information form, including under the heading “Risk Factors and Uncertainties”, and in its most recently filed management’s discussion and analysis, including under the headings “Caution Regarding Forward-Looking Statements”, “Risk Factors and Uncertainties” and “Non-IFRS Measures, Key Metrics and Other Data”, each available on SEDAR at www.sedar.com, EDGAR at www.sec.gov and The Stars Group’s website at www.starsgroup.com, and in other filings that The Stars Group has made and may make in the future with applicable securities


authorities in the future, should be considered carefully. Investors are cautioned not to put undue reliance on forward-looking statements or information. Any forward-looking statement or information in this news release are expressly qualified by this cautionary statement. Any forward-looking statement or information speaks only as of the date hereof, and The Stars Group undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

 

Non-IFRS Measures

 

This news release references non-IFRS financial measures. The Stars Group believes these non-IFRS financial measures will provide investors with useful supplemental information about the financial and operational performance of its business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating its business, identifying and evaluating trends, and making decisions. The Stars Group believes that such non-IFRS financial measures provide useful information about its underlying, core operating results and trends, enhance the overall understanding of its past performance and future prospects and allow for greater transparency with respect to metrics and measures used by management in its financial and operational decision-making.

 

Although management believes these non-IFRS financial measures are important in evaluating The Stars Group, they are not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with IFRS. They are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS. These measures may be different from non-IFRS financial measures used by other companies any may not be comparable to similar meanings prescribed by other companies, limiting its usefulness for comparison purposes. Moreover, presentation of certain of these measures is provided for period-over-period comparison purposes, and investors should be cautioned that the effect of the adjustments thereto provided herein have an actual effect on The Stars Group’s operating results. In addition to QNY, which is defined below under “Key Metrics and Other Data”, The Stars Group provides the following non-IFRS measures in this news release:

Adjusted EBITDA means net earnings before financial expenses, income tax expense (recovery), depreciation and amortization, stock-based compensation, restructuring, net earnings (loss) on associate and certain other items as set out in the reconciliation tables under “above” below.

Adjusted EBITDA Margin means Adjusted EBITDA as a proportion of total revenue.

Adjusted Net Earnings means net earnings before interest accretion, amortization of intangible assets resulting from purchase price allocations following acquisitions, stock-based compensation, restructuring, net earnings (loss) on associate, and certain other items. In addition, as previously disclosed, The Stars Group makes adjustments for (i) the re-measurement of contingent consideration, which was previously included in, and adjusted for through, interest accretion, but starting with The Stars Group’s interim condensed consolidated financial statements and related notes for the three and nine months ended September 30, 2018 (the “Q3 2018 Financial Statements”), it is a separate line item, (ii) the re-measurement of embedded derivatives and ineffectiveness on cash flow hedges, each of which were new line items in the Q3 2018 Financial Statements, and (iii) certain non-recurring tax adjustments and settlements. Each adjustment to net earnings is then adjusted for the tax impact, where applicable, in the respective jurisdiction to which the adjustment relates. Adjusted Net Earnings and any other non-IFRS measures used by The Stars Group that relies on or otherwise incorporates Adjusted Net Earnings that was reported for previous periods have not been restated under the updated definition on the basis that The Stars Group believes that the impact of the change to those periods would not be material.

Adjusted Diluted Net Earnings per Share means Adjusted Net Earnings attributable to the Shareholders of The Stars Group Inc.  divided by Diluted Shares. Diluted Shares means the weighted average number of Common Shares on a fully diluted basis, including options, other equity-based awards such as warrants and any convertible preferred shares of The Stars Group then outstanding. The effects of anti-dilutive potential Common Shares are ignored in calculating Diluted Shares. Diluted Shares used in the calculation of diluted earnings per share may differ from diluted shares used in the calculation of Adjusted Diluted Net Earnings per Share where the dilutive effects of the potential Common Shares differ. For the quarter ended March 31, 2019, Diluted Shares used for the calculation of Adjusted Diluted Net Earnings per Share equalled 273,946,225, compared with 209,495,673 for the same period in 2018.

Constant Currency Revenue means IFRS reported revenue for the relevant period calculated using the applicable prior year period’s monthly average exchange rates for its local currencies other than the U.S. dollar. Currently, The Stars Group provides Constant Currency Revenue for the International segment and its applicable lines of operations. It does not currently provide Constant Currency Revenue for the United Kingdom and Australia segments because The Stars Group does not yet have reported comparative periods for these segments as a result of the respective acquisition dates.

Free Cash Flow means net cash flows from operating activities after adding back customer deposit liability movements, and after capital expenditures and debt servicing cash flows (excluding voluntary prepayments).

Net Debt means total long-term debt less operational cash.


For additional information on certain of The Stars Group’s non-IFRS measures and the reasons why it believes such measures are useful, see above and the Q1 2019 MD&A, including under the headings “Management’s Discussion and Analysis”,Non-IFRS Measures, Key Metrics and Other Data, “Segment Results of Operations” and “Reconciliations”.