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Deutschland TORONTO, May 15, 2019 /CNW/ - 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% | — |
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