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The Stars Group Reports Third Quarter 2018 Results

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The Stars Group Reports Third Quarter 2018 ResultsReading Time: 24 minutes

 

The Stars Group Inc. today reported its financial results for the third quarter ended September 30, 2018 and provided certain additional highlights and updates. Unless otherwise noted, all dollar ($) amounts are in U.S. dollars.

“This was a landmark quarter during a transformative year for the company as we begin to deliver on our vision to become the world’s favorite iGaming destination,” stated Rafi Ashkenazi, The Stars Group’s Chief Executive Officer. “We completed our acquisition of Sky Betting & Gaming, which was cleared by the CMA in October, making us the leader in the UK online betting and gaming market. We also launched BetEasy in Australia and sports betting in New Jersey.”

“We are pleased with our quarterly results, which reflect both continued organic growth from our International business and contributions from both BetEasy and Sky Betting & Gaming, despite unfavorable sporting results during the period,” said Mr. Ashkenazi.

“As we continue our transformation and look towards 2019, we are excited to take advantage of the opportunities ahead of us by leveraging our leading positions in attractive markets, strong brands, technology and operating expertise,” concluded Mr. Ashkenazi.

Third Quarter 2018 Summary

Consolidated

Three Months Ended September 30,

Nine Months Ended September 30,

In thousands of U.S. Dollars

(except percentages and per share amounts)

2018

2017

%
Change

2018

2017

%
Change

Total Revenue

571,983

329,443

73.6%

1,376,386

952,065

44.6%

Gross Profit

442,757

266,966

65.8%

1,083,259

774,460

39.9%

Operating Income

70,901

118,724

(40.3%)

185,832

335,128

(44.5%)

Net Earnings (loss)

9,730

75,874

(87.2%)

(70,733)

212,110

(133.3%)

Adjusted Net Earnings ¹

119,500

119,595

(0.1%)

389,285

346,990

12.2%

Adjusted EBITDA ¹

198,252

155,767

27.3%

541,545

453,305

19.5%

Adjusted EBITDA Margin ¹

34.7%

47.3%

(26.7%)

39.3%

47.6%

(17.4%)

Diluted (loss) earnings per Common Share ($/Share)

0.06

0.37

(84.9%)

(0.34)

1.05

(132.3%)

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

0.45

0.58

(23.8%)

1.67

1.71

(2.2%)

Net cash flows from operating activities

73,227

144,870

(49.5%)

369,307

370,843

(0.4%)

Free Cash Flow ¹

(26,723)

95,306

(128.0%)

140,392

255,028

(45.0%)

_____________________________

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”.

 

  • Total Revenues – Revenues for the quarter increased 73.6% year-over-year primarily as a result of the contribution of revenue from the acquisitions of Sky Betting & Gaming (“SBG”) and BetEasy, as well as organic growth in the International segment.
  • Adjusted EBITDA and Adjusted EBITDA Margin – Adjusted EBITDA for the quarter increased 27.3% year-over-year, primarily driven by the impact of the acquisitions of SBG and BetEasy and by increased gross profit from organic growth within the International segment. Adjusted EBITDA Margin for the quarter decreased 26.7% year-over-year, primarily driven by the higher contribution from the Betting and Gaming verticals within each segment.
  • Consolidated Debt and Cash – The total principal amount owing on long-term debt outstanding at the end of the quarter was $5.65 billion with a carrying value of $5.52 billion. The Stars Group ended the third quarter of 2018 with approximately $419 million in operational cash on its balance sheet, which translated into Net Debt of $5.1 billion. Subsequent to the quarter end, on October 24, 2018, The Stars Group fully repaid the $100 million outstanding on its revolving credit facility using cash on its balance sheet.
  • U.S. Sports Betting Update – On August 10, 2018, The Stars Group and Mount Airy Casino Resort announced a partnership to enter Pennsylvania’s online sports wagering and gaming market, where The Stars Group will offer to customers in Pennsylvania its online poker, casino (including slots and tables) and sports wagering products. On September 13, 2018, The Stars Group launched its BetStars online sports betting brand in New Jersey through its partnership with Resorts Casino Hotel. The offering, which is initially available through mobile, provides New Jersey customers with an innovative and robust mobile-led sportsbook alongside The Stars Group’s already existing online poker and casino offerings available through the PokerStarsNJ and PokerStars Casino NJ brands.
  • Sky Betting & Gaming Update – On July 10, 2018, The Stars Group completed the previously announced Sky Betting & Gaming acquisition for $4.7 billion, and on October 11, 2018, the UK Competition & Markets Authority cleared the acquisition, allowing The Stars Group to begin executing on its integration plans. As it relates to the previously announced expected synergies of at least $70 million, The Stars Group currently believes that approximately 53% will relate to headcount and other staff costs, 23% to purchasing costs and 24% to other cost savings. In addition, The Stars Group currently estimates that it may achieve approximately $5 million of such synergies before year end, followed by a further $50 million in 2019 and an additional $15 million in 2020. The Stars Group continues to expect approximately $85 million in implementation costs to achieve those synergies, with the majority of such costs being incurred in 2019.

International

Three Months Ended  September 30,

Nine Months Ended September 30,

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

2018

2017

% Change

2018

2017

% Change

Stakes

233,694

163,844

42.6%

705,251

451,699

56.1%

Betting Net Win Margin (%)

9.0%

7.1%

26.1%

8.1%

6.1%

33.4%

Revenue

Poker         

212,832

221,393

(3.9%)

675,688

642,946

5.1%

Gaming

107,602

83,474

28.9%

316,253

243,959

29.6%

Betting

21,030

11,688

79.9%

57,351

27,541

108.2%

Other 2

10,982

12,888

(14.8%)

35,155

37,619

(6.5%)

Total Revenue

352,446

329,443

7.0%

1,084,447

952,065

13.9%

Gross Profit

287,522

266,966

7.7%

873,444

774,460

12.8%

Gross Profit Margin (%)

81.6%

81.0%

0.7%

80.5%

81.3%

(1.0%)

General and administrative

111,295

95,250

16.8%

319,668

276,798

15.5%

Sales and marketing

31,912

32,624

(2.2%)

119,136

97,914

21.7%

Research and development

6,808

6,030

12.9%

22,985

18,513

24.2%

Operating Income

137,507

133,062

3.3%

411,655

381,235

8.0%

Adjusted EBITDA ¹

182,228

162,880

11.9%

533,025

478,264

11.4%

Adjusted EBITDA Margin (%) ¹

51.7%

49.4%

4.6%

49.2%

50.2%

(2.2%)

_____________________________

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 Other revenue includes $1.0 million 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 for the quarter was $212.8 million, or a decrease of approximately 3.9% year-over-year. Excluding the impact of year-over-year changes in foreign exchange rates, Poker revenues for the quarter would have increased by 0.3%. The reported decrease was primarily driven by foreign exchange fluctuations, the cessation of operations in certain markets, notably Australia in September 2017, and cross selling to other verticals (particularly during the FIFA World Cup), and offset by, among other things, the Stars Rewards loyalty program (introduced during the quarter ended September 30, 2017) and the introduction of shared poker liquidity in France and Spain in the first quarter and Portugal in the second quarter.
  • Gaming – Gaming revenue for the quarter was $107.6 million, or an increase of 28.9% year-over-year. Excluding the impact of year-over-year changes in foreign exchange rates, Gaming revenues for the quarter would have increased by 32.5%. The reported increase was primarily the result of product and content improvements to PokerStars Casino, including the introduction of over 250 new casino games since the beginning of the year and the launch of PokerStars Casino in certain new markets. This was partially offset by, among other things, the impact of year-over-year changes in foreign exchange rates.
  • Betting – Betting revenue for the quarter was $21.0 million, or an increase of 79.9% year-over-year. Excluding the impact of year-over-year changes in foreign exchange rates, Betting revenues for the quarter would have increased by 86.5%. The reported increase was primarily the result of increases in Stakes and Betting Net Win Margin. These increases were primarily driven by increased wagering activity due to product and content improvements to BetStars, the launch of BetStars in certain new markets, and the 2018 FIFA World Cup.
  • Adjusted EBITDA and Adjusted EBITDA Margin – Adjusted EBITDA for the quarter increased 11.9% year-over-year, primarily driven by increased revenue and gross profit across all segments as noted above. Adjusted EBITDA Margin for the quarter increased 4.6% year-over-year, primarily driven by increased revenues combined with operational leverage from additional product and content improvements and a decline in sales and marketing expenses in the quarter.
  • Quarterly Real-Money Active Uniques (QAUs) – QAUs were 2.0 million, which represents a decrease of 3.1% year-over-year. This decrease was primarily the result of the cessation of real-money online poker operations in certain markets, notably Australia in September 2017, and The Stars Group’s continued strategy of focusing on high-value customers (primarily recreational players), as offset by the growth and expansion of the real-money casino and betting product offerings.
  • Quarterly Net Yield (QNY) – QNY was $167, an increase of 11.3% year-over-year, and QNY excluding the impact of year-over-year changes in foreign exchange rates was $174, an increase of 16.0% year-over-year. QNY is a non-IFRS measure.
  • Net Deposits – Net Deposits were $335 million, an increase of 4.1% year-over-year. The increase was primarily driven by the implementation of the Stars Rewards loyalty program and continued focus on high-value customers (primarily recreational players), foreign exchange fluctuations and continued development of the casino and betting product offerings.
  • Stakes and Betting Net Win Margin – Stakes were $233.7 million, an increase of 42.6% year-over-year, and Betting Net Win Margin was 9.0%, an increase of 1.9 percentage points year-over-year. The increases in the quarter were primarily due to product and content improvements to BetStars driving incremental QAUs, the launch of BetStars in certain new markets, and the World Cup. The Betting Net Win Margin for the International segment is less exposed to the English Premier League and UK horse racing, and as such, was not impacted to the same extent by the operator-unfavorable results The Stars Group experienced within the United Kingdom segment as a whole.

United Kingdom

Three Months Ended September 30,

Nine Months Ended September 30,

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

2018

2017

% Change

2018

2017

% Change

Stakes

1,221,854

1,221,854

Betting Net Win Margin (%)

7.0%

7.0%

Revenue

Poker

2,884

2,884

Gaming

73,318

73,318

Betting

85,189

85,189

Other

6,989

6,989

Total Revenue

168,380

168,380

Gross Profit

121,226

121,226

Gross Profit Margin (%)

72.0%

72.0%

General and administrative

104,697

104,697

Sales and marketing 2

40,224

40,224

Research and development

4,940

4,940

Operating Loss

(28,635)

(28,635)

Adjusted EBITDA ¹

27,943

27,943

Adjusted EBITDA Margin (%) ¹

16.6%

16.6%

____________________________

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 Sales and marketing expense includes $1.0 million that the Corporation excluded from its consolidated results as it related to certain non-gaming related transactions with the United Kingdom segment.

 

  • Revenue, Adjusted EBITDA and Adjusted EBITDA Margin – Revenue from July 10, 2018 through the end of the quarter ended September 30, 2018, was $168.4 million. Adjusted EBITDA and Adjusted EBITDA Margin for the same period were $27.9 million and 16.6%, respectively. Revenue for the period was primarily impacted by low Betting Net Win Margin when compared to historical averages driven by particularly operator-unfavorable sports results. This was partially offset by strong Stakes during the period, due to strong growth in QAUs. Adjusted EBITDA and Adjusted EBTIDA Margin were similarly impacted by the low Betting Net Win Margin and were also impacted by marketing investment for the start of the European football season.
  • Stakes and Betting Net Win Margin – Stakes and Betting Net Win Margin from July 10, 2018 through the end of the quarter ended September 30, 2018 were $1.22 billion and 7.0%, respectively. The Betting Net Win Margin can vary significantly from quarter to quarter; however, over the long term, the Corporation believes that these margins tend to become more predictable. The Betting Net Win Margin is below SBG’s expected long-term average of approximately 9% primarily as a result of operator-unfavorable results in English Premier League football and horse racing, which collectively represent a significant portion of Stakes. The Stars Group believes that had Betting Net Win Margin been 9% during the period, Betting revenue would have been $110.0 million as opposed to $85.2 million.

Australia

Three Months Ended September 30,

Nine Months Ended September 30,

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

2018

2017

% Change

2018

2017

% Change

Stakes

825,438

1,693,164

Betting Net Win Margin (%)

6.3%

7.4%

Revenue

Betting

52,157

124,559

Total Revenue

52,157

124,559

Gross Profit

35,154

89,589

Gross Profit Margin (%)

67.4%

71.9%

General and administrative

39,963

84,588

Sales and marketing

21,050

37,523

Research and development

114

1,098

Operating Loss

(25,973)

(33,620)

Adjusted EBITDA ¹

(4,764)

7,861

Adjusted EBITDA Margin (%) ¹

(9.1%)

6.3%

_____________________________

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, Adjusted EBITDA and Adjusted EBITDA Margin – Revenue for the quarter was $52.2 million. Adjusted EBITDA and Adjusted EBITDA Margin for the same period were $(4.8) million and (9.1)%, respectively. Revenue for the quarter was impacted by low Betting Net Win Margin when compared to historical averages driven by particularly operator-unfavorable sports results.
  • Stakes and Betting Net Win Margin – Stakes and Betting Net Win Margin for the quarter ended September 30, 2018 were $825.4 million and 6.3%, respectively. The Betting Net Win Margin can vary significantly from quarter to quarter; however, over the long term, the Corporation believes that these margins tend to become more predictable. The Betting Net Win Margin is below BetEasy’s long-term average of 8.5% primarily as a result of operator-unfavorable results in horse racing, which represents a significant portion of Stakes. The Stars Group believes that had Betting Net Win Margin been 8.5% during the quarter, Betting revenue would have been $70.2 million as opposed to $52.2 million.

For additional information regarding The Stars Group’s reporting segments and major lines of operations, please see The Stars Group’s unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2018 (the “Q3 2018 Financial Statements”), including note 6 therein, and management’s discussion and analysis thereon (the “Q3 2018 MD&A”).

Historic Supplemental Information and 2019 Update

Due to its recent acquisitions of SBG and BetEasy and to provide additional clarity with respect to the historical performance of The Stars Group’s business on a proforma basis for the three and nine months ended September 30, 2018 and 2017, and presented based on The Stars Group’s current reporting segments and lines of operations, see the information below under the heading “Supplementary Information”. Certain of this information contains non-IFRS measures. 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”.

In addition, to provide further clarity with respect to the potential impact of such acquisitions on its full year 2019 results, The Stars Group is also providing information for certain financial items:

  • Depreciation and amortization excluding purchase price allocation amortization of between $65 and $75 million;
  • Cash interest expense of between $295 and $305 million;
  • Effective tax rate (applied to Adjusted EBITDA less cash interest expense and non-purchase price allocation related depreciation and amortization) of between 8.0 and 10.0%; and
  • Diluted Shares of between 274 and 278 million.

These unaudited expected financial items are based on certain accounting assumptions and reflect management’s view of current and future market and business conditions, including assumptions of (i) no material impairment or write-down of the assets to which this depreciation and amortization relates, (ii) no material change in the prevailing EURIBOR or LIBOR rates as at September 30, 2018 and no material adverse impact on applicable hedging counterparties, (iii) no material change in the mix of taxable income by jurisdiction, in the rate of corporate tax or tax regimes in the jurisdictions in which The Stars Group currently operates and no material change in the geographies where The Stars Group currently offers its products, (iv) no material increases or decreases in The Stars Group’s issued and outstanding shares, (v) no other material regulatory events, and (vi) no material foreign currency exchange rate fluctuations, particularly against the Euro, Great Britain pound sterling and Australian dollar.

Supplementary information

Proforma Three Months Ended September 30, 2018

In millions of U.S. Dollars

International

United Kingdom

Australia2

Corporate3

Consolidated

Stakes

233.7

1,404.7

825.4

2,463.8

Betting Net Win Margin

9.0%

7.3%

6.3%

7.1%

Revenue

Poker

212.8

3.2

216.0

Gaming

107.6

83.9

191.5

Betting

21.0

102.3

52.2

175.5

Other

11.0

8.4

(1.0)

18.4

Total

352.4

197.8

52.2

(1.0)

601.4

Operating Income (loss)

137.5

(67.9)

(26.0)

(12.0)

31.6

Adjusted EBITDA1

182.2

37.5

(4.8)

(7.2)

207.7

Adjusted EBITDA Margin1

51.7%

19.0%

(9.1%)

34.5%

QAUs (millions)

2.0

2.0

0.3

4.3

 

Proforma Three Months Ended September 30, 2017

In millions of U.S. Dollars

International

United Kingdom

Australia2

Corporate

Consolidated

Stakes

163.8

1,207.6

437.1

1,808.5

Betting Net Win Margin

7.1%

9.0%

9.1%

8.8%

Revenue

Poker

221.4

3.6

225.0

Gaming

83.5

72.8

156.3

Betting

11.7

108.4

39.7

159.8

Other

12.8

6.6

19.4

Total

329.4

191.4

39.7

560.5

Operating Income (loss)

133.1

(24.7)

(10.0)

(14.3)

84.1

Adjusted EBITDA1

162.9

54.7

(2.9)

(7.1)

207.6

Adjusted EBITDA Margin1

49.4%

28.6%

(7.3%)

37.0%

QAUs (millions)

2.1

1.6

0.1

3.8

 

Proforma Nine Months Ended September 30, 2018

In millions of U.S. Dollars

International

United Kingdom

Australia2

Corporate3

Consolidated

Stakes

705.3

4,194.9

1,982.2

6,882.4

Betting Net Win Margin

8.1%

8.9%

7.6%

8.4%

Revenue

Poker

675.7

10.5

686.2

Gaming

316.2

244.2

560.4

Betting

57.3

372.0

150.4

579.7

Other

35.2

27.2

(1.0)

61.4

Total

1,084.4

653.9

150.4

(1.0)

1,887.7

Operating Income (loss)

411.7

(177.8)

(35.4)

(163.5)

35.0

Adjusted EBITDA1

533.0

161.4

13.5

(27.3)

680.6

Adjusted EBITDA Margin1

49.2%

24.7%

9.0%

36.1%

 

Proforma Nine Months Ended September 30, 2017

In millions of U.S. Dollars

International

United Kingdom

Australia2

Corporate

Consolidated

Stakes

451.7

3,728.6

1,194.5

5,374.8

Betting Net Win Margin

6.1%

8.5%

9.2%

8.4%

Revenue

Poker

643.0

10.6

653.6

Gaming

244.0

206.4

450.4

Betting

27.5

315.8

109.5

452.8

Other

37.6

18.6

56.2

Total

952.1

551.4

109.5

1,613.0

Operating Income (loss)

381.2

(80.0)

(16.2)

(46.1)

238.9

Adjusted EBITDA1

478.3

161.0

3.5

(25.0)

617.8

Adjusted EBITDA Margin1

50.2%

29.2%

3.2%

38.3%

 

FX Rates

Mar. 31,

Jun. 30,

Sept. 30,

Mar. 31,

Jun. 30,

Sept. 30,

Average for the three months ended

2017

2017

2017

2018

2018

2018

GBP to USD

1.2393

1.2786

1.3087

1.3917

1.3616

1.3035

AUD to USD

0.7579

0.7508

0.7890

0.7861

0.7572

0.7393

_____________________________

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 The Australia segment supplementary information includes the results of operations of William Hill Australia beginning with its acquisition on April 24, 2018. In August 2018, The Stars Group substantially completed its migration of customers and platforms and integration of William Hill Australia into BetEasy.

3 Other revenue includes $1.0 million that the Corporation excluded from its consolidated results as it related to certain non-gaming related transactions with the United Kingdom segment.

 

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

The Stars Group’s Q3 2018 Financial Statements, Q3 2018 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 Q3 2018 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, November 7, 2018 at 8:30 a.m. ET to discuss its financial results for the third quarter ended 2018 and related matters, and provide additional detail with respect to the information in this news release, its webcast presentation, its Q3 2018 Financial Statements and Q3 2018 MD&A, as well as certain additional historical supplemental financial information, including on a proforma basis for the SBG and BetEasy acquisitions. To access via tele-conference, please dial +1 855-327-6838 or +1-631-891-4304 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 10005822. To access the webcast please use the following link: http://public.viavid.com/index.php?id=132084

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 (loss) earnings, which is the nearest IFRS measure:

Three Months Ended September 30, 2018

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

International

United Kingdom

Australia

Corporate

Consolidated

Net earnings (loss)

137,507

(28,635)

(25,973)

(73,169)

9,730

Income tax recovery

13,189

13,189

Net financing charges

(74,360)

(74,360)

Operating income (loss)

137,507

(28,635)

(25,973)

(11,998)

70,901

Depreciation and amortization

34,398

53,642

10,855

43

98,938

Add (deduct) the impact of the following:

Acquisition-related costs and deal contingent forwards

1,667

1,667

Stock-based compensation

3,154

3,154

Loss from investments and associates

123

123

Impairment of intangibles assets and assets held for sale

3,869

3,869

Other costs

6,331

2,936

10,354

(21)

19,600

Total adjusting items

10,323

2,936

10,354

4,800

28,413

Adjusted EBITDA

182,228

27,943

(4,764)

(7,155)

198,252

 

Nine Months Ended September 30, 2018

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

International

United Kingdom

Australia

Corporate

Consolidated

Net earnings (loss)

412,723

(28,635)

(33,620)

(421,201)

(70,733)

Income tax recovery

15,438

15,438

Net financing charges

(273,071)

(273,071)

Net earnings from associates

1,068

1,068

Operating income (loss)

411,655

(28,635)

(33,620)

(163,568)

185,832

Depreciation and amortization

108,354

53,642

20,723

62

182,781

Add (deduct) the impact of the following:

Acquisition-related costs and deal contingent forwards

112,485

112,485

Stock-based compensation

8,802

8,802

Loss from investments and associates

370

370

Impairment of intangibles assets and assets held for sale

4,943

4,943

Other costs

7,703

2,936

20,758

14,935

46,332

Total adjusting items

13,016

2,936

20,758

136,222

172,932

Adjusted EBITDA

533,025

27,943

7,861

(27,284)

541,545

 

Three Months Ended September 30, 2017

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

International

United Kingdom

Australia

Corporate

Consolidated

Net earnings (loss)

130,493

(54,619)

75,874

Income tax recovery

(2,186)

(2,186)

Net financing charges

(38,095)

(38,095)

Net loss from associates

(2,569)

(2,569)

Operating income (loss)

133,062

(14,338)

118,724

Depreciation and amortization

36,626

5

36,631

Add (deduct) the impact of the following:

Stock-based compensation

3,298

3,298

Gain from investments

(8,920)

(8,920)

Reversal of impairment of intangibles assets and assets held for sale

(1,117)

(1,117)

Other costs

3,229

3,922

7,151

Total adjusting items

(6,808)

7,220

412

Adjusted EBITDA

162,880

(7,113)

155,767

 

Nine Months Ended September 30, 2017

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

International

United Kingdom

Australia

Corporate

Consolidated

Net earnings (loss)

378,666

(166,556)

212,110

Income tax recovery

(856)

(856)

Net financing charges

(119,593)

(119,593)

Net loss from associates

(2,569)

(2,569)

Operating income (loss)

381,235

(46,107)

335,128

Depreciation and amortization

108,814

152

108,966

Add (deduct) the impact of the following:

Stock-based compensation

7,914

7,914

Gain from investments

(9,137)

(4,429)

(13,566)

Reversal of impairment of intangibles assets and assets held for sale

(6,162)

(2,267)

(8,429)

Other costs

3,514

19,778

23,292

Total adjusting items

(11,785)

20,996

9,211

Adjusted EBITDA

478,264

(24,959)

453,305

 

Three Months Ended
September
 30,

Nine Months Ended
September
 30,

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

2018

2017

2018

2017

Net (loss) earnings

9,730

75,874

(70,733)

212,110

Income tax (recovery) expense

(13,189)

2,186

(15,438)

856

Net loss (earnings) before tax

(3,459)

78,060

(86,171)

212,966

Add (deduct) the impact of the following:

Interest accretion

8,984

10,767

30,064

35,708

Loss on debt extinguishment

18,521

143,497

Re-measurement of contingent consideration

5,056

8,753

Re-measurement of derivatives

(11,300)

(11,300)

Ineffectiveness of cash flow hedges

(11,949)

(11,949)

Acquisition-related costs and deal contingent forwards

1,667

112,485

Amortization of acquisition intangibles

92,107

31,077

154,965

93,227

Stock based compensation

3,154

3,298

8,802

7,914

(Gain) loss from investments and associates

123

(6,353)

(698)

(10,998)

Impairment (reversal of impairment) of intangibles assets and assets held for sale

3,869

(1,117)

4,943

(8,429)

Other costs (income)

19,600

7,151

46,332

23,292

Income tax impact of the above

(6,873)

(3,288)

(10,438)

(6,690)

Adjusted net earnings

119,500

119,595

389,285

346,990

Adjusted net earnings attributable to

Shareholders of The Stars Group Inc.

119,961

119,595

389,430

346,990

Non-controlling interest

(461)

(145)

Weighted average diluted number of shares

269,526,633

204,800,009

232,640,294

202,796,952

Adjusted Diluted Net Earnings per Share attributable to
Shareholders of The Stars Group Inc

0.45

0.58

1.67

1.71

 

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

Three Months Ended September 30,

Nine Months Ended September 30,

2018

2017

2018

2017

In thousands of U.S. Dollars

$000’s

$000’s

$000’s

$000’s

Integration costs

17,088

28,555

Financial (income) expenses

(4,948)

2,839

(2,899)

3,062

Termination of employment agreements

4,486

1,358

6,544

4,166

AMF and other investigation professional fees

(888)

(1,265)

3,771

3,888

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

4,260

2,916

9,918

12,233

Non-recurring professional fees

1,423

664

1,976

2,168

Retention bonuses

25

41

259

1,271

Loss on disposal of assets

338

41

599

Austria gaming duty

(3,679)

(3,679)

(5,000)

Termination of affiliate agreements

407

Other

1,833

260

1,846

498

Other costs

19,600

7,151

46,332

23,292

 

The tables below present reconciliations of proforma Adjusted EBITDA to operating income (loss), which is the nearest IFRS measure:

Proforma Three Months Ended September 30, 2018

In millions of U.S. Dollars

International

United Kingdom

Australia1

Corporate

Consolidated

Operating income (loss)

137.5

(67.9)

(26.0)

(12.0)

31.6

Depreciation and amortization

34.4

102.5

10.9

147.8

Add (deduct) the impact of the following:

Acquisition related costs

2.9

10.3

1.7

14.9

Impairment of intangible assets

3.9

3.9

Other Adjustments

6.4

3.1

9.5

Total adjusting items

10.3

2.9

10.3

4.8

28.3

Adjusted EBITDA

182.2

37.5

(4.8)

(7.2)

207.7

 

Proforma Three Months Ended September 30, 2017

In millions of U.S. Dollars

International

United Kingdom

Australia1

Corporate

Consolidated

Operating income (loss)

133.1

(24.7)

(10.0)

(14.3)

84.1

Depreciation and amortization

36.6

79.4

6.0

122.0

Add (deduct) the impact of the following:

Impairment of intangible assets

(1.1)

(1.1)

Other Adjustments

(5.7)

1.1

7.2

2.6

Total adjusting items

(6.8)

1.1

7.2

1.5

Adjusted EBITDA

162.9

54.7

(2.9)

(7.1)

207.6

 

Proforma Nine Months Ended September 30, 2018

In millions of U.S. Dollars

International

United Kingdom

Australia1

Corporate

Consolidated

Operating income (loss)

411.7

(177.8)

(35.4)

(163.5)

35.0

Depreciation and amortization

108.4

269.9

25.6

403.9

Add (deduct) the impact of the following:

Acquisition related costs

2.9

10.3

112.5

125.7

Impairment of intangible assets

4.8

4.8

Transaction related costs

66.4

66.4

Other Adjustments

8.1

13.0

23.7

44.8

Total adjusting items

12.9

69.3

23.3

136.2

241.7

Adjusted EBITDA

533.0

161.4

13.5

(27.3)

680.6

 

Proforma Nine Months Ended September 30, 2017

In millions of U.S. Dollars

International

United Kingdom

Australia1

Corporate

Consolidated

Operating income (loss)

381.2

(80.0)

(16.2)

(46.1)

238.9

Depreciation and amortization

108.8

232.9

17.1

0.2

359.0

Add (deduct) the impact of the following:

Impairment of intangible assets

(6.1)

8.1

(2.3)

(0.3)

Other Adjustments

(5.6)

2.6

23.2

20.2

Total adjusting items

(11.7)

8.1

2.6

20.9

19.9

Adjusted EBITDA

478.3

161.0

3.5

(25.0)

617.8

_____________________________

1 The Australia segment supplementary information includes the results of operations of William Hill Australia beginning with its acquisition on April 24, 2018. In August 2018, The Stars Group substantially completed its migration of customers and platforms and integration of William Hill Australia into BetEasy.

 

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

Three Months Ended September 30,

Nine Months Ended September 30,

In thousands of U.S. Dollars

2018

2017

2018

2017

Net cash inflows from operating activities

73,227

144,870

369,307

370,843

Customer deposit liability movement

1,552

(2,884)

(12,349)

22,398

74,779

141,986

356,958

393,241

Capital Expenditure:

Additions to deferred development costs

(16,496)

(6,275)

(32,686)

(16,701)

Additions to property and equipment

(9,530)

(3,253)

(18,791)

(5,507)

Additions to intangible assets

(4,426)

(565)

(16,268)

(1,484)

Interest paid

(62,113)

(30,556)

(128,391)

(95,620)

Debt principal repayments

(8,937)

(6,031)

(20,430)

(18,901)

Free Cash Flow

(26,723)

95,306

140,392

255,028

 

The table below presents a reconciliation of Net Debt:

In thousands of U.S. Dollars

As at September 30, 2018

Current portion of long-term debt

35,750

Long-term debt

5,483,900

Less: Cash and cash equivalents – operational

418,896

Net Debt

5,100,754

 

For additional information on The Stars Group’s non-IFRS measures, see below and the Q3 2018 MD&A, including under the headings “Management’s Discussion and Analysis”, “Limitations of Key Metrics, Other Data and Non-IFRS Measures” and “Key Metrics and Non-IFRS Measures”.

About The Stars Group

The Stars Group is a global leader in the online and mobile gaming and interactive entertainment industries, entertaining millions of customers across its online real- and play-money poker, gaming and betting product offerings, which are delivered through both mobile and desktop applications and the web. The Stars Group offers these products directly or indirectly under several ultimately owned or licensed gaming and related consumer businesses and brands, including, among others, PokerStars, PokerStars Casino, BetStars, Full Tilt, 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 19 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. 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: the heavily regulated industry in which The Stars Group carries on its business; risks associated with interactive entertainment and online and mobile gaming generally; current and future laws or regulations and new interpretations of existing laws or regulations, or potential prohibitions, with respect to interactive entertainment or online gaming or activities related to or necessary for the operation and offering of online gaming; potential changes to the gaming regulatory framework; legal and regulatory requirements; 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; significant barriers to entry; competition and the competitive environment within addressable markets and industries; impact of inability to complete future or announced acquisitions or to integrate businesses successfully, including, without limitation, Sky Betting & Gaming and BetEasy; The Stars Group’s substantial indebtedness requires that it use a significant portion of its cash flow to make debt service payments; The Stars Group’s secured credit facilities contain covenants and other restrictions that may limit its flexibility in operating its business; risks associated with advancements in technology, including artificial intelligence; ability to develop and enhance existing product offerings and new commercially viable product offerings; ability to mitigate foreign exchange and currency risks; 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 exposure to greater than anticipated tax liability; risks of foreign operations generally; protection of proprietary technology and intellectual property rights; ability to recruit and retain management and other qualified personnel, including key technical, sales and marketing personnel; defects in product offerings; losses due to fraudulent activities; management of growth; contract awards; potential financial opportunities in addressable markets and with respect to individual contracts; ability of technology infrastructure to meet applicable demand and reliance on online and mobile telecommunications operators; systems, networks, telecommunications or service disruptions or failures or cyber-attacks and failure to protect customer data, including personal and financial information; regulations and laws that may be adopted with respect to the Internet and electronic commerce or that may otherwise impact The Stars Group in the jurisdictions where it is currently doing business or intends to do business, particularly those related to online gaming or that could impact the ability to provide online product offerings, including, without limitation, as it relates to payment processing; ability to obtain additional financing or to complete any refinancing on reasonable terms or at all; customer and operator preferences and changes in the economy; dependency on customers’ acceptance of its product offerings; consolidation within the gaming industry; litigation costs and outcomes; expansion within existing and into new markets; relationships with vendors and distributors; natural events; contractual relationships of Sky Betting & Gaming or The Stars Group with Sky plc and/or its subsidiaries; counterparty risks; failure of systems and controls of The Stars Group to restrict access to its products; reliance on scheduling and live broadcasting of major sporting events; macroeconomic conditions and trends in the gaming and betting industry; bookmaking risks; an ability to realize projected financial increases attributable to acquisitions and The Stars Group’s business strategies; and 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. 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 The Stars Group’s annual information form for the year ended December 31, 2017, including under the heading “Risk Factors and Uncertainties”, in the June 21, 2018 prospectus supplement to the short form base shelf prospectus dated January 16, 2018 under the heading “Risk Factors”, and in the Q3 2018 MD&A, including under the headings “Risk Factors and Uncertainties”, “Limitations of Key Metrics, Other Data and Non-IFRS Measures” and “Key Metrics and Non-IFRS Measures”, 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, including Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Earnings, Adjusted Diluted Net Earnings per Share, Free Cash Flow, Net Debt and the numerator of QNY. The Stars Group believes these non-IFRS financial measures will provide investors with useful supplemental information about the financial 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. Although management believes these 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, limiting its usefulness for comparison purposes. Moreover, presentation of certain of these measures is provided for year-over-year 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 taxes 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 “Reconciliation of Non-IFRS Measures to Nearest IFRS Measures” above.

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, beginning with the Q3 2018 MD&A, adjustments are made for (i) the re-measurement of contingent consideration, which was previously included in, and adjusted for through, interest accretion, but starting with the Q3 2018 Financial Statements it is now a separate line item, (ii) the re-measurement of embedded derivatives and ineffectiveness on cash flow hedges, each of which are 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, as set out in the reconciliation tables under “Reconciliation of Non-IFRS Measures to Nearest IFRS Measures” above.

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, warrants and the preferred shares of The Stars Group. 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. See note 9 in the Q3 2018 Financial Statements. For the three and nine months ended September 30, 2018, Diluted Shares used for the calculation of Adjusted Diluted Net Earnings per Share equalled 269,526,633 and 232,640,294, respectively, compared with 204,800,009 and 202,796,952 for the same periods in 2017, respectively.

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), as set out in the reconciliation tables under “Reconciliation of Non-IFRS Measures to Nearest IFRS Measures” above. The Corporation believes that removing movements in customer deposit liabilities provides a more meaningful understanding of its free cash flows as customer deposits are not available funds for the Corporation to use for financial or operational purposes.

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

To show the foreign exchange impact due to translation and purchasing power the Corporation calculates revenue on a constant currency basis, by translating the International segment’s revenue for the three and nine months ended September 30, 2018 using the prior year’s monthly exchange rates for its local source currencies other than the U.S. dollar, which The Stars Group believes is a useful metric that facilitates comparison to its historical performance.

For additional information on The Stars Group’s non-IFRS measures, see above and the Q3 2018 MD&A, including under the headings “Management’s Discussion and Analysis”, “Limitations of Key Metrics, Other Data and Non-IFRS Measures” and “Key Metrics and Non-IFRS Measures”.

Key Metrics and Other Data

The Stars Group provides the following key metrics in this news release:

QAUs for the International and Australia reporting segments means active unique customers (online, mobile and desktop client) who (i) made a deposit or transferred funds into their real-money account with The Stars Group at any time, and (ii) generated real-money online rake or placed a real-money online bet or wager on during the applicable quarterly period. The Stars Group defines “active unique customer” as a customer who played or used one of its real-money offerings at least once during the period, and excludes duplicate counting, even if that customer is active across multiple lines of operation (Poker, Gaming and/or Betting, as applicable) within the applicable reporting segment. The definition of QAUs excludes customer activity from certain low-stakes, non-raked real-money poker games, but includes real-money activity by customers using funds (cash and cash equivalents) deposited by The Stars Group into such customers’ previously funded accounts as promotions to increase their lifetime value.

QAUs for the United Kingdom reporting segment (which currently includes the Sky Betting & Gaming business operations only) means active unique customers (online and mobile) who have settled a Stake or made a wager on any betting or gaming product within the relevant period. The Stars Group defines unique for the United Kingdom reporting segment as a customer who played at least once on one of its real-money offerings during the period, and excludes duplicate counting, even if that customer is active across more than one line of operation. For the purpose of the three months ended September 30, 2018, QAUs for the United Kingdom reporting segment also include the applicable pre-acquisition period.

QNY means combined revenue for The Stars Group’s lines of operation (i.e., Poker, Gaming and/or Betting, as applicable), excluding Other revenues, as reported during the applicable quarterly period (or as adjusted to the extent any accounting reallocations are made in later periods) divided by the total QAUs during the same period. The United Kingdom reporting segment’s definition of QNY includes revenue noted in the definition above for the full financial quarter, including the pre-acquisition period.  QNY is a non-IFRS measure. The Stars Group does not provide a reconciliation for the numerator of QNY as the revenue components thereof are set forth in this news release.

Net Deposits means the aggregate of gross deposits or transfer of funds made by customers into their real-money online accounts less withdrawals or transfer of funds by such customers from such accounts, in each case during the applicable quarterly period. Gross deposits exclude (i) any deposits, transfers or other payments made by such customers into The Stars Group’s play-money and social gaming offerings, and (ii) any real-money funds (cash and cash equivalents) deposited by The Stars Group into such customers’ previously funded accounts as promotions to increase their lifetime value.

Stakes means betting amounts wagered on The Stars Group’s applicable online betting product offerings, and is also an industry term that represents the aggregate amount of funds wagered by customers within the Betting line of operation for the period specified.

Betting Net Win Margin is calculated as Betting revenue as a proportion of Stakes.

The Stars Group is in the process of the integration and migration of customers and platforms with respect to the Australian acquisitions (which management believes is substantially complete as of the date hereof), the integration of Sky Betting & Gaming, and the implementation of its new operating and reporting segments, and once complete, The Stars Group may revise or remove currently presented key metrics or non-IFRS measures or report certain additional or other key metrics or non-IFRS measures in the future.

For additional information on The Stars Group’s key metrics and other data, see the Q3 2018 MD&A, including under the headings “Limitations of Key Metrics, Other Data and Non-IFRS Measures”, “Key Metrics and Non-IFRS Measures” and “Segment Results of Operations”.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

Three Months Ended September 30,

Nine Months Ended September 30,

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

2018

2017

2018

2017

Revenues

571,983

329,443

1,376,386

952,065

Cost of revenue

(129,226)

(62,477)

(293,127)

(177,605)

Gross profit

442,757

266,966

1,083,259

774,460

General and administrative

(267,463)

(109,096)

(671,556)

(322,344)

Sales and marketing

(92,531)

(33,116)

(196,848)

(98,475)

Research and development

(11,862)

(6,030)

(29,023)

(18,513)

Operating income

70,901

118,724

185,832

335,128

Net financing charges

(74,360)

(38,095)

(273,071)

(119,593)

Net earnings from associates

(2,569)

1,068

(2,569)

(Loss) earnings before income taxes

(3,459)

78,060

(86,171)

212,966

Income tax recovery

13,189

(2,186)

15,438

(856)

Net (loss) earnings

9,730

75,874

(70,733)

212,110

Net (loss) earnings attributable to

Shareholders of The Stars Group Inc.

15,127

76,082

(63,067)

211,987

Non-controlling interest

(5,397)

(208)

(7,666)

123

Net (loss) earnings

9,730

75,874

(70,733)

212,110

(Loss) earnings per Common Share (U.S. dollars)

Basic

$

0.06

$

0.52

$

(0.34)

$

1.45

Diluted

$

0.06

$

0.37

$

(0.34)

$

1.05

Weighted Average Common Shares Outstanding (thousands)

Basic

257,322

147,351

186,517

146,537

Diluted

269,527

204,800

186,517

202,797

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at September 30,

As at December 31,

In thousands of U.S. Dollars

2018

2017

ASSETS

Current assets

     Cash and cash equivalents – operational

418,896

283,225

     Cash and cash equivalents – customer deposits

327,765

227,098

Total cash and cash equivalents

746,661

510,323

Restricted cash advances and collateral

10,696

7,862

Prepaid expenses and other current assets

50,816

29,695

Current investments – customer deposits

104,125

122,668

Accounts receivable

154,102

100,409

Income tax receivable

29,643

16,540

Derivatives

2,037

Total current assets

1,096,043

789,534

Non-current assets

Restricted cash advances and collateral

10,700

45,834

Prepaid expenses and other non-current assets

27,496

26,551

Non-current accounts receivable

12,430

11,818

Property and equipment

76,745

44,837

Income tax receivable

11,805

14,061

Deferred income taxes

6,597

5,141

Derivatives

32,904

Goodwill and intangible assets

10,205,886

4,477,350

Total non-current assets

10,384,563

4,625,592

Total assets

11,480,606

5,415,126

LIABILITIES

Current liabilities

Accounts payable and other liabilities

434,087

194,187

Customer deposits

429,574

349,766

Current provisions

31,853

17,590

Derivatives

14,136

Income tax payable

91,864

35,941

Due to related parties

2,028

Current portion of long-term debt

35,750

4,990

Total current liabilities

1,039,292

602,474

Non-current liabilities

Long-term debt

5,483,900

2,353,579

Long-term provisions

4,268

3,093

Derivatives

21,093

111,762

Other long-term liabilities

91,521

Due to related parties

34,267

Income tax payable

12,825

24,277

Deferred income taxes

594,297

16,510

Total non-current liabilities

6,242,171

2,509,221

Total liabilities

7,281,463

3,111,695

EQUITY

Share capital

4,095,038

1,884,219

Reserves

(442,234)

(142,340)

Retained earnings

542,146

561,519

Equity attributable to the Shareholders of The Stars Group Inc.

4,194,950

2,303,398

Non-controlling interest

4,193

33

Total equity

4,199,143

2,303,431

Total liabilities and equity

11,480,606

5,415,126

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

In thousands of U.S. Dollars

2018

2017

Operating activities

Net (loss) earnings

(70,733)

212,110

Add (deduct):

Income tax (recovery) expense recognized in net earnings

(15,438)

856

Net financing charges

273,071

118,824

Depreciation and amortization

182,781

108,966

Unrealized loss (gain) on foreign exchange

58,954

(9,891)

Unrealized loss (gain) on investments

584

(9,332)

Impairment (reversal of impairment) of intangible assets and assets held for sale

4,901

(8,430)

Net (earnings) loss from associates

(1,068)

2,569

Realized loss (gain) on current investments and promissory note

420

(9,155)

Income taxes paid

(27,182)

(8,941)

Changes in non-cash operating elements of working capital

(49,805)

(10,284)

Customer deposit liability movement

12,349

(22,398)

Other

473

5,949

Net cash inflows from operating activities

369,307

370,843

Investing activities

Acquisition of subsidiaries, net of cash acquired

(1,865,262)

(6,516)

Additions to intangible assets

(16,268)

(1,484)

Additions to property and equipment

(18,791)

(5,507)

Additions to deferred development costs

(32,686)

(16,701)

Net sale of investments utilizing customer deposits

18,543

4,466

Cash movement from (to) restricted cash

35,000

Settlement of promissory note

8,084

Net investment in associates

1,068

(2,000)

Proceeds on disposal of interest in associate classified as held for sale

16,127

Other

(1,074)

(6,577)

Net cash outflows from investing activities

(1,879,470)

(10,108)

Financing activities

Issuance of Common Shares

717,250

Transaction costs on issuance of Common Shares

(32,312)

Issuance of Common Shares in relation to stock options

30,572

9,921

Redemption of SBG preferred shares and payment of shareholder loan on acquisition

(674,286)

Issuance of long-term debt

5,957,976

Repayment of long-term debt

(2,865,456)

(133,901)

Repayment of long-term debt assumed on business combination

(1,079,729)

Interest paid

(36,559)

(4,719)

Transaction costs on long-term debt

31,730

Net proceeds on related party debt

(128,391)

(95,620)

Payment of deferred consideration

(197,510)

Settlement of derivatives

(125,822)

13,904

Acquisition of further interest in subsidiaries

(48,240)

Settlement of margin

(7,602)

Capital contribution from non-controlling interest

12,060

Net cash inflows (outflows) from financing activities

1,758,793

(415,527)

Increase (decrease) in cash and cash equivalents

248,630

(54,792)

Unrealized foreign exchange difference on cash and cash equivalents

(12,292)

14,298

Cash and cash equivalents – beginning of period

510,323

267,684

Cash and cash equivalents – end of period


Source: European Gaming Media

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Betway becomes official global betting partner of the Mzansi Super League T20

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Betway has agreed a three-year-deal to become the official betting partner of the Mzansi Super League T20 – further adding to its cricket sponsorship portfolio.

The tournament, which takes place in Johannesburg, Tshwane, Durban, Nelson Mandela Bay, Cape Town and Paarl, is broadcast live in the UK and the first fixtures have already provided some great action.

Former South African international AB de Villiers impressed the locals as he hit fifty in vain as Tshwane Spartans were beaten by Cape Town Blitz, while Nelson Mandela Bay Giants beat the Jozi Stars.

Betway’s latest seven-figure-deal comes just months after it was confirmed as the official betting partner of both the men’s and women’s Cricket West Indies (CWI) sides.

Betway’s Anthony Werkman, said: “We are really pleased to be on board at the start of this new look T20 tournament.

“Being involved as a global partner shows the ambition Betway has to become a recognised worldwide supporter of elite professional sport, and the names appearing in this tournament certainly fit that bill.

“I am sure that the crowds will enjoy the games and we look forward to delivering an exciting experience for our customers too over the next three years.”

Cricket South Africa CEO, Thabang Moroe, added: “We are thrilled to have sports betting brand, Betway, on board to join our roster of sponsors, all whom have committed to helping us take Mzansi T20 to the world through the game of cricket.”


Source: European Gaming Media

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Praesepe put faith in Project pokers

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Project has received what it is describing as a ‘substantial order’ from Praesepe, part of the Gauselmann group of companies, for its specialist poker themed games comprising Red Hot Poker, Jacks or Better and the Cat C lite, Hi Lo Poker.

Confirming the order, Praesepe’s Head of Gaming Machines, Nigel Davis, said:We have a long and successful history of working with Project, one of the industry’s leading independent machine innovators. Project was the first to fully understand poker and over the last decade has mastered the art of translating the dynamics of the game into an array of stylish B4, Cat C and Cat C lite machines. We’ve found that poker attracts a different segment of the player base into our venues. They don’t perceive themselves as being slots players but poker players, which means that as an operator we are not simply cannibalising spend from one machine to another. Attracting new income is the lifeblood of any business and poker themed games bring new customers into our venues. I am confident the Project pokers that we have ordered will further enhance the fantastic Cashino customer experience.

Project Managing Director, Tony Boulton stated:We are delighted at the faith shown by Praesepe in our products. We have spent a lot of time understanding the psyche of the poker player and working hard to deliver new and enhanced experiences for poker aficionados. Poker doesn’t go out of fashion, it works across machine categories and it can be deployed either as a stand alone machine or, as we’ve demonstrated in 5 Star Games, as part of a mixed game style compendium. Key to its success and its longevity is the fact that it generates differentiated income courtesy of its’ distinct player base.


Source: European Gaming Media

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Continent 8 Named “International Business of the Year” at the Isle of Man Newspapers Awards for Excellence

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Continent 8 Named “International Business of the Year” at the Isle of Man Newspapers Awards for ExcellenceReading Time: 2 minutes

 

Continent 8 Technologies, the award-winning, multi-jurisdictional global data solutions provider, has been named the 2018 “International Business of the Year” at the prestigious Isle of Man Newspapers Awards for Excellence held last night at the Villa Marina, Isle of Man.

This year, Continent 8 was shortlisted in the “International Business of the Year category” – one of the most sought after awards of the night. Now in its 13th year, the Awards for Excellence has recognised more than 300 local companies since the awards started, creating a unique opportunity to recognise success for companies, individuals, the public sector, and the charitable sector.

This is the second time Continent 8 has been recognised for success and innovation. In 2014, Continent 8 was honoured as the “Company of the Year”. At that time, the judges remarked that Continent 8 demonstrated a clear strategy, as well as innovative ways of sourcing and delivering service on and off island. They recognised that Continent 8 had a firmly established local and international profile and has served as a strong ambassador on behalf of the Island.

Continent 8’s CEO Michael Tobin stated about this year’s award, “We are truly honoured to be recognised as this year’s International Business of the Year. Our success and growth are directly attributed to our global team of experts, our ability to develop long-term partnerships, and by offering the most sophisticated, innovative, and reliable services to our customers.” Mr. Tobin, described the award as a “Humbling recognition of our relentless pursuit of service and innovation on a global scale and our commitment to the growth of the Isle of Man.”

In accepting the award on behalf of Continent 8 David Black thanked the organisers, judges, shareholders, the global team and led a touching tribute following the recent tragic loss of colleague, Paul Steer.

Continent 8 is an award-winning, multi-jurisdictional global network solutions provider that connects, manages, and secures the world’s most valuable information. Its advanced data centers and high-quality networks support critical online operations in both private and public-sector organisations in over 30 locations across Europethe United States and Asia. For more information visit www.continent8.com.


Source: European Gaming Media

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