TORONTO, Feb. 27, 2020 /PRNewswire/ -- The Stars
Group Inc. (NASDAQ: TSG) (TSX: TSGI) today reported its financial
results for the fourth quarter and year ended December 31, 2019 and provided certain additional
highlights and updates. Unless otherwise noted, all dollar ($)
amounts are in U.S. dollars.
"In 2019, we continued to execute on our strategy to deliver
long-term sustainable growth and become the world's favorite
iGaming destination. We not only began to see the full-year
benefits of our transformative 2018 acquisitions, but executed on
delivering a landmark media partnership in the U.S., with the
launch of FOX Bet, strengthening our position in this emerging
market," said Rafi Ashkenazi, The Stars Group's Chief Executive
Officer. "We also focused on creating shareholder value through
efficient capital allocation, prepaying over $450 million of debt during the year."
"In-line with our expectations, we exited 2019 with a strong
fourth quarter with Constant Currency Revenue growth of 7%
year-over-year driven primarily by the continued impressive
underlying performance of our primary sports betting brands,"
continued Mr. Ashkenazi. "With sports betting now our largest
product vertical and 81% of our revenues coming from locally
regulated or taxed markets, we are well positioned for diversified
growth in 2020 and beyond."
"We entered 2020 with the full $100
million run-rate of expected cost synergies from our 2018
Sky Betting & Gaming acquisition and earlier this month prepaid
an additional $100 million of debt,
underpinning our ability to execute on complex integrations and the
highly cash-generative nature of our business model. In addition to
cost synergies, we have detailed plans in place to continue driving
revenue synergies and to increase investments in product and
marketing, giving us confidence in continued revenue growth in the
years ahead. In 2020, we plan to further enhance the global appeal
of the PokerStars brand, including by launching the PokerStars
Sports brand, leveraging the operational capabilities of our Sky
Betting & Gaming business, and launching television advertising
for PokerStars Casino," continued Mr. Ashkenazi.
"Lastly, ahead of closing our combination with Flutter, which
will enhance and accelerate each company's growth strategy, we
remain focused on our key strategic priorities of integration,
execution, and debt reduction," concluded Mr. Ashkenazi.
Fourth Quarter and
Full Year 2019 Summary
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
December 31,
|
|
Year Ended
December 31,
|
In thousands of U.S.
Dollars (except percentages and
per share amounts)
|
|
2019
|
|
|
2018
|
|
|
%
Change
|
|
2019
|
|
|
2018
|
|
%
Change
|
Total
revenue
|
|
687,962
|
|
|
652,852
|
|
|
5.4 %
|
|
2,528,448
|
|
|
2,029,238
|
|
24.6 %
|
Gross profit (excluding
depreciation and amortization)
|
|
497,471
|
|
|
486,815
|
|
|
2.2 %
|
|
1,835,386
|
|
|
1,570,074
|
|
16.9 %
|
Operating
income
|
|
92,373
|
|
|
73,992
|
|
|
24.8 %
|
|
264,199
|
|
|
260,124
|
|
1.6 %
|
Net earnings
(loss)
|
|
81,290
|
|
|
(38,173)
|
|
|
313.0 %
|
|
61,862
|
|
|
(108,906)
|
|
156.8 %
|
Adjusted Net
Earnings¹
|
|
144,816
|
|
|
144,663
|
|
|
0.1 %
|
|
533,225
|
|
|
533,948
|
|
(0.1) %
|
Adjusted
EBITDA¹
|
|
249,112
|
|
|
239,404
|
|
|
4.1 %
|
|
921,125
|
|
|
780,949
|
|
17.9 %
|
Adjusted EBITDA
Margin¹
|
|
36.2 %
|
|
|
36.7 %
|
|
|
(1.3) %
|
|
36.4 %
|
|
|
38.5 %
|
|
(5.4) %
|
Diluted earnings (loss)
per Common Share ($/Share)
|
|
0.28
|
|
|
(0.14)
|
|
|
297.6 %
|
|
0.22
|
|
|
(0.49)
|
|
144.9 %
|
Adjusted Diluted Net
Earnings per Share ($/Share)¹
|
|
0.49
|
|
|
0.52
|
|
|
(5.7) %
|
|
1.86
|
|
|
2.19
|
|
(15.1) %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash inflows from
operating activities
|
|
190,149
|
|
|
190,537
|
|
|
(0.2) %
|
|
670,634
|
|
|
559,844
|
|
19.8 %
|
Free Cash
Flow¹
|
|
98,932
|
|
|
82,558
|
|
|
19.8 %
|
|
216,390
|
|
|
222,950
|
|
(2.9) %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
|
%
Change
|
Long-term debt -
principal
|
|
5,024,562
|
|
|
5,666,075
|
|
|
(11.3) %
|
Long-term debt -
carrying value
|
|
4,931,175
|
|
|
5,446,958
|
|
|
(9.5) %
|
Cash -
operational
|
|
321,008
|
|
|
392,853
|
|
|
(18.3) %
|
__________________________
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 – Revenue for the quarter increased
primarily as a result of revenue growth within the United Kingdom and Australia segments, which were largely driven
by strong underlying trends in customer activity and revenues
across those segments, as well as a year-over-year increase in
Betting Net Win Margin. During the quarter, online sports betting
was The Stars Group's largest product vertical (39.1% versus 34.3%
in 2018), followed by online casino (30.8% versus 30.1% in 2018)
and online poker (27.5% versus 32.8% in 2018), while 81% of
consolidated revenues were derived from locally regulated or taxed
markets 76% in 2018). Revenue for the year increased primarily as a
result of the Sky Betting & Gaming and BetEasy acquisitions and
the same or substantially similar factors that impacted the fourth
quarter as described above. Additional segment specific factors
impacting revenue are described below.
- Debt and Cash – The Stars Group generated Free
Cash Flow of $98.9 million in the
fourth quarter of 2019, which was after, among other items, the
cash impact of certain adjustments set forth in the Adjusted EBITDA
reconciliation below under "Reconciliation of Non-IFRS Measures to
Nearest IFRS Measures". The Stars Group ended the quarter with
approximately $321.0 million in
operational cash and $4.9 billion of
gross debt on its balance sheet, resulting in Net Debt of
$4.6 billion, which was relatively
stable compared to the third quarter and a reduction of
approximately $443.9 million from the
end of 2018. In February, The Stars Group prepaid an additional
$100 million, including accrued and
unpaid interest, of its USD first lien term loan using cash on its
balance sheet, which brings the total amount repaid since
completion of the SBG acquisition in July
2018 to over $700
million.
- U.S. Update – Since its launch in
September 2019, just four months
after The Stars Group announced its U.S. media and sports wagering
partnership with FOX Sports, the FOX Sports Super 6 app saw more
than 1.3 million downloads in 2019, with an average of over 500,000
customers making at least one prediction each week during the
fourth quarter. The Stars Group currently operates its FOX Bet
real-money wagering products and PokerStars-branded real-money
poker and casino products in New
Jersey and Pennsylvania,
and since the launch of FOX Bet in New
Jersey and Pennsylvania in
2019, the performance has been in-line with The Stars Group's
expectations, with strong progress in both active customers and
revenue on a month-to-month basis, with approximately 65,000
combined QAUs in the fourth quarter. During 2019, FOX Bet's
financial performance was in-line with its previously disclosed
expected loss of approximately $40
million for the year. So far in 2020, The Stars Group
announced a market access agreement with the Little Traverse Bay
Bands of Odawa Indians Gaming Authority for first-skin online
betting and gaming market access in the State of Michigan, and currently expects to
increase investments in the United
States to support planned FOX Bet launches in further
states, including Colorado.
- BetEasy minority acquisition – In December 2019, The Stars Group announced that it
agreed with the minority shareholders of BetEasy, its
Australian-based sports betting business, to acquire the remaining
20% interest in the company for AUD$151 million following the
earlier of the release of The Stars Group's full-year 2020
financial results or the completion of its combination with Flutter
Entertainment Plc. As part of this agreement, The Stars Group also
agreed to pay AUD$100 million to settle the previously disclosed
performance, or earn-out, payment under the agreements for its 2018
acquisition of the initial 80% interest, which were subject to
certain performance conditions primarily related to BetEasy's
EBITDA and could have reached AUD$232 million, and to repay
AUD$56.9 million of outstanding BetEasy minority shareholder
loans.
- Combination with Flutter Entertainment
plc – In October
2019, The Stars Group and Flutter announced that they
entered into an arrangement agreement providing for an all-share
combination at an exchange ratio of 0.2253 and whereby immediately
following completion, shareholders of Flutter would own
approximately 54.64% and shareholders of The Stars Group would own
approximately 45.36% of the share capital of the combined group.
Completion of the combination is currently expected to occur during
the second or third quarter of 2020, subject to, among other
things, shareholder, court and applicable regulatory
approvals. As previously disclosed, in addition to Mr.
Gadhia, The Stars Group's current Executive Chairman, and Mr.
Ashkenazi, The Stars Group's current Chief Executive Officer, The
Stars Group is entitled under the arrangement agreement to nominate
three additional non-executive directors to serve on the combined
group's board of directors post-completion of the
combination. Accordingly, The Stars Group has nominated
Messrs. Alfred F. Hurley Jr. and
David Lazzarato and Ms. Mary Turner to also serve as directors on the
combined group's board of directors.
- Financial Guidance; Earnings Call and
Presentation – As a result of the pending
combination of The Stars Group and Flutter, The Stars Group will
not hold an earnings conference call for the fourth quarter and
full-year 2019 and has suspended its practice of providing
forward-looking financial guidance. This press release and an
accompanying presentation will be available on The Stars Group's
website at www.starsgroup.com. For additional information, see
below under "Consolidated Financial Statements, Management's
Discussion and Analysis and Additional Information".
International
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
In thousands of U.S.
Dollars (except otherwise noted)
|
|
2019
|
|
|
2018
|
|
|
%
Change
|
|
|
2019
|
|
|
2018
|
|
|
%
Change
|
|
Stakes
|
|
301,434
|
|
|
261,055
|
|
|
15.5
%
|
|
|
1,054,220
|
|
|
966,306
|
|
|
9.1
%
|
|
Betting Net Win
Margin (%)
|
|
5.3
%
|
|
|
8.3
%
|
|
|
(36.0)
%
|
|
|
6.9
%
|
|
|
8.2
%
|
|
|
(15.9)
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Poker
|
|
186,226
|
|
|
210,940
|
|
|
(11.7) %
|
|
|
781,637
|
|
|
886,628
|
|
|
(11.8) %
|
|
Poker Constant
Currency Revenue
|
|
188,919
|
|
|
210,940
|
|
|
(10.4)
%
|
|
|
821,332
|
|
|
886,628
|
|
|
(7.4)
%
|
|
Gaming
|
|
114,770
|
|
|
112,111
|
|
|
2.4 %
|
|
|
427,316
|
|
|
428,364
|
|
|
(0.2) %
|
|
Gaming Constant
Currency Revenue
|
|
118,209
|
|
|
112,111
|
|
|
5.4
%
|
|
|
450,754
|
|
|
428,364
|
|
|
5.2
%
|
|
Betting
|
|
16,089
|
|
|
21,766
|
|
|
(26.1) %
|
|
|
72,561
|
|
|
79,117
|
|
|
(8.3) %
|
|
Betting Constant
Currency Revenue
|
|
16,388
|
|
|
21,766
|
|
|
(24.7)
%
|
|
|
75,860
|
|
|
79,117
|
|
|
(4.1)
%
|
|
Other
|
|
7,327
|
|
|
10,913
|
|
|
(32.9) %
|
|
|
30,851
|
|
|
46,068
|
|
|
(33.0) %
|
|
Other Constant
Currency Revenue
|
|
7,558
|
|
|
10,913
|
|
|
(30.7)
%
|
|
|
35,081
|
|
|
46,068
|
|
|
(23.8)
%
|
|
Total
revenue
|
|
324,412
|
|
|
355,730
|
|
|
(8.8)
%
|
|
|
1,312,365
|
|
|
1,440,177
|
|
|
(8.9)
%
|
|
Constant
Currency Revenue
|
|
331,074
|
|
|
355,730
|
|
|
(6.9) %
|
|
|
1,383,027
|
|
|
1,440,177
|
|
|
(4.0)
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QAUs
(millions)
|
|
1.9
|
|
|
2.1
|
|
|
(9.5)
%
|
|
|
|
|
|
|
|
QNY
($/QAU)
|
|
166
|
|
|
163
|
|
|
1.8
%
|
|
|
|
|
|
|
|
Constant Currency
Revenue QNY
|
|
169
|
|
|
163
|
|
|
3.8
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
(excluding depreciation and
amortization)
|
|
249,594
|
|
|
286,167
|
|
|
(12.8)
%
|
|
|
1,015,244
|
|
|
1,159,611
|
|
|
(12.4)
%
|
|
Gross profit margin
(%)
|
|
76.9 %
|
|
|
80.4 %
|
|
|
(4.4) %
|
|
|
77.4 %
|
|
|
80.5 %
|
|
|
(3.9) %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
116,606
|
|
|
143,734
|
|
|
(18.9) %
|
|
|
441,683
|
|
|
468,238
|
|
|
(5.7) %
|
|
Sales and
marketing1
|
|
47,297
|
|
|
45,464
|
|
|
4.0 %
|
|
|
165,588
|
|
|
164,600
|
|
|
0.6 %
|
|
Research and
development
|
|
8,148
|
|
|
4,880
|
|
|
67.0 %
|
|
|
32,185
|
|
|
27,865
|
|
|
15.5 %
|
|
Operating
income
|
|
77,543
|
|
|
92,089
|
|
|
(15.8)
%
|
|
|
375,788
|
|
|
498,908
|
|
|
(24.7)
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA2
|
|
135,066
|
|
|
168,177
|
|
|
(19.7)
%
|
|
|
604,851
|
|
|
703,342
|
|
|
(14.0)
%
|
|
Adjusted EBITDA
Margin (%)2
|
|
41.6
%
|
|
|
47.3
%
|
|
|
(11.9)
%
|
|
|
46.1
%
|
|
|
48.8
%
|
|
|
(5.6)
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Deposits
(millions)
|
|
316
|
|
|
338
|
|
|
(6.4)
%
|
|
|
|
|
|
|
|
_____________________________
1 Sales and marketing includes $1.2 million and $5.0
million for the three months and year ended December 31, 2019, respectively, that The Stars
Group excluded from its consolidated results as it related to
certain non-gaming related transactions with the United Kingdom segment.
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 decreased for the quarter and for the
year, primarily as a result of adverse foreign exchange
fluctuations and continued disruptions and regulatory headwinds in
certain markets due to local restrictions on some methods of
payment processing and on certain methods of downloading The Stars
Group's products, particularly related to casino and poker. In
markets that have been impacted by such disruption, which are all
lower-priority markets, revenues for the quarter were 29% lower
year-over-year, similar to the trend in each of the first three
quarters of the year, with improvements in some markets primarily
offset by the closure of PokerStars in Switzerland in July
2019 (where The Stars Group is working with regulators and
its local partner to operate in a newly regulated environment in
due course). These markets now represent 14% of revenue for the
International segment, down from 18% in the prior year period. In
the rest of the world, Constant Currency Revenue for the quarter
was 1% lower year-over-year, with continued strength in gaming
partially offsetting revenue declines in poker. Constant Currency
Revenue for 2019 was 3% higher year-over-year, with continued
strong growth in gaming.
- Poker – Revenue decreased for the quarter and year, with
Constant Currency Revenue decreasing 10.4% and 7.4% respectively,
primarily as a result of the same factors noted above. Underlying
trends were similar in the fourth quarter to those in each of the
first three quarters of the year, with the primary negative impact
related to the closure of PokerStars in Switzerland in July
2019, together with tougher operating conditions in other
markets such as Spain and
Sweden, following regulatory
changes in those countries. The Stars Group has a deep pipeline of
new product launches and marketing plans, in addition to expected
new market expansion plans, which it believes will support the
development of its International poker business throughout 2020 and
into 2021 and help mitigate ongoing disruption in certain markets
that will continue to weigh on poker revenues in 2020 before
beginning to improve in 2021. The Stars Group believes that Poker
remains an important driver of cost-effective customer acquisition,
leveraging the awareness and trust of the PokerStars brand to
create a large and low-cost customer acquisition channel,
supporting The Stars Group's ability to drive revenue growth
through cross-selling to the International segments other product
offerings.
- Gaming – Revenue increased for the quarter and was
relatively flat for the year, primarily as a result of organic
growth in most markets, which continues to be driven by the
roll-out of new casino games and innovative content, as well as
ongoing improvements in cross-selling from poker to casino games.
Constant Currency Revenue growth in The Stars Group's rest of the
world markets (all markets excluding disrupted markets) was 21% for
the quarter and 24% for the year. The growth in gaming revenue was
partially offset by the cessation of operations in certain markets,
as well as similar restrictions on some methods of payment
processing and adverse foreign exchange fluctuations as described
above. The Stars Group currently plans to increase marketing
investment in its International gaming business during 2020, which
it expects to deliver strong returns over time, but to
negatively impact profitability during 2020.
- Betting – Revenue for the quarter and year decreased
year-over-year primarily as a result of a reduced Betting Net Win
Margin, reflecting both the planned investment in the launch of FOX
Bet in the United States, and
operator-unfavorable sporting results in certain European markets.
Stakes increased by 16%, primarily as a result of the launch of FOX
Bet and continued organic growth in most key markets, partially
offset by the cessation of operations in certain markets, as well
as similar restrictions on some methods of payment processing and
adverse foreign exchange fluctuations as described above. During
2020, The Stars Group intends to expand the range of products,
features and marketing campaigns for its International betting
business, leveraging increased expertise from the United Kingdom segment and leveraging the Sky
Bet brand in Italy and
Germany, as well as launching the
new PokerStars Sports brand in certain markets.
- Customers – QAUs decreased, primarily due to reduced
activity in and the closure of certain markets, each as noted
above, but was partially offset by the launch of FOX Bet and
PokerStars in Pennsylvania.
United
Kingdom
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
In thousands of U.S.
Dollars (except otherwise noted)
|
|
2019
|
|
|
2018
¹
|
|
|
%
Change
|
|
|
2019
|
|
|
2018
¹
|
|
|
%
Change
|
|
Stakes
|
|
1,460,111
|
|
|
1,289,374
|
|
|
13.2
%
|
|
|
5,848,641
|
|
|
2,511,228
|
|
|
132.9
%
|
|
Betting Net Win
Margin (%)
|
|
12.1
%
|
|
|
10.1
%
|
|
|
20.1
%
|
|
|
9.0
%
|
|
|
8.6
%
|
|
|
5.0
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Poker
|
|
2,792
|
|
|
3,045
|
|
|
(8.3) %
|
|
|
11,647
|
|
|
5,929
|
|
|
96.4 %
|
|
Poker Constant
Currency Revenue
|
|
2,788
|
|
|
3,045
|
|
|
(8.4)
%
|
|
|
|
|
|
|
|
Gaming
|
|
96,870
|
|
|
84,164
|
|
|
15.1 %
|
|
|
364,983
|
|
|
157,482
|
|
|
131.8 %
|
|
Gaming Constant
Currency Revenue
|
|
96,585
|
|
|
84,164
|
|
|
14.8
%
|
|
|
|
|
|
|
|
Betting
|
|
177,150
|
|
|
130,732
|
|
|
35.5 %
|
|
|
528,110
|
|
|
215,921
|
|
|
144.6 %
|
|
Betting Constant
Currency Revenue
|
|
176,500
|
|
|
130,732
|
|
|
35.0
%
|
|
|
|
|
|
|
|
Other2
|
|
10,935
|
|
|
7,810
|
|
|
40.0 %
|
|
|
41,939
|
|
|
14,799
|
|
|
183.4 %
|
|
Other Constant
Currency Revenue
|
|
10,926
|
|
|
7,810
|
|
|
39.9
%
|
|
|
|
|
|
|
|
Total
revenue
|
|
287,747
|
|
|
225,751
|
|
|
27.5
%
|
|
|
946,679
|
|
|
394,131
|
|
|
140.2
%
|
|
Constant
Currency Revenue
|
|
286,799
|
|
|
225,751
|
|
|
27.0
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QAUs
(millions)
|
|
2.0
|
|
|
1.9
|
|
|
8.0
%
|
|
|
|
|
|
|
|
QNY
($/QAU)
|
|
137
|
|
|
116
|
|
|
17.6
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
(excluding depreciation and amortization)
|
|
199,056
|
|
|
153,880
|
|
|
29.4
%
|
|
|
655,087
|
|
|
275,106
|
|
|
138.1
%
|
|
Gross profit margin
(%)
|
|
69.2 %
|
|
|
68.2 %
|
|
|
1.4 %
|
|
|
69.2 %
|
|
|
69.8 %
|
|
|
(0.9) %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
111,645
|
|
|
96,089
|
|
|
16.2 %
|
|
|
432,354
|
|
|
200,576
|
|
|
115.6 %
|
|
Sales and
marketing
|
|
38,637
|
|
|
35,413
|
|
|
9.1 %
|
|
|
138,275
|
|
|
75,637
|
|
|
82.8 %
|
|
Research and
development
|
|
7,168
|
|
|
5,660
|
|
|
26.6 %
|
|
|
18,882
|
|
|
10,600
|
|
|
78.1 %
|
|
Operating income
(loss)
|
|
41,606
|
|
|
16,718
|
|
|
148.9
%
|
|
|
65,576
|
|
|
(11,707)
|
|
|
660.1
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA3
|
|
104,344
|
|
|
73,954
|
|
|
41.1
%
|
|
|
324,633
|
|
|
102,107
|
|
|
217.9
%
|
|
Adjusted EBITDA
Margin (%)3
|
|
36.3
%
|
|
|
32.8
%
|
|
|
10.7
%
|
|
|
34.3
%
|
|
|
25.9
%
|
|
|
32.4
%
|
|
____________________________
1 The Stars Group acquired Sky Betting &
Gaming on July 10, 2018.
2 Other revenue includes $1.2
million and $5.0 million for
the three months and year ended December 31,
2019, respectively, that The Stars Group excluded from its
consolidated results as it related to certain non-gaming related
transactions with the International segment.
3 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 increased significantly for the
quarter, primarily due to strong operational momentum across the
United Kingdom segment's betting
and gaming products. Constant Currency Revenue for the quarter
increased approximately 27% year-over-year. Revenue for the year
grew strongly primarily as a result of the timing of the Sky
Betting & Gaming acquisition and the same or substantially
similar factors that impacted the fourth quarter as described
above.
- Betting – Revenue increased for the quarter
as a result of increased Stakes and an increase in Betting Net Win
Margin. The increase in Stakes was primarily driven by ongoing
improvements to the segment's products and promotions, particularly
around in-play football, which drove growth in customer engagement
and retention. The Betting Net Win Margin for the quarter was
12.1%, which was two percentage points higher year-over-year,
primarily driven by a combination of Stakes mix across sports and
bet types, more strategic use of free bets, and operator-favorable
sporting results compared to the prior year period, which when
combined with the growth in Stakes, resulted in revenue growth of
35% year-over year. Revenue for the year grew strongly as a result
of the timing of the SBG Acquisition and the same or substantially
similar factors that impacted the fourth quarter as described
above, with the Betting Net Win Margin for the year of 9% being
in-line with the long-term average.
- Gaming – Revenue increased for the quarter,
benefiting from continued improvements in cross-sell of customers
to and from the United Kingdom's
gaming and betting products, as well as the continued roll-out of
new and innovative content. Revenue for the year grew strongly as a
result of the timing of the SBG Acquisition and the same or
substantially similar factors that impacted the fourth quarter as
described above.
- Customers – QAUs were 2.0 million, which represented
growth of 8% year-over-year, primarily driven by strong momentum
from the early stages of the European domestic soccer season,
together with a successful promotional period around December.
Australia
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
In thousands of U.S.
Dollars (except otherwise noted)
|
|
2019
|
|
|
2018
¹
|
|
|
%
Change
|
|
|
2019
|
|
|
2018
¹
|
|
|
%
Change
|
|
Stakes
|
|
794,603
|
|
|
877,338
|
|
|
(9.4)%
|
|
|
3,018,705
|
|
|
2,570,502
|
|
|
17.4
%
|
|
Betting Net Win
Margin (%)
|
|
9.6
%
|
|
|
8.2
%
|
|
|
16.5
%
|
|
|
9.0
%
|
|
|
7.6
%
|
|
|
17.8
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Betting
|
|
75,920
|
|
|
71,542
|
|
|
6.1 %
|
|
|
270,267
|
|
|
196,101
|
|
|
37.8 %
|
|
Betting Constant
Currency Revenue
|
|
79,657
|
|
|
71,542
|
|
|
11.3
%
|
|
|
|
|
|
|
|
Other
|
|
1,093
|
|
|
829
|
|
|
31.8 %
|
|
|
4,147
|
|
|
829
|
|
|
400.2 %
|
|
Other Constant
Currency Revenue
|
|
1,145
|
|
|
829
|
|
|
38.1
%
|
|
|
|
|
|
|
|
Total
revenue
|
|
77,013
|
|
|
72,371
|
|
|
6.4
%
|
|
|
274,414
|
|
|
196,930
|
|
|
39.3
%
|
|
Constant
Currency Revenue
|
|
80,802
|
|
|
72,371
|
|
|
11.6
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QAUs
(millions)
|
|
0.26
|
|
|
0.3
|
|
|
(13.9)%
|
|
|
|
|
|
|
|
QNY
($/QAU)
|
|
297
|
|
|
243
|
|
|
21.9
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
(excluding depreciation and
amortization)
|
|
50,031
|
|
|
47,768
|
|
|
4.7
%
|
|
|
170,065
|
|
|
137,357
|
|
|
23.8
%
|
|
Gross profit margin
(%)
|
|
65.0 %
|
|
|
66.0 %
|
|
|
(1.6)%
|
|
|
62.0 %
|
|
|
69.7 %
|
|
|
(11.1)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
30,190
|
|
|
31,762
|
|
|
(4.9)%
|
|
|
110,135
|
|
|
116,323
|
|
|
(5.3)%
|
|
Sales and
marketing
|
|
20,085
|
|
|
15,862
|
|
|
26.6 %
|
|
|
60,983
|
|
|
53,385
|
|
|
14.2 %
|
|
Research and
development
|
|
602
|
|
|
432
|
|
|
39.4 %
|
|
|
4,018
|
|
|
1,530
|
|
|
162.6 %
|
|
Operating
loss
|
|
(846)
|
|
|
(288)
|
|
|
(193.8)%
|
|
|
(5,071)
|
|
|
(33,881)
|
|
|
85.0
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
2
|
|
19,881
|
|
|
13,683
|
|
|
45.3
%
|
|
|
44,358
|
|
|
21,571
|
|
|
105.6
%
|
|
Adjusted EBITDA
Margin (%) 2
|
|
25.8
%
|
|
|
18.9
%
|
|
|
36.5
%
|
|
|
16.2
%
|
|
|
11.0
%
|
|
|
47.6
%
|
|
_____________________________
1 The Stars Group acquired 62% of BetEasy on
February 27, 2018 and a further 18%
on April 24, 2018, with BetEasy
acquiring William Hill Australia on the same day. See above for
information regarding The Stars Group's agreement to purchase the
remaining minority interest in BetEasy and related matters.
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 increased by 6%,
primarily as a result of a higher Betting Net Win Margin, partially
offset by a decrease in Stakes and adverse foreign exchange
fluctuations. The decrease in Stakes was primarily a result of an
increased focus on high-value, recreational customers through the
continued roll-out of MyRewards allowing for targeted, personalized
promotions, together with the prior year period still benefiting
from above average promotional activity related to the migration of
customers to the BetEasy platform. The Betting Net Win Margin of
9.6% was higher year-over year and compared to 9.0% for the
full-year 2019 and the historical long-term average of
approximately 8.5%, primarily as a result of the increased
effectiveness of MyRewards promotions. Revenue for the year grew
strongly as a result of the timing of the BetEasy acquisition and
the same or substantially similar factors that impacted the fourth
quarter as described above.
- Customers – QAUs decreased, primarily as a result of the
migration of customers onto the BetEasy platform in 2018 which
positively impacted the prior year period, together with a
continued focus on high-value, recreational customers as noted
above.
For additional information regarding The Stars Group's reporting
segments and major lines of operations, please see The Stars
Group's consolidated financial statements for the year ended
December 31, 2019 (the "2019 Annual
Financial Statements"), including note 7 therein, and management's
discussion and analysis thereon (the "2019 Annual MD&A").
Annual Information Form, Consolidated Financial Statements,
Management's Discussion and Analysis and Additional Information;
Internal Control Over Financial Reporting
The Stars Group's annual information form for the year ended
December 31, 2019 (the "2019 AIF"),
2019 Annual Financial Statements, 2019 Annual 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 2019 Annual Financial Statements.
In connection with the first year-end internal control
effectiveness evaluation of BetEasy following The Stars Group's
majority acquisition of the business in early-2018, management has
identified internal control deficiencies at BetEasy that constitute
material weaknesses in The Stars Group's overall internal control
over financial reporting as of December 31,
2019. As of the date hereof, The Stars Group has identified
and implemented, or is continuing to evaluate, assess and
implement, as applicable, steps to remediate these material
weaknesses. There were no restatements required in the 2019 Annual
Financial Statements or material adjustments as a result of the
foregoing. For additional information, see "Disclosure Controls and
Procedures and Internal Control Over Financial Reporting" in the
2019 Annual MD&A.
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.
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
per Share to net earnings (loss), which is the nearest IFRS
measure. For additional information, see "Reconciliations" in
the 2019 Annual MD&A.
|
|
Three Months Ended
December 31, 2019
|
In thousands of U.S.
Dollars
|
|
International
|
|
United
Kingdom
|
|
Australia
|
|
Corporate
|
|
Consolidated
|
Net earnings
(loss)
|
|
77,543
|
|
41,606
|
|
(846)
|
|
(37,013)
|
|
81,290
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
recovery
|
|
—
|
|
—
|
|
—
|
|
17,965
|
|
17,965
|
Net financing
charges
|
|
—
|
|
—
|
|
—
|
|
(29,048)
|
|
(29,048)
|
Net loss from
associates
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
77,543
|
|
41,606
|
|
(846)
|
|
(25,930)
|
|
92,373
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
44,224
|
|
61,179
|
|
9,080
|
|
178
|
|
114,661
|
Add (deduct) the impact
of the following:
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related
costs and other certain costs
related to the Combination
|
|
—
|
|
—
|
|
11,780
|
|
5,246
|
|
17,026
|
Stock-based
compensation
|
|
—
|
|
—
|
|
—
|
|
5,331
|
|
5,331
|
(Gains) losses from
investments
|
|
(1,975)
|
|
33
|
|
—
|
|
—
|
|
(1,942)
|
Impairment of
intangible and other assets
|
|
1,059
|
|
85
|
|
—
|
|
—
|
|
1,144
|
Other costs
(income)
|
|
14,215
|
|
1,441
|
|
(133)
|
|
4,996
|
|
20,519
|
Total adjusting
items
|
|
13,299
|
|
1,559
|
|
11,647
|
|
15,573
|
|
42,078
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
135,066
|
|
104,344
|
|
19,881
|
|
(10,179)
|
|
249,112
|
|
|
Year Ended
December 31, 2019
|
In thousands of U.S.
Dollars
|
|
International
|
|
United
Kingdom
|
|
Australia
|
|
Corporate
|
|
Consolidated
|
Net earnings
(loss)
|
|
375,788
|
|
65,576
|
|
(5,071)
|
|
(374,431)
|
|
61,862
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
recovery
|
|
—
|
|
—
|
|
—
|
|
197
|
|
197
|
Net financing
charges
|
|
—
|
|
—
|
|
—
|
|
(202,534)
|
|
(202,534)
|
Net loss from
associates
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
375,788
|
|
65,576
|
|
(5,071)
|
|
(172,094)
|
|
264,199
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
159,895
|
|
241,283
|
|
36,703
|
|
745
|
|
438,626
|
Add (deduct) the impact
of the following:
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related
costs and other certain costs
related to the Combination
|
|
—
|
|
—
|
|
11,780
|
|
15,385
|
|
27,165
|
Stock-based
compensation
|
|
—
|
|
—
|
|
—
|
|
18,842
|
|
18,842
|
(Gains) losses from
investments
|
|
(2,690)
|
|
77
|
|
—
|
|
93
|
|
(2,520)
|
Impairment of
intangible and other assets
|
|
1,071
|
|
2,860
|
|
—
|
|
—
|
|
3,931
|
Other
costs
|
|
70,787
|
|
14,837
|
|
946
|
|
84,312
|
|
170,882
|
Total adjusting
items
|
|
69,168
|
|
17,774
|
|
12,726
|
|
118,632
|
|
218,300
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
604,851
|
|
324,633
|
|
44,358
|
|
(52,717)
|
|
921,125
|
|
|
Three Months Ended
December 31, 2018
|
In thousands of U.S.
Dollars
|
|
International
|
|
United
Kingdom
|
|
Australia
|
|
Corporate
|
|
Consolidated
|
Net earnings
(loss)
|
|
92,089
|
|
16,718
|
|
(288)
|
|
(146,692)
|
|
(38,173)
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
—
|
|
—
|
|
—
|
|
(14,450)
|
|
(14,450)
|
Net financing
charges
|
|
—
|
|
—
|
|
—
|
|
(97,715)
|
|
(97,715)
|
Net earnings from
associates
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
92,089
|
|
16,718
|
|
(288)
|
|
(34,527)
|
|
73,992
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
35,950
|
|
55,237
|
|
8,753
|
|
85
|
|
100,025
|
Add (deduct) the impact
of the following:
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related
costs
|
|
—
|
|
—
|
|
—
|
|
3,084
|
|
3,084
|
Stock-based
compensation
|
|
—
|
|
—
|
|
—
|
|
4,004
|
|
4,004
|
Loss from investments
and associates
|
|
1,297
|
|
—
|
|
—
|
|
—
|
|
1,297
|
Impairment of
intangible and other assets
|
|
678
|
|
602
|
|
—
|
|
—
|
|
1,280
|
Other
costs
|
|
38,163
|
|
1,397
|
|
5,218
|
|
10,944
|
|
55,722
|
Total adjusting
items
|
|
40,138
|
|
1,999
|
|
5,218
|
|
18,032
|
|
65,387
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
168,177
|
|
73,954
|
|
13,683
|
|
(16,410)
|
|
239,404
|
|
|
Year Ended
December 31, 2018
|
In thousands of U.S.
Dollars
|
|
International
|
|
United
Kingdom
|
|
Australia
|
|
Corporate
|
|
Consolidated
|
Net earnings
(loss)
|
|
499,976
|
|
(11,707)
|
|
(33,881)
|
|
(563,294)
|
|
(108,906)
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
recovery
|
|
—
|
|
—
|
|
—
|
|
988
|
|
988
|
Net financing
charges
|
|
—
|
|
—
|
|
—
|
|
(371,086)
|
|
(371,086)
|
Net earnings from
associates
|
|
1,068
|
|
—
|
|
—
|
|
—
|
|
1,068
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
498,908
|
|
(11,707)
|
|
(33,881)
|
|
(193,196)
|
|
260,124
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
144,304
|
|
108,879
|
|
29,476
|
|
147
|
|
282,806
|
Add (deduct) the impact
of the following:
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related
costs and deal contingent
forward expenses
|
|
—
|
|
—
|
|
—
|
|
115,569
|
|
115,569
|
Stock-based
compensation
|
|
—
|
|
—
|
|
—
|
|
12,806
|
|
12,806
|
Loss from investments
and associates
|
|
1,667
|
|
—
|
|
—
|
|
—
|
|
1,667
|
Impairment of
intangible and other assets
|
|
5,621
|
|
602
|
|
—
|
|
—
|
|
6,223
|
Other
costs
|
|
52,842
|
|
4,333
|
|
25,976
|
|
18,603
|
|
101,754
|
Total adjusting
items
|
|
60,130
|
|
4,935
|
|
25,976
|
|
146,978
|
|
238,019
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
703,342
|
|
102,107
|
|
21,571
|
|
(46,071)
|
|
780,949
|
|
|
Quarter Ended
December 31,
|
|
|
Year Ended December
31,
|
In thousands of U.S.
Dollars (except per share amounts)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Net earnings
(loss)
|
|
81,290
|
|
|
(38,173)
|
|
|
61,862
|
|
|
(108,906)
|
|
Income tax (recovery)
expense
|
|
(17,965)
|
|
|
14,450
|
|
|
(197)
|
|
|
(988)
|
|
Earnings (loss)
before income taxes
|
|
63,325
|
|
|
(23,723)
|
|
|
61,665
|
|
|
(109,894)
|
|
Add (deduct) the impact
of the following:
|
|
|
|
|
|
|
|
|
Interest
accretion
|
|
9,336
|
|
|
12,367
|
|
|
37,267
|
|
|
42,431
|
|
Loss on debt
extinguishment
|
|
—
|
|
|
3,453
|
|
|
—
|
|
|
146,950
|
|
Loss (gain) on
re-measurement of deferred contingent
payment
|
|
5,342
|
|
|
(9,095)
|
|
|
(7,371)
|
|
|
(342)
|
|
(Gain) loss on
re-measurement of embedded derivative
|
|
(48,100)
|
|
|
17,400
|
|
|
(98,300)
|
|
|
6,100
|
|
Unrealized foreign
exchange loss on financial instruments
associated with financing activities
|
|
4,169
|
|
|
6,902
|
|
|
11,320
|
|
|
7,202
|
|
Ineffectiveness on
cash flow hedges
|
|
(2,196)
|
|
|
(2,960)
|
|
|
8,052
|
|
|
(14,909)
|
|
Acquisition-related
costs, deal contingent forward expenses
and certain other costs related to the Combination
|
|
17,026
|
|
|
3,084
|
|
|
27,165
|
|
|
115,569
|
|
Amortization of
acquisition intangibles
|
|
85,066
|
|
|
86,686
|
|
|
346,946
|
|
|
241,651
|
|
Stock-based
compensation
|
|
5,331
|
|
|
4,004
|
|
|
18,842
|
|
|
12,806
|
|
(Gain) loss from
investments and earnings from associates
|
|
(1,942)
|
|
|
1,297
|
|
|
(2,520)
|
|
|
599
|
|
Impairment of
intangible and other assets
|
|
1,144
|
|
|
1,280
|
|
|
3,931
|
|
|
6,223
|
|
Other
costs
|
|
20,519
|
|
|
55,722
|
|
|
170,882
|
|
|
101,754
|
|
Adjust for income tax
expense
|
|
(14,204)
|
|
|
(11,754)
|
|
|
(44,654)
|
|
|
(22,192)
|
|
Adjusted Net
Earnings
|
|
144,816
|
|
|
144,663
|
|
|
533,225
|
|
|
533,948
|
|
Adjusted Net
Earnings attributable to
|
|
|
|
|
|
|
|
|
Shareholders of The
Stars Group Inc.
|
|
142,331
|
|
|
141,738
|
|
|
528,510
|
|
|
531,168
|
|
Non-controlling
interest
|
|
2,485
|
|
|
2,925
|
|
|
4,715
|
|
|
2,780
|
|
|
|
|
|
|
|
|
|
|
Diluted
Shares
|
|
291,102,048
|
|
|
273,294,532
|
|
|
284,478,637
|
|
|
242,768,766
|
|
Adjusted Diluted Net
Earnings per Share
|
|
0.49
|
|
|
0.52
|
|
|
1.86
|
|
|
2.19
|
|
The table below presents certain items comprising "Other costs"
in the reconciliation tables above:
|
|
Quarter Ended
December 31,
|
|
Year Ended December
31,
|
In thousands of U.S.
Dollars
|
|
2019
|
2018
|
|
|
2019
|
|
2018
|
|
Integration costs of
acquired businesses
|
|
2,556
|
17,042
|
|
|
19,753
|
|
45,597
|
|
Financial
expenses
|
|
144
|
3,645
|
|
|
1,733
|
|
446
|
|
Restructuring
expenses
|
|
8,941
|
2,283
|
|
|
37,474
|
|
8,827
|
|
AMF, foreign payments
and other investigation and related professional fees
|
|
2,873
|
2,902
|
|
|
18,896
|
|
6,673
|
|
Lobbying (U.S. and
Non-U.S.) and other legal expenses
|
|
2,768
|
6,276
|
|
|
14,909
|
|
16,194
|
|
Professional fees in
connection with non-core activities
|
|
3,019
|
2,602
|
|
|
21,889
|
|
4,578
|
|
Retention
bonuses
|
|
—
|
—
|
|
|
—
|
|
|
Gain on disposal of
assets
|
|
—
|
—
|
|
|
—
|
|
|
Austria gaming
duty
|
|
—
|
—
|
|
|
—
|
|
(3,679)
|
|
Acquisition of option
rights for market access
|
|
|
—
|
20,661
|
|
|
22,500
|
|
20,661
|
|
Legal
settlement
|
|
—
|
—
|
|
|
32,500
|
|
—
|
|
Other
|
|
218
|
311
|
|
|
1,228
|
|
2,457
|
|
Other
costs
|
|
20,519
|
55,722
|
|
|
|
170,882
|
|
101,754
|
|
For additional information and descriptions of certain "Other
costs", see the 2019 Annual MD&A, including under the
heading "Reconciliations".
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
December 31,
|
|
Year Ended December
31,
|
In thousands of U.S.
Dollars
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Net cash inflows from
operating activities
|
|
190,149
|
|
|
190,537
|
|
|
670,634
|
|
|
559,844
|
|
Customer deposit
liability movement
|
|
13,122
|
|
|
4,712
|
|
|
13,884
|
|
|
(7,637)
|
|
|
|
203,271
|
|
|
195,249
|
|
|
684,518
|
|
|
552,207
|
|
Capital
expenditure:
|
|
|
|
|
|
|
|
|
Additions to deferred
development costs
|
|
(23,535)
|
|
|
(18,888)
|
|
|
(82,751)
|
|
|
(51,574)
|
|
Additions to property
and equipment
|
|
(11,672)
|
|
|
(15,161)
|
|
|
(27,523)
|
|
|
(33,952)
|
|
Additions to
intangible assets
|
|
(3,967)
|
|
|
(11,934)
|
|
|
(25,288)
|
|
|
(28,202)
|
|
Interest
paid
|
|
(50,971)
|
|
|
(57,771)
|
|
|
(279,284)
|
|
|
(186,162)
|
|
Debt servicing cash
flows (excluding voluntary prepayments)
|
|
(14,194)
|
|
|
(8,937)
|
|
|
(53,282)
|
|
|
(29,367)
|
|
Free Cash
Flow
|
|
98,932
|
|
|
82,558
|
|
|
216,390
|
|
|
222,950
|
|
The table below presents a calculation of Net Debt, which is
comprised solely of IFRS measures:
In thousands of U.S.
Dollars
|
|
As at December 31,
2019
|
Current portion of
long-term debt
|
|
35,750
|
Long-term
debt
|
|
4,895,425
|
Less: Cash and cash
equivalents - operational
|
|
321,008
|
Net
Debt
|
|
4,610,167
|
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 and Asia Pacific Poker Tour. The Stars Group is
one of the world's most licensed online gaming operators with its
subsidiaries collectively holding licenses or approvals in 22
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 the 2019 AIF, including under the
heading "Risk Factors and Uncertainties", and in the 2019 Annual
MD&A, 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 "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, 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 (loss) 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 10 in the 2019 Annual
Financial Statements. For the quarter and year ended December 31, 2019, Diluted Shares used for the
calculation of Adjusted Diluted Net Earnings per Share equalled
291,102,048 and 284,478,637, respectively, compared with
273,294,532 and 242,768,766 for the same periods in 2018,
respectively.
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 full reported
comparative periods for these segments as a result of the
respective acquisition dates of Sky Betting & Gaming and
BetEasy, and with respect to BetEasy, the Corporation had not yet
completed the previously announced migration of the former William
Hill Australia customers onto the BetEasy platform. The
Corporation intends to provide information on the impact of foreign
exchange rates for these segments either individually or on a
consolidated basis when applicable reported comparative period
information is available that the Corporation believes would be
reasonably comparable to the current periods as noted above.
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 2019 Annual 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".
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 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 (as defined below) or
made a wager on any betting or gaming product within the applicable
quarterly period. The Stars Group defines "active unique customer"
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.
QNY means combined revenue for its lines of operation (i.e.,
Poker, Gaming and/or Betting, as applicable) for each reporting
segment, excluding Other revenue, 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.
Net Deposits for the International segment 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 means Betting revenue as a proportion of
Stakes.
The Stars Group is also continuing the process of integrating
its recent acquisitions, as applicable, and implementing its
recently changed operating and reporting segments, and once
complete, The Stars Group may revise or remove currently presented
key metrics or report certain additional or other measures in the
future.
For additional information on The Stars Group's key metrics and
other data, see the 2019 Annual MD&A, including under the
headings "Non-IFRS Measures, Key Metrics and Other Data" and
"Segment Results of Operations".
CONSOLIDATED
STATEMENTS OF EARNINGS (LOSS)
|
|
|
|
|
|
|
|
Year Ended December
31,
|
In thousands of U.S.
Dollars (except per share and share amounts)
|
|
2019
|
2018
|
Revenue
|
|
2,528,448
|
|
2,029,238
|
Cost of revenue
(excluding depreciation and amortization)
|
|
(693,062)
|
|
(459,164)
|
Gross profit
(excluding depreciation and amortization)
|
|
1,835,386
|
|
1,570,074
|
General and
administrative
|
|
(1,155,440)
|
|
(976,992)
|
Sales and
marketing
|
|
(360,662)
|
|
(292,963)
|
Research and
development
|
|
(55,085)
|
|
(39,995)
|
Operating
income
|
|
264,199
|
|
260,124
|
Gain on re-measurement
of deferred contingent payment
|
|
7,371
|
|
342
|
Gain (loss) on
re-measurement of Embedded Derivative
|
|
98,300
|
|
(6,100)
|
Unrealized foreign
exchange loss on financial instruments associated with
financing
activities
|
|
(11,320)
|
|
(7,202)
|
Other net financing
charges
|
|
(296,885)
|
|
(358,126)
|
Net financing
charges
|
|
(202,534)
|
|
(371,086)
|
Net earnings from
associates
|
|
—
|
|
1,068
|
Earnings (loss)
before income taxes
|
|
61,665
|
|
(109,894)
|
Income tax
recovery
|
|
197
|
|
988
|
Net earnings
(loss)
|
|
61,862
|
|
(108,906)
|
Net earnings (loss)
attributable to
|
|
|
|
Shareholders of The
Stars Group Inc.
|
|
62,822
|
|
(102,452)
|
Non-controlling
interest
|
|
(960)
|
|
(6,454)
|
Net earnings
(loss)
|
|
61,862
|
|
(108,906)
|
Earnings (loss) per
Common Share (U.S. dollars)
|
|
|
|
Basic
|
|
$0.22
|
|
($0.49)
|
Diluted
|
|
$0.22
|
|
($0.49)
|
Weighted average
Common Shares outstanding (thousands)
|
|
|
|
Basic
|
|
282,885
|
|
208,270
|
Diluted
|
|
284,479
|
|
208,270
|
CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
|
|
|
|
|
|
|
|
As at December
31,
|
In thousands of U.S.
Dollars
|
|
2019
|
|
2018
|
ASSETS
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents – operational
|
|
321,008
|
|
392,853
|
Cash and cash
equivalents – customer deposits
|
|
300,916
|
|
328,223
|
Total cash and cash
equivalents
|
|
621,924
|
|
721,076
|
Restricted cash
advances and collateral
|
|
6,401
|
|
10,819
|
Prepaid expenses and
other current assets
|
|
79,578
|
|
43,945
|
Current investments –
customer deposits
|
|
109,017
|
|
103,153
|
Accounts
receivable
|
|
111,215
|
|
136,347
|
Income tax
receivable
|
|
49,504
|
|
26,085
|
Derivatives
|
|
—
|
|
—
|
Total current
assets
|
|
977,639
|
|
1,041,425
|
Non-current
assets
|
|
|
|
|
Restricted cash
advances and collateral
|
|
10,607
|
|
10,630
|
Prepaid expenses and
other non-current assets
|
|
33,482
|
|
32,760
|
Non-current accounts
receivable
|
|
16,765
|
|
14,906
|
Property and
equipment
|
|
139,228
|
|
85,169
|
Income tax
receivable
|
|
18,556
|
|
15,611
|
Deferred income
taxes
|
|
11,149
|
|
1,775
|
Derivatives
|
|
169,158
|
|
54,583
|
Intangible
assets
|
|
4,550,222
|
|
4,742,699
|
Goodwill
|
|
5,348,976
|
|
5,265,980
|
Total non-current
assets
|
|
10,298,143
|
|
10,224,113
|
Total
assets
|
|
11,275,782
|
|
11,265,538
|
LIABILITIES
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts payable and
other liabilities
|
|
562,731
|
|
424,007
|
Customer
deposits
|
|
409,390
|
|
423,739
|
Current
provisions
|
|
64,928
|
|
39,189
|
Derivatives
|
|
17,628
|
|
16,493
|
Income tax
payable
|
|
40,834
|
|
72,796
|
Due to related
party
|
|
—
|
|
—
|
Current portion of
lease liability
|
|
19,633
|
|
—
|
Current portion of
long-term debt
|
|
35,750
|
|
35,750
|
Total current
liabilities
|
|
1,150,894
|
|
1,011,974
|
Non-current
liabilities
|
|
|
|
|
Lease
liability
|
|
35,691
|
|
—
|
Long-term
debt
|
|
4,895,425
|
|
5,411,208
|
Long-term
provisions
|
|
2,885
|
|
4,002
|
Derivatives
|
|
95,931
|
|
6,068
|
Other long-term
liabilities
|
|
1,770
|
|
79,716
|
Due to related
party
|
|
—
|
|
—
|
Income tax
payable
|
|
21,609
|
|
18,473
|
Deferred income
taxes
|
|
552,134
|
|
580,697
|
Total non-current
liabilities
|
|
5,605,445
|
|
6,100,164
|
Total
liabilities
|
|
6,756,339
|
|
7,112,138
|
EQUITY
|
|
|
|
|
Share
capital
|
|
4,374,150
|
|
4,116,287
|
Reserves
|
|
(423,283)
|
|
(469,629)
|
Retained
earnings
|
|
565,583
|
|
502,761
|
Equity attributable
to the Shareholders of The Stars Group Inc.
|
|
4,516,450
|
|
4,149,419
|
Non-controlling
interest
|
|
2,993
|
|
3,981
|
Total
equity
|
|
4,519,443
|
|
4,153,400
|
Total liabilities
and equity
|
|
|
11,275,782
|
|
|
11,265,538
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
Year Ended December
31,
|
In thousands of U.S.
Dollars
|
|
2019
|
|
2018
|
Operating
activities
|
|
|
|
|
Net earnings
(loss)
|
|
61,862
|
|
(108,906)
|
Add
(deduct):
|
|
|
|
|
Income tax recovery
recognized in net earnings (loss)
|
|
(197)
|
|
(988)
|
Net financing
charges
|
|
202,534
|
|
371,086
|
Depreciation and
amortization
|
|
438,626
|
|
282,806
|
Stock-based
compensation
|
|
18,842
|
|
12,806
|
Acquisition of market
access rights in connection with Eldorado
|
|
—
|
|
20,661
|
Unrealized loss on
foreign exchange
|
|
5,708
|
|
18,134
|
Unrealized gain on
investments and other assets
|
|
(971)
|
|
(673)
|
Impairment of
intangible and other assets
|
|
3,931
|
|
6,156
|
Net earnings from
associates
|
|
—
|
|
(1,068)
|
Realized (gain) loss
on current investments and promissory note
|
|
(2,520)
|
|
2,727
|
Income taxes
paid
|
|
(78,267)
|
|
(41,117)
|
Changes in non-cash
operating elements of working capital
|
|
34,073
|
|
(9,403)
|
Customer deposit
liability movement
|
|
(13,884)
|
|
7,637
|
Other
|
|
897
|
|
(14)
|
Net cash inflows
from operating activities
|
|
670,634
|
|
559,844
|
Investing
activities
|
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
|
(2,460)
|
|
(1,865,262)
|
Additions to intangible
assets
|
|
(25,288)
|
|
(28,202)
|
Additions to property
and equipment
|
|
(27,523)
|
|
(33,952)
|
Additions to deferred
development costs
|
|
(82,751)
|
|
(51,574)
|
Net (purchase) sale of
investments utilizing customer deposits
|
|
(5,972)
|
|
19,515
|
Cash movement from
restricted cash
|
|
—
|
|
35,000
|
Settlement of minimum
revenue guarantee
|
|
(675)
|
|
(7,006)
|
Net investments in
associates
|
|
—
|
|
1,068
|
Other
|
|
4,885
|
|
(3,760)
|
Net cash outflows
from investing activities
|
|
(139,784)
|
|
(1,934,173)
|
Financing
activities
|
|
|
|
|
Issuance of Common
Shares
|
|
235,963
|
|
717,250
|
Transaction costs on
issuance of Common Shares
|
|
—
|
|
(32,312)
|
Issuance of Common
Shares in relation to stock options
|
|
12,159
|
|
31,066
|
Redemption of SBG
preferred shares
|
|
—
|
|
(663,407)
|
Repayment of
shareholder loan on acquisition
|
|
—
|
|
(10,879)
|
Issuance of
long-debt
|
|
—
|
|
5,957,976
|
Repayment of long-term
debt
|
|
(485,750)
|
|
(2,974,393)
|
Repayment of long-term
debt assumed on business combinations
|
|
—
|
|
(1,079,729)
|
Transaction costs on
long-term debt
|
|
—
|
|
(36,559)
|
Settlement of
derivatives
|
|
—
|
|
(125,822)
|
Repayment of lease
liability principal
|
|
(17,532)
|
|
—
|
Interest
paid
|
|
(279,284)
|
|
(186,162)
|
Acquisition of further
interest in subsidiaries including deferred contingent
payment
|
|
(68,394)
|
|
(48,240)
|
Capital contribution
from the holders of non-controlling interest
|
|
—
|
|
12,060
|
Net (repayment)
proceeds on loan issued from the holders of non-controlling
interest
|
|
(34,047)
|
|
31,730
|
Net cash (outflows)
inflows from financing activities
|
|
(636,885)
|
|
1,592,579
|
(Decrease) increase in
cash and cash equivalents
|
|
(106,035)
|
|
218,250
|
Unrealized foreign
exchange difference on cash and cash equivalents
|
|
6,883
|
|
(7,497)
|
Cash and cash
equivalents – beginning of period
|
|
721,076
|
|
510,323
|
Cash and cash
equivalents – end of period
|
|
|
621,924
|
|
721,076
|
For investor relations and media inquiries, please
contact:
Vaughan Lewis
Senior Vice President, Communications
Tel: +1 437-371-5730
ir@starsgroup.com
press@starsgroup.com
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SOURCE The Stars Group