TORONTO, May 10, 2018 /PRNewswire/ --
The Stars Group Inc. (NASDAQ: TSG; TSX: TSGI) today reported its
financial results for the first quarter ended March 31, 2018 and provided certain additional
highlights and updates. Unless otherwise noted, all dollar ($)
amounts are in U.S. dollars.
"The Stars Group's strong first quarter results continued our
organic growth trajectory," stated Rafi Ashkenazi, The Stars
Group's Chief Executive Officer. "We are pleased with the
performance of each of our verticals, poker, casino and sportsbook,
which are benefiting not only from the continued success of Stars
Rewards, but also from our strategy of focusing on the customer and
continued improvements to our product offerings."
"Moving forward, the exceptional foundation of our existing
business will be complemented by our acquisitions of CrownBet and
William Hill Australia, and expected completion of the Sky Betting
& Gaming acquisition. These acquisitions will help diversify
our revenue base, increase our exposure to regulated markets, and
transform our combined sportsbook into a second customer
acquisition channel. These new additions will accelerate not only
the organic growth we are seeing in our existing business, but also
our progress towards realizing our vision of becoming the world's
favorite iGaming destination."
First Quarter 2018 Financial
Summary[1]
Three Months Ended Year-over-Year
March 31, Change
$000's, except percentages
and per share amounts 2018 2017
Revenue 392,891 317,320 23.8%
Net earnings 74,361 65,753 13.1%
Diluted net earnings
per common share $ 0.36 $ 0.33 9.1%
Adjusted EBITDA 175,022 151,001 15.9%
Adjusted Net Earnings 139,207 113,367 22.8%
Adjusted Net Earnings
per Diluted Share $ 0.66 $ 0.56 17.9%
Net cash inflows from
operating activities 132,069 95,547 38.2%
Adjusted Cash Flow from
Operations 132,258 111,776 18.3%
[1] For important information on The Stars Group's non-IFRS measures, see below
under "Non-IFRS and Non-U.S. GAAP Measures" and the tables under "Reconciliation of
Non
IFRS Measures to Nearest IFRS Measures". The financial information presented in
this news release was derived from the Q1 2018 Financial Statements (as defined below).
First Quarter 2018 and Subsequent Financial
Highlights
- Revenues - Revenues for the quarter increased
approximately 23.8% year-over-year. Excluding the impact of
year-over-year changes in foreign exchange rates, revenues for the
quarter would have increased by approximately 12.4%. Real-money
online poker revenues and real-money online casino and sportsbook
combined revenues represented approximately 62.6% and 34.2% of
revenues for the quarter, respectively.
- Poker Revenues - Real-money online poker revenues for
the quarter were $245.9 million, or
an increase of approximately 12.4% year-over-year. Excluding the
impact of year-over-year changes in foreign exchange rates,
real-money online poker revenues would have increased by
approximately 2.3% for the quarter. The increase in poker revenue
was primarily driven by the positive impact of the Stars
Rewards loyalty program, foreign exchange fluctuations, and the
introduction of shared poker liquidity in France and Spain, as offset by, among other things, the
cessation of operations or difficult operating conditions in
certain markets including Australia and Colombia.
- Casino & Sportsbook Revenues - Real-money online
casino and sportsbook combined revenues for the quarter were
$134.5 million, or an increase of
approximately 55.0% year-over-year. During the three months ended
March 31, 2018, 20.7% of the combined
casino and sportsbook revenues related to sportsbook revenues.
Excluding the impact of year-over-year changes in foreign exchange
rates, real-money online casino and sportsbook combined revenues
would have increased by approximately 39.3% for the quarter. The
increase in casino and sportsbook combined revenue was primarily
driven by continued improvements in The Stars Group's casino and
sportsbook product offerings, positive impacts of foreign exchange
fluctuations, and the addition of revenue related to the
acquisition of a majority of the equity interests in CrownBet.
- Debt and Cash - Total long-term debt
outstanding at the end of the quarter was $2.45 billion with a weighted average interest
rate of 5.1%. As previously disclosed, on April 6, 2018, The Stars Group successfully
increased the size, repriced at lower interest rates and extended
the maturity on its U.S. dollar and Euro denominated first lien
term loans and revolving credit facility, amended and restated the
applicable credit agreement, and fully repaid the remaining
$95 million outstanding on its second
lien term loan. The Stars Group ended the first quarter of 2018
with approximately $257 million in
operational cash on its balance sheet.
First Quarter 2018 and Subsequent Operational
Highlights
- Quarterly Real-Money Active Uniques (QAUs) - Total QAUs
were approximately 2.24 million, a decrease of approximately 4.6%
year-over-year primarily led by The Stars Group's strategy of
focusing on positive return customer relationship management
initiatives to attract high-value, net-depositing customers
(primarily recreational players) and the cessation of operations or
difficult operating conditions in certain markets including
Australia and Colombia. Approximately 2.09 million of such
QAUs played online poker during the quarter, a decrease of
approximately 5.5% year-over-year, while The Stars Group's online
casino offerings had approximately 621,800 QAUs, a decrease of 2.4%
year-over-year, which The Stars Group continues to estimate as one
of the largest active casino player bases among its competitors.
The Stars Group's emerging online sportsbook offerings had
approximately 335,800 QAUs, a 16.3% increase year-over-year.
- Quarterly Net Yield (QNY) - Total QNY was $165, an increase of 26.7% year-over-year, and
QNY excluding the impact of year-over-year changes in foreign
exchange rates was $155, an increase
of 18.7% year-over-year. QNY is a non-IFRS measure.
- Net Deposits - Net Deposits were $353.4 million in the first quarter, an increase
of 25.9% year-over-year. Net Deposits are closely correlated to The
Stars Group's reported net gaming revenue as some or all of the
deposits eventually become revenue. The Stars Group believes that
the increase in Net Deposits was primarily driven by the
implementation of the Stars Rewards loyalty program and
continued focus on high-value customers (primarily recreational
players), positive impacts from foreign exchange fluctuations and
continued development of the casino and sportsbook product
offerings.
- Customer Registrations - Customer Registrations
increased by 2.3 million during the quarter.
- CrownBet and William Hill Australia - On
February 27, 2018, The Stars Group
acquired a 62% equity interest in CrownBet Holdings Pty Limited, an
Australian-based online sportsbook, from Crown Resorts Limited and
then on April 24, 2018, The Stars
Group increased its equity interest in CrownBet to 80%, and
CrownBet completed the acquisition of William Hill Australia
Holdings Pty Ltd. The aggregate purchase price for these
transactions was $435 million
(inclusive of $117.7 million to
acquire the 62% equity interest in CrownBet), which was paid in a
combination of cash and the issuance of approximately 3.1 million
newly-issued common shares of The Stars Group.
- Sky Betting & Gaming - On April 21, 2018, The Stars Group announced that it
had entered into an agreement to acquire Sky Betting & Gaming,
one of the United Kingdom's
leading online sportsbooks and gaming providers. The aggregate
purchase price was $4.7 billion, of
which $3.6 billion will be payable in
cash and the remainder will be payable through the issuance of
approximately 37.9 million newly-issued common shares. Completion
of the transaction is conditional upon obtaining customary
approvals from the Toronto Stock Exchange, Nasdaq, and certain
gaming and other regulatory authorities, in addition to the
completion of other customary closing conditions. To finance the
cash portion of the purchase price for the transaction, The Stars
Group obtained fully committed debt financing of $6.9 billion, including $5.1 billion of first lien term loans,
$1.4 billion of senior unsecured
notes and a $400 million revolving
credit facility. The funded proceeds of $6.5
billion will be used for the cash portion of the transaction
consideration, refinancing The Stars Group's existing first lien
term loans and repaying Sky Betting & Gaming's outstanding
debt.
2018 Full Year Guidance
- Full Year Guidance - The Stars Group intends to provide
revised 2018 full year financial guidance to include its
acquisitions of Crown Bet, William Hill Australia and Sky Betting
& Gaming when it releases its financial results for the second
quarter in August. The Stars Group continues to be satisfied with
the performance of its existing operations and as of the date
hereof continues to expect the following 2018 full year financial
guidance ranges:
- Revenues of between $1,390
and $1,470 million;
- Adjusted EBITDA of between $625 and $650
million;
- Adjusted Net Earnings of between $487 and $512
million; and
- Adjusted Net Earnings per Diluted Share of between
$2.33 and $2.47.
These unaudited expected results reflect The Stars Group's
existing business, excluding CrownBet, William Hill Australia and
Sky Betting & Gaming. These expectations also reflect
management's view of current and future market and business
conditions, including assumptions of (i) potential negative
operating conditions in Russia
expected to begin in late-May 2018,
(ii) no other material regulatory events, and (iii) no material
foreign currency exchange rate fluctuations, particularly against
the Euro. Such guidance is also based on a Euro to U.S. dollar
exchange rate of 1.20 to 1.00, Diluted Shares of between
207,000,000 and 209,000,000 for the high and low ends of the
Adjusted Net Earnings per Diluted Share range, respectively, and
certain accounting assumptions.
Financial Statements, Management's Discussion and
Analysis and Additional Information
The Stars Group's unaudited interim condensed consolidated
financial statements for the three months ended March 31, 2018 (the "Q1 2018 Financial
Statements"), management's discussion and analysis thereon (the "Q1
2018 MD&A"), as well as additional information relating to The
Stars Group and its business, can be found on SEDAR at
http://www.sedar.com, Edgar at http://www.sec.gov and The
Stars Group's website at http://www.starsgroup.com.
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
The Stars Group will host a conference call today, May 10, 2018 at 8:30 a.m.
ET to discuss its financial results for the first quarter
ended 2018 and related matters. To access via tele-conference,
please dial +1 877-451-6152 or +1 201-389-0879 ten minutes prior to
the scheduled start of the call. The playback will be made
available two hours after the event at +1 844-512-2921 or +1
412-317-6671. The Conference ID number is 13678731. To access the
webcast please use the following link:
http://public.viavid.com/index.php?id=129256
Reconciliation of Non-IFRS Measures to Nearest IFRS
Measures
The table below presents reconciliations of Adjusted EBITDA,
Adjusted Net Earnings and Adjusted Net Earnings per Diluted Share
to net earnings, which is the nearest IFRS measure:
Three Months Ended March 31,
$000's, except per share
amounts 2018 2017
Net earnings 74,361 65,753
Financial expenses 45,015 40,589
Income taxes expense 1,155 2,688
Depreciation of property and
equipment 2,744 2,161
Amortization of intangible
and deferred development costs 36,514 33,574
EBITDA 159,789 144,765
Stock-based compensation 2,383 2,164
Termination of employment agreements 672 2,126
Termination of affiliate agreements - 407
Loss on disposal of assets - 59
Gain from investments (1,023) (435)
Acquisition-related costs 7,739 -
Impairment of (reversal of
impairment of) intangible assets
and assets held for sale 115 (6,684)
Other costs (see table below) 5, 347 8,599
Adjusted EBITDA 175,022 151,001
Current income tax expense (2,420) (3,322)
Depreciation and amortization
(excluding amortization of purchase
price allocation intangibles) (7,096) (4,660)
Interest * (26,299) (29,652)
Adjusted Net Earnings 139,207 113,367
Diluted Shares 209,495,673 200,656,549
Adjusted Net Earnings per
Diluted Share 0.66 0.56
* Excluding interest accretion and non-refundable late payment fees related to the
unpaid balance of the deferred purchase price for the Stars Interactive Group
Acquisition.
The table below presents certain items comprising "Other costs"
in the reconciliation table above:
Three Months Ended March 31,
2018 2017
$000's $000's
Non-U.S. lobbying and legal expenses 1,138 741
U.S. lobbying and legal expenses 1,855 3,978
Strategic review professional fees - 125
Retention bonuses 117 615
Non-recurring professional fees 451 662
AMF and other investigation professional
fees (net of insurance proceeds) 1,784 2,390
Office restructuring and legacy business
unit shutdown costs 2 88
Other costs 5,347 8,599
The table below presents a reconciliation of Adjusted Cash Flow
from Operations to net cash inflows from operating activities,
which is the nearest IFRS measure:
Three Months Ended March 31,
2018 2017
$000's $000's
Net cash inflows from operating
activities 132,069 95,547
Customer deposit liability movement 189 16,229
Adjusted Cash Flow from Operations 132,258 111,776
The table below presents a reconciliation of the numerator of
QNY (i.e., real-money online poker revenue and real-money online
casino and sportsbook combined revenue) to the nearest IFRS measure
(i.e., revenue) as reported for the applicable period. Unless
otherwise noted, any deviation in the reconciliation below to
measures presented herein may be the result of immaterial
adjustments made in later periods due to certain accounting
reallocations.
Three Months Ended March 31,
2018 2017
$000's $000's
Revenue 392,891 317,320
Corporate revenue (294) (22)
Other gaming revenue (12,209) (11,854)
Real-money online poker revenue and real-money
online casino
and sportsbook combined revenue (including
CrownBet revenue) 380,388 305,444
CrownBet revenue 11,124 -
Real-money online poker revenue and
and real-money online casino
and sportsbook combined revenue
(excluding CrownBet revenue) 369,264 305,444
The Stars Group has not provided a reconciliation of the
non-IFRS measures to the nearest IFRS measures included in its full
year 2018 financial guidance provided in this news release,
including Adjusted EBITDA, Adjusted Net Earnings and Adjusted Net
Earnings per Diluted Share, because certain reconciling items
necessary to accurately project such IFRS measures, particularly
net earnings (loss), cannot be reasonably projected due to a number
of factors, including variability from potential foreign exchange
fluctuations impacting financial expenses, and the nature of other
non-recurring or one-time costs (which are excluded from non-IFRS
measures but included in net earnings (loss)), as well as the
typical variability arising from the audit of annual financial
statements, including, without limitation, certain income tax
provision accounting, and related accounting matters.
For additional information on The Stars Group's non-IFRS
measures, see below and the Q1 2018 MD&A, including under the
headings "Management's Discussion and Analysis" and "Selected
Financial Information-Other Financial Information".
About The Stars Group
The Stars Group is a leading provider of technology-based product
offerings in the global gaming and interactive entertainment
industries. The Stars Group directly or indirectly, including
through its Stars Interactive Group division, owns gaming and
related consumer businesses and brands, such as PokerStars,
PokerStars Casino, BetStars, Full Tilt, and 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 live poker tour
and event brands. These brands together have millions of registered
customers globally and collectively form the largest poker business
in the world, comprising online poker games and tournaments,
sponsored live poker competitions, marketing arrangements for
branded poker rooms in popular casinos in major cities around the
world, and poker programming and content created for television and
online audiences. The Stars Group, through certain of these and
other brands, also offers non-poker gaming product offerings,
including casino and sportsbook. The Stars Group, through certain
of its subsidiaries, is licensed or approved to offer, or offers
under third party licenses or approvals, its product offerings in
various jurisdictions throughout the world, including in
Europe, both within and outside of
the European Union, Australia, the
Americas and elsewhere. In particular, as of the date hereof, The
Stars Group holdings gaming licenses or related operating approvals
in 18 jurisdictions, and PokerStars, the world's most licensed
online gaming brand, holds gaming licenses or related operating
approvals in 17 of those jurisdictions.
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 full year 2018 financial guidance, and
certain future operational and growth plans and strategies,
including as it relates to certain recently announced acquisitions.
Forward-looking statements and information can, but may not always,
be identified by the use of words such as "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 and information 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; 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; impact of inability
to complete future acquisitions or to integrate businesses
successfully; significant barriers to entry; competition and the
competitive environment within The Stars Group's addressable
markets and industries; ability to obtain additional financing on
reasonable terms or at all; refinancing risks; 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, the imposition of new or additional taxes, such as
value-added and point of consumption taxes, and gaming duties;
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 The Stars
Group's 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; systems, networks, telecommunications or service
disruptions or failures or cyber-attacks; 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; 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; and natural events. 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", and
in the Q1 2018 MD&A, including under the headings "Risk Factors
and Uncertainties", "Limitations of Key Metrics and Other Data" and
"Key Metrics", each available on SEDAR at http://www.sedar.com,
EDGAR at http://www.sec.gov and The Stars Group's website at
http://www.starsgroup.com, and in other filings that The Stars
Group has made and may make with applicable securities authorities
in the future. Investors are cautioned not to put undue reliance on
forward-looking statements or information. 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 and Non-U.S. GAAP Measures
This news release references non-IFRS and non-U.S. GAAP
financial measures, including QNY, Adjusted EBITDA, Adjusted Cash
Flow from Operations, Adjusted Net Earnings, Adjusted Net Earnings
per Diluted Share, and the foreign exchange impact on revenues
(i.e., constant currency). The Stars Group believes these non-IFRS
and non-U.S. GAAP 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 or U.S.
GAAP. They are not recognized measures under IFRS or U.S. GAAP and
do not have standardized meanings prescribed by IFRS or U.S. GAAP.
These measures may be different from non-IFRS and non-U.S. GAAP
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 uses the following
non-IFRS and non-U.S. GAAP measures in this news release:
Adjusted EBITDA means net earnings before financial expenses,
income taxes expense (recovery), depreciation and amortization,
stock-based compensation, restructuring and certain other
items.
Adjusted Cash Flow from Operations means net cash inflows from
operating activities after adding back customer deposit liability
movements.
Adjusted Net Earnings means net earnings before interest
accretion, amortization of intangible assets resulting from
purchase price allocation following acquisitions, deferred income
taxes, stock-based compensation, restructuring, foreign exchange,
and certain other items.
Adjusted Net Earnings per Diluted Share means Adjusted Net
Earnings 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
convertible preferred shares. The effects of anti-dilutive
potential common shares are ignored in calculating Diluted Shares.
See note 7 to the Q1 2018 Financial Statements. For the three
months ended March 31, 2018 and 2017,
Diluted Shares equaled 209,495,673 and 200,656,549, respectively.
For the purposes of the full year 2018 financial guidance provided
in this news release, Diluted Shares equals between 207,000,000 and
209,000,000 for the high and low ends of the Adjusted Net Earnings
per Diluted Share range, respectively.
To calculate revenue on a constant currency basis, The Stars
Group translated revenue for the three months ended March 31, 2018 using the prior year's monthly
exchange rates for its local 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 the Q1 2018 MD&A, including under the headings
"Management's Discussion and Analysis" and "Selected Financial
Information-Other Financial Information".
Key Metrics and Other Data
The Stars Group defines QAUs as 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 rake or placed a
real-money bet or wager on or through one of its real-money online
poker, casino or sportsbook offerings during the applicable
quarterly period. The Stars Group defines unique 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 multiple verticals (poker, casino and/or sportsbook).
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.
The Stars Group defines QNY as combined real-money online gaming
and related revenue (excluding certain other revenues, such as
revenues that are included in "other gaming" revenues) for its two
business lines (i.e., real-money online poker and real-money online
casino and sportsbook) 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 Stars Group provides QNY on a U.S. dollar and
constant currency basis. QNY is a non-IFRS measure.
The Stars Group defines Net Deposits as 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.
The Stars Group defines Customer Registrations as the cumulative
number of online real-money and play-money customer registrations
on The Stars Group's brands.
To ensure consistency in The Stars Group's key metrics for the
three months ended March 31, 2018
presented in this news release, The Stars Group has excluded all
QAUs, Net Deposits and Customer Registrations related to CrownBet
and has excluded CrownBet revenues from QNY. The Stars Group will
continue to review and analyze applicable data and information
available to it and will consider including key metrics from
CrownBet in its own key metrics, including QAUs, QNY, Net Deposits
and Customer Registrations, once it has had sufficient time to
evaluate, confirm and record the same.
For additional information on The Stars Group's key metrics and
other data, see the Q1 2018 MD&A, including under the headings
"Limitations of Key Metrics and Other Data" and "Key Metrics".
THE STARS GROUP INC.
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended March 31,
2018 2017
$000's $000's
U.S. dollars (except per share amounts) (except per share amounts)
Revenues 392,891 317,320
Expenses
Selling 61,297 43,051
General and administrative 161,395 131,141
Financial 45,015 40,589
Gaming duty 42,952 34,533
Acquisition-related costs 7,739 -
Total expenses 318,398 249,314
Gain from investments 1,023 435
Net earnings before income taxes 75,516 68,441
Income taxes 1,155 2,688
Net earnings 74,361 65,753
Net earnings (loss) attributable
to Shareholders of The Stars
Group Inc. 75,451 65,411
Non-controlling interest (1,090) 342
Net earnings 74,361 65,753
Basic earnings per
Common Share $ 0.51 $ 0.45
Diluted earnings per
Common Share $ 0.36 $ 0.33
THE STARS GROUP INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at March 31, As at December 31,
2018 2017
U.S. dollars $000's $000's
ASSETS
Current assets
Cash and cash equivalents - operational 256,647 283,225
Cash and cash equivalents -
customer deposits 255,939 227,098
Total cash and cash equivalents 512,586 510,323
Restricted cash advances and collateral 5,962 7,862
Current investments - customer deposits 109,650 122,668
Accounts receivable 103,924 100,409
Inventories 245 302
Prepaid expenses and deposits 30,214 29,393
Income tax receivable 17,038 16,540
Derivatives 3,706 2,037
Total current assets 783,325 789,534
Non-current assets
Restricted cash advances and collateral 50,215 45,834
Prepaid expenses and deposits 16,929 16,514
Long-term accounts receivable 13,243 11,818
Long-term investments 9,298 6,981
Property and equipment 52,647 44,837
Investment tax credits receivable 3,881 3,056
Income tax receivable 17,411 14,061
Deferred income taxes 5,278 5,141
Goodwill and intangible assets 4,611,579 4,477,350
Total non-current assets 4,780,481 4,625,592
Total assets 5,563,806 5,415,126
LIABILITIES
Current liabilities
Accounts payable and accrued
liabilities 170,553 151,473
Other payables 52,688 42,714
Provisions 17,709 17,590
Customer deposits 364,587 349,766
Income tax payable 43,220 35,941
Current maturity of long-term debt 24,274 4,990
Derivatives 7,452 -
Total current liabilities 680,483 602,474
Non-current liabilities
Long-term accounts payable and accrued
liabilities 2,646 -
Long-term debt 2,316,023 2,353,579
Provisions 3,140 3,093
Derivatives 130,149 111,762
Income tax payable 20,518 24,277
Deferred income taxes 29,366 16,510
Total non-current liabilities 2,501,842 2,509,221
Total liabilities 3,182,325 3,111,695
EQUITY
Share capital 1,895,788 1,884,219
Reserves (182,839) (142,340)
Retained earnings 667,755 561,519
Equity attributable to the Shareholders
of The Stars Group Inc. 2,380,704 2,303,398
Non-controlling interest 777 33
Total equity 2,381,481 2,303,431
Total liabilities and equity 5,563,806 5,415,126
THE STARS GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
2018 2017
$000's $000's
U.S. dollars
Operating activities
Net earnings 74,361 65,753
Dormant accounts recognized as income (1,866) (886)
Stock-based compensation 2,383 2,164
Interest accretion 12,485 8,978
Interest expense 25,130 33,683
Income tax expense recognized in net earnings 1,155 2,688
Depreciation of property and equiptment 2,744 2,161
Amortization of intangible assets 32,462 31,697
Amortization of deferred development costs 4,052 1,877
Unrealized gain on foreign exchange (4,425) (2,099)
Unrealized gain on investments (1,033) (226)
Impairment of (reversal of impairment
of) intangible assets and assets held for sale 115 (6,684)
Realized loss (gain) on current investments,
promissory note and other 437 (2,122)
Income taxes paid (1,370) (1,128)
Changes in non-cash operating elements of
working capital (13,308) (24,139)
Customer deposit liability movement (189) (16,229)
Other (1,064) 59
Net cash inflows from operating activities 132,069 95,547
Financing activities
Issuance of common shares in relation to
exercised employee stock options 9,737 1,710
Settlement of brokerage margin account - (7,602)
Payment of deferred consideration - (75,000)
Repayment of long-term debt (6,068) (6,888)
Transaction costs on repricing of
long-term debt - (4,719)
Interest paid (31,488) (34,047)
Gain on settlement of derivative - 13,904
Net cash outflows from financing activities (27,819) (112,642)
Investing activities
Acquisition of subsidiaries, net of
cash acquired (101,703) -
Additions in deferred development costs (6,431) (4,413)
Purchase of property and equiptment (3,585) (856)
Acquired intangible assets (2,427) (707)
Sale of investments - 149
Cash movement from (into) restricted cash
advances and collateral 1,126 (546)
Settlement of minimum revenue guarantee (2,713) (1,707)
Net sale of investments utilizing
customer deposits 12,447 5,169
Other (551) (4)
Net cash outflows from investing activities (103,837) (2,915)
Increase (decrease) in cash and cash equivalents 413 (20,010)
Cash and cash equivalents - beginning of period 510,323 267,684
Unrealized foreign exchange difference on
cash and cash equivalents 1,850 (265)
Cash and cash equivalents - end of period 512,586 247,409
For investor relations, please contact: Tim Foran, Tel: +1-437-371-5730,
ir@starsgroup.com; For media inquiries, please contact:
Eric Hollreiser,
Press@starsgroup.com