TORONTO, Aug. 13, 2018 /PRNewswire/ - The Stars Group
Inc. (NASDAQ: TSG)(TSX: TSGI) today reported its financial results
for the second quarter ended June 30,
2018, updated its full year 2018 financial guidance, and
provided certain additional highlights and updates. Unless
otherwise noted, all dollar ($) amounts are in U.S. dollars.
"The Stars Group's quarterly results reflect both continued
organic growth within our International business and the
contributions of our Australian acquisitions," stated Rafi
Ashkenazi, The Stars Group's Chief Executive Officer. "We continued
enhancing our products and user experience across all verticals and
executing on our cross-selling strategy."
"The continued emergence of our sports betting and casino
offerings and the addition of our 2018 acquisitions have
transformed our business and greatly enhanced the foundation and
diversity of our consolidated revenue base, which will now be
nearly equally split among verticals and roughly 75% locally
regulated or taxed," said Mr. Ashkenazi.
"We are now focused on the next stage of our
transformation—integration," concluded Mr. Ashkenazi. "While this
will be a phased and measured process, we expect that it will
prepare us to not only be a leader within the world's largest
regulated markets but to also leverage the strength of our combined
platform to take advantage of new opportunities and markets."
Second Quarter 2018 Consolidated Financial Summary
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
In thousands of U.S.
Dollars
(except percentages
and per share amounts)
|
|
2018
|
|
2017
|
|
%
Change
|
|
2018
|
|
2017
|
|
%
Change
|
Total
Revenue
|
|
411,512
|
|
305,305
|
|
34.8%
|
|
804,403
|
|
622,625
|
|
29.2%
|
Gross
Profit
|
|
327,875
|
|
252,637
|
|
29.8%
|
|
640,502
|
|
507,496
|
|
26.2%
|
Operating
Income
|
|
1,064
|
|
105,517
|
|
(99.0%)
|
|
114,930
|
|
216,403
|
|
(46.9%)
|
Net (Loss)
Earnings
|
|
(154,824)
|
|
70,483
|
|
(319.7%)
|
|
(80,463)
|
|
136,236
|
|
(159.1%)
|
Adjusted Net Earnings
¹
|
|
131,023
|
|
114,028
|
|
14.9%
|
|
269,785
|
|
227,396
|
|
18.6%
|
Adjusted EBITDA
¹
|
|
168,270
|
|
146,539
|
|
14.8%
|
|
343,292
|
|
297,540
|
|
15.4%
|
Adjusted EBITDA
Margin ¹
|
|
40.9%
|
|
48.0%
|
|
(14.8%)
|
|
42.7%
|
|
47.8%
|
|
(10.7%)
|
Diluted (loss)
earnings per Common Share ($/Share)
|
|
(1.01)
|
|
0.35
|
|
(388.6%)
|
|
(0.52)
|
|
0.67
|
|
(177.2%)
|
Adjusted Diluted Net
Earnings per Share ($/Share) ¹
|
|
0.60
|
|
0.56
|
|
7.1%
|
|
1.27
|
|
1.13
|
|
12.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
|
164,011
|
|
130,426
|
|
25.8%
|
|
296,080
|
|
225,973
|
|
31.0%
|
Free Cash Flow
¹
|
|
84,856
|
|
94,857
|
|
(10.5%)
|
|
167,115
|
|
159,722
|
|
4.6%
|
____________________________________
1 Non-IFRS measure. For important information on The
Stars Group's non-IFRS measures, see below under "Non-IFRS
Measures" and the tables under "Reconciliation of Non-IFRS Measures
to Nearest IFRS Measures".
|
Second Quarter 2018 Segmented Financial Summary
International
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
In thousands of U.S.
Dollars (except otherwise noted)
|
|
2018
|
|
2017
|
|
%
Change
|
|
2018
|
|
2017
|
|
%
Change
|
|
Stakes
|
|
248,572
|
|
144,352
|
|
72.2%
|
|
471,557
|
|
287,448
|
|
64.0%
|
|
Betting Net Win
Margin (%)
|
|
7.9%
|
|
6.1%
|
|
29.0%
|
|
7.7%
|
|
5.5%
|
|
39.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Poker
|
|
216,986
|
|
202,897
|
|
6.9%
|
|
462,861
|
|
421,559
|
|
9.8%
|
|
Gaming
|
|
101,941
|
|
80,726
|
|
26.3%
|
|
208,651
|
|
160,488
|
|
30.0%
|
|
Betting
|
|
19,635
|
|
8,836
|
|
122.2%
|
|
36,321
|
|
15,853
|
|
129.1%
|
|
Other
|
|
11,673
|
|
12,846
|
|
(9.1%)
|
|
24,169
|
|
24,725
|
|
(2.2%)
|
Total
Revenue
|
|
350,235
|
|
305,305
|
|
14.7%
|
|
732,002
|
|
622,625
|
|
17.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
281,076
|
|
252,637
|
|
11.3%
|
|
586,131
|
|
507,496
|
|
15.5%
|
Gross Profit Margin
(%)
|
|
80.3%
|
|
82.7%
|
|
(3.0%)
|
|
80.1%
|
|
81.5%
|
|
(1.8%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
105,257
|
|
104,208
|
|
1.0%
|
|
208,581
|
|
190,338
|
|
9.6%
|
Sales and
marketing
|
|
42,255
|
|
31,302
|
|
35.0%
|
|
87,226
|
|
65,290
|
|
33.6%
|
Research and
development
|
|
8,358
|
|
5,383
|
|
55.3%
|
|
16,176
|
|
12,483
|
|
29.6%
|
Operating
Income
|
|
125,206
|
|
111,744
|
|
12.0%
|
|
274,148
|
|
239,385
|
|
14.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA ¹
|
|
164,317
|
|
145,828
|
|
12.7%
|
|
350,796
|
|
307,386
|
|
14.1%
|
Adjusted EBITDA
Margin (%) ¹
|
|
46.9%
|
|
47.8%
|
|
(1.8%)
|
|
47.9%
|
|
49.4%
|
|
(2.9%)
|
Australia
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
In thousands of U.S.
Dollars (except otherwise noted)
|
|
2018
|
|
2017
|
|
%
Change
|
|
2018
|
|
2017
|
|
%
Change
|
|
Stakes
|
|
710,269
|
|
—
|
|
100.0%
|
|
867,726
|
|
—
|
|
100.0%
|
|
Betting Net Win
Margin (%)
|
|
8.6%
|
|
—
|
|
100.0%
|
|
8.3%
|
|
—
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Betting
|
|
61,277
|
|
—
|
|
100.0%
|
|
72,401
|
|
—
|
|
100.0%
|
Total
Revenue
|
|
61,277
|
|
—
|
|
100.0%
|
|
72,401
|
|
—
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
46,799
|
|
—
|
|
100.0%
|
|
54,371
|
|
—
|
|
100.0%
|
Gross Profit Margin
(%)
|
|
76.4%
|
|
—
|
|
100.0%
|
|
75.1%
|
|
—
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
40,288
|
|
—
|
|
100.0%
|
|
44,562
|
|
—
|
|
100.0%
|
Sales and
marketing
|
|
12,262
|
|
—
|
|
100.0%
|
|
16,472
|
|
—
|
|
100.0%
|
Research and
development
|
|
768
|
|
—
|
|
100.0%
|
|
984
|
|
—
|
|
100.0%
|
Operating
Loss
|
|
(6,519)
|
|
—
|
|
(100.0%)
|
|
(7,647)
|
|
—
|
|
(100.0%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA ¹
|
|
13,471
|
|
—
|
|
100.0%
|
|
12,625
|
|
—
|
|
100.0%
|
Adjusted EBITDA
Margin (%) ¹
|
|
22.0%
|
|
—
|
|
100.0%
|
|
17.4%
|
|
—
|
|
100.0%
|
1 Non-IFRS
measure. For important information on The Stars Group's non-IFRS
measures, see below under "Non-IFRS Measures" and the tables under
"Reconciliation of Non-IFRS Measures to Nearest IFRS
Measures".
|
As a result of its previously announced Australian acquisitions
and in anticipation of the future integration of Sky Betting &
Gaming and potential future geographic expansion, The Stars Group
revised the composition of its reporting segments and the manner in
it reports its operating results as set forth above. The
Stars Group believes that the new presentation will better reflect
its current and expected management and operational structure. The
Stars Group previously had one reporting segment, gaming, with two
major lines of operations, real-money online poker and combined
real-money online casino and sportsbook. Given the timing of the
recent acquisitions, this is now divided into two reporting
segments, International and Australia, and four major lines of operations,
Poker, Gaming, Betting and Other, as applicable. The International
segment currently includes the business operations of The Stars
Group's existing business prior to the Australian acquisitions and
Sky Betting & Gaming acquisition, and the Australia segment currently includes the
business operations of CrownBet and William Hill Australia.
Second Quarter 2018 and Subsequent Financial
Highlights
- Consolidated Total Revenues – Revenues for the quarter
increased 34.8% year-over-year. Excluding the impact of
year-over-year changes in foreign exchange rates, revenues for the
quarter would have increased by 30.7%. Real-money online Poker,
Gaming, and Betting revenues represented 52.7%, 24.8%, and 19.7% of
revenues for the quarter, respectively.
- Consolidated Adjusted EBITDA and Adjusted EBITDA Margin
– Adjusted EBITDA for the quarter increased 14.8% year-over-year,
primarily driven by increased gross profit from organic growth
within the International segment. Adjusted EBITDA Margin for the
quarter decreased 14.8% year-over-year, primarily driven by higher
contribution from the Betting vertical within both the
International and Australian segments.
- Poker Revenues – International– Poker revenue for the
quarter was $217.0 million, or an
increase of approximately 6.9% year-over-year. Excluding the impact
of year-over-year changes in foreign exchange rates, Poker revenues
for the quarter would have increased by 3.8%. The increase was
primarily driven by the continued positive impact of the Stars
Rewards loyalty program, foreign exchange fluctuations, and the
introduction of shared poker liquidity in France and Spain in the first quarter and Portugal in the second quarter, as offset by,
among other things, the cessation of operations in Australia in September
2017 and Colombia in
July 2017, and continued negative
operating conditions in Poland due
to certain prior regulatory changes in that jurisdiction.
- Gaming Revenues – International – Gaming revenue for the
quarter was $101.9 million, or an
increase of 26.3% year-over-year. Excluding the impact of
year-over-year changes in foreign exchange rates, Gaming revenues
for the quarter would have increased by 21.0%. The increase was
primarily the result of product and content improvements to
PokerStars Casino, including the introduction of over 150 new
casino games since the beginning of the year, foreign exchange
fluctuations, and the launch of PokerStars Casino in certain new
markets. This was partially offset by, among other things,
continued negative operating conditions in Poland due to certain prior regulatory changes
in that jurisdiction.
- Betting Revenues - International – Betting revenue for
the quarter were $19.6 million, or an
increase of 122.2% year-over-year. Excluding the impact of
year-over-year changes in foreign exchange rates, Betting revenues
for the quarter would have increased by 106.1%. The increase was
primarily the result of increases in Stakes and Betting Net Win
Margin. These increases were primarily driven by increased wagering
activity due to product and content improvements to BetStars, the
launch of BetStars in certain new markets, and the 2018 FIFA World
Cup.
- Consolidated Debt and Cash – The total principal amount
owing on long-term debt outstanding at the end of the quarter was
$2.73 billion with a weighted average
interest rate of 4.9%. The Stars Group ended the second quarter of
2018 with approximately $1.05 billion
in operational cash on its balance sheet. Following the end of the
quarter, The Stars Group completed the Sky Betting & Gaming
acquisition and incurred additional debt in connection with the
same.
Second Quarter 2018 and Subsequent Operational
Highlights
- Quarterly Real-Money Active Uniques (QAUs) –
International–QAUs were 2.02 million, which represents a
decrease of 5.2% year-over-year. This decrease was primarily the
result of The Stars Group's continued strategy of focusing on
high-value customers (primarily recreational players), the
cessation of online poker operations in Australia and Colombia, and an impaired market in
Poland, as offset by the growth
and expansion of the casino and betting product offerings.
Approximately 1.86 million of such QAUs played online poker during
the quarter, a decrease of approximately 7.3% year-over-year, while
The Stars Group's online casino offerings had approximately 0.6
million QAUs, an increase of 11.4% year-over-year. The Stars
Group's BetStars had approximately 0.2 million QAUs, a 78.3%
increase year-over-year.
- Quarterly Net Yield (QNY) – International – QNY was
$167, an increase of 21.9%
year-over-year, and QNY excluding the impact of year-over-year
changes in foreign exchange rates was $161, an increase of 17.5% year-over-year. QNY is
a non-IFRS measure.
- Net Deposits – International – Net Deposits were
$322 million, an increase of 19.3%
year-over-year. The increase was primarily driven by the
implementation of the Stars Rewards loyalty program and continued
focus on high-value customers (primarily recreational players),
foreign exchange fluctuations and continued development of the
casino and betting product offerings.
- Stakes and Betting Net Win Margin – International –
Stakes were $248.6 million, an
increase of 72.2% year-over-year, and Betting Net Win Margin was
7.9%, an increase of 1.8 percentage points year-over-year. The
increases in the quarter were primarily due to product and content
improvements to BetStars driving incremental QAUs, the launch of
BetStars in certain new markets, and the World Cup.
- CrownBet and William Hill Australia – On
April 24, 2018, The Stars Group
increased its equity interest in CrownBet from 62% to 80% and
CrownBet acquired William Hill Australia. The aggregate purchase
price under the agreements for these transactions was $435 million (inclusive of $117.7 million to acquire the previously
announced 62% equity interest in CrownBet in February 2017), which was paid in a combination
of cash and the issuance of approximately 3.1 million newly-issued
common shares. As part of the purchase of the additional 18% equity
interest in CrownBet, the management team of CrownBet is entitled
to an additional payment of up to $182
million in 2020 subject to certain performance conditions
and payable in cash, additional common shares or a combination
thereof, at The Stars Group's discretion.
- U.S. Sports Betting – On May 14,
2018, the United States Supreme Court struck down, as an
unconstitutional exercise of federal power, the nearly 30-year ban
on sports betting under the Professional and Amateur Sports
Protection Act. The Stars Group believes that the decision by the
Court is an important step forward in the regulation of sports
betting in the United States and
that it is well-positioned to take advantage of any new business
and market opportunities as they develop. Currently, more than 20
states have either existing sports betting laws or have pending
legislation to legalize or study sports betting. On August 2, 2018, The Stars Group and Resorts
Casino Hotel announced the extension of their existing partnership
in the New Jersey regulated online
gaming market to include online and mobile sports wagering through
the BetStars brand alongside the already existing online poker and
casino offering available through the PokerStarsNJ brand. On
August 10, 2018, The Stars Group and
Mount Airy Casino Resort announced a partnership to enter
Pennsylvania's online sports
wagering and gaming market, where The Stars Group will offer to
customers in Pennsylvania its
online poker, casino (including slots and tables) and sports
wagering products.
- Sky Betting & Gaming – On July 10, 2018, The Stars Group completed the Sky
Betting & Gaming acquisition. The aggregate purchase price
under the transaction agreements was $4.7
billion, of which $3.6 billion
was paid in cash and the remainder was paid through the issuance of
approximately 37.9 million newly issued common shares. To finance
the cash portion of the purchase price, repay the existing first
lien term loans and repay Sky Betting & Gaming's existing
long-term debt, The Stars Group used cash on its balance sheet and
raised $4.567 billion in first lien
term loans, $1.00 billion in senior
notes and $621.8 million of net
proceeds (before expenses and excluding the overallotment option,
which was exercised in full by the underwriters at the end of July)
from the issuance of additional common shares in a public equity
offering. The Stars Group also obtained a new revolving credit
facility of $700.0 million of which
it had drawn $100.0 million as of
completion of the acquisition.
- Preferred Shares – On July 18,
2018, The Stars Group completed the previously announced
mandatory conversion of all of its issued and outstanding
convertible preferred shares as of such date and issued
approximately 52 million common shares to the holders thereof.
2018 Full Year Guidance
- Full Year Guidance – The Stars Group is updating its
2018 full year financial guidance ranges on a consolidated basis to
reflect expected partial year contributions from the Australian
acquisitions and the Sky Betting & Gaming acquisition and the
impact from changes in The Stars Group's capital structure as a
result of such acquisitions, including increases in The Stars
Group's long-term debt outstanding and number of common shares
issued and outstanding:
-
- Revenues of between $1.995
and $2.145 billion, as compared to
between $1.390 and $1.470 billion;
- Adjusted EBITDA of between $755 and $810
million, as compared to between $625 and $650
million;
- Adjusted Net Earnings of between $485 and $545
million, as compared to between $487 and $512
million;
- Adjusted Diluted Net Earnings per Share of between
$1.99 and $2.22, as compared to between $2.33 and $2.471;
and
- Capital Expenditures of between $110 million and $150
million.
These unaudited expected results reflect management's view of
current and future market and business conditions, including
assumptions of (i) expected Betting Net Win Margin of between 8.0%
and 10.5%, (ii) continued negative operating conditions in
Poland and potential negative
operating conditions in Russia
resulting from prior regulatory changes, including constraints on
payment processing, (iii) no other material regulatory events or
investments associated with the entry into new markets, (iv) no
impact from the gaming advertising ban in Italy, and (v) no material foreign currency
exchange rate fluctuations, particularly against the Euro,
Great Britain pound sterling and
Australian dollar. Such guidance is also based on a Euro to U.S.
dollar exchange rate of 1.17 to 1.00 as compared to 1.20 to 1.00, a
Great Britain pound sterling to
U.S. dollar exchange rate of 1.32 to 1.00 and an Australian dollar
to U.S. dollar exchange rate of 0.74 to 1.00, Diluted Shares of
between 241,000,000 and 243,000,000 for the high and low ends of
the Adjusted Diluted Net Earnings per Share range, respectively, as
compared to between 207,000,000 and 209,000,000, respectively, and
certain accounting assumptions.
Capital Expenditures include estimated spend on intangible
assets, property, plant and equipment and certain development
costs.
Financial Statements, Management's Discussion and Analysis
and Additional Information
The Stars Group's unaudited interim condensed consolidated
financial statements for the three and six months ended
June 30, 2018 (the "Q2 2018 Financial
Statements"), management's discussion and analysis thereon (the "Q2
2018 MD&A"), as well as 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 Q2 2018 Financial
Statements.
In addition to press releases, securities filings and public
conference calls and webcasts, The Stars Group intends to use its
investor relations page on its website as a means of disclosing
material information to its investors and others and for complying
with its disclosure obligations under applicable securities laws.
Accordingly, investors and others should monitor the website in
addition to following The Stars Group's press releases, securities
filings and public conference calls and webcasts. This list may be
updated from time to time.
Conference Call and Webcast
The Stars Group will host a conference call today, August 13, 2018 at 8:30
a.m. ET to discuss its financial results for the second
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 13682288. To access
the webcast please use the following link:
http://public.viavid.com/index.php?id=130894
Reconciliation of Non-IFRS Measures to Nearest IFRS
Measures
The tables below present reconciliations of Adjusted EBITDA,
Adjusted Net Earnings and Adjusted Diluted Net Earnings per Share
to net (loss) earnings, which is the nearest IFRS measure:
|
|
Three Months Ended
June 30, 2018
|
In thousands of U.S.
Dollars (except per share amounts)
|
|
International
|
|
Australia
|
|
Corporate
|
|
Consolidated
|
Net earnings
(loss)
|
|
126,274
|
|
(6,519)
|
|
(274,579)
|
|
(154,824)
|
|
|
|
|
|
|
|
|
|
Income tax
recovery
|
|
—
|
|
—
|
|
3,404
|
|
3,404
|
Net financing
charges
|
|
—
|
|
—
|
|
(160,360)
|
|
(160,360)
|
Net earnings from
associates
|
|
1,068
|
|
—
|
|
—
|
|
1,068
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
125,206
|
|
(6,519)
|
|
(117,623)
|
|
1,064
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
35,987
|
|
8,588
|
|
10
|
|
44,585
|
Add (deduct) the
impact of the following:
|
|
|
|
|
|
|
|
|
|
Acquisition-related
costs and deal contingent forwards
|
|
—
|
|
—
|
|
95,627
|
|
95,627
|
|
Stock based
compensation
|
|
—
|
|
—
|
|
3,265
|
|
3,265
|
|
(Gain) loss from
investments and associates
|
|
(270)
|
|
5
|
|
—
|
|
(265)
|
|
Impairment of
intangibles assets and assets held for sale
|
|
958
|
|
—
|
|
—
|
|
958
|
|
Other
costs
|
|
2,436
|
|
11,397
|
|
9,203
|
|
23,036
|
Total adjusting
items
|
|
3,124
|
|
11,402
|
|
108,095
|
|
122,621
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
164,317
|
|
13,471
|
|
(9,518)
|
|
168,270
|
|
|
Six Months Ended
June 30, 2018
|
In thousands of U.S.
Dollars (except per share amounts)
|
|
International
|
|
Australia
|
|
Corporate
|
|
Consolidated
|
Net earnings
(loss)
|
|
275,216
|
|
(7,647)
|
|
(348,032)
|
|
(80,463)
|
|
|
|
|
|
|
|
|
|
Income tax
recovery
|
|
—
|
|
—
|
|
2,249
|
|
2,249
|
Net financing
charges
|
|
—
|
|
—
|
|
(198,710)
|
|
(198,710)
|
Net earnings from
associates
|
|
1,068
|
|
—
|
|
—
|
|
1,068
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
274,148
|
|
(7,647)
|
|
(151,571)
|
|
114,930
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
73,956
|
|
9,868
|
|
19
|
|
83,843
|
Add (deduct) the
impact of the following:
|
|
|
|
|
|
|
|
|
|
Acquisition-related
costs and deal contingent forwards
|
|
—
|
|
—
|
|
110,818
|
|
110,818
|
|
Stock based
compensation
|
|
—
|
|
—
|
|
5,649
|
|
5,649
|
|
Loss from investments
and associates
|
|
247
|
|
—
|
|
—
|
|
247
|
|
Impairment of
intangibles assets and assets held for sale
|
|
1,074
|
|
—
|
|
—
|
|
1,074
|
|
Other
costs
|
|
1,371
|
|
10,404
|
|
14,956
|
|
26,731
|
Total adjusting
items
|
|
2,692
|
|
10,404
|
|
131,423
|
|
144,519
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
350,796
|
|
12,625
|
|
(20,129)
|
|
343,292
|
|
|
Three Months Ended
June 30, 2017
|
In thousands of U.S.
Dollars (except per share amounts)
|
|
International
|
|
Australia
|
|
Corporate
|
|
Consolidated
|
Net earnings
(loss)
|
|
111,744
|
|
—
|
|
(41,261)
|
|
70,483
|
|
|
|
|
|
|
|
|
|
Income tax
recovery
|
|
—
|
|
—
|
|
4,018
|
|
4,018
|
Net financing
charges
|
|
—
|
|
—
|
|
(39,052)
|
|
(39,052)
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
111,744
|
|
—
|
|
(6,227)
|
|
105,517
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
36,530
|
|
—
|
|
70
|
|
36,600
|
Add (deduct) the
impact of the following:
|
|
|
|
|
|
|
|
|
|
Stock based
compensation
|
|
—
|
|
—
|
|
2,452
|
|
2,452
|
|
(Gain) loss from
investments
|
|
(8,452)
|
|
—
|
|
12,944
|
|
4,492
|
|
Reversal of
impairment of intangibles assets and assets held for
sale
|
|
(629)
|
|
—
|
|
—
|
|
(629)
|
|
Other costs
(income)
|
|
6,635
|
|
—
|
|
(8,528)
|
|
(1,893)
|
Total adjusting
items
|
|
(2,446)
|
|
—
|
|
6,868
|
|
4,422
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
145,828
|
|
—
|
|
711
|
|
146,539
|
|
|
Six Months Ended
June 30, 2017
|
In thousands of U.S.
Dollars (except per share amounts)
|
|
International
|
|
Australia
|
|
Corporate
|
|
Consolidated
|
Net earnings
(loss)
|
|
239,385
|
|
—
|
|
(103,149)
|
|
136,236
|
|
|
|
|
|
|
|
|
|
Income tax
recovery
|
|
—
|
|
—
|
|
1,330
|
|
1,330
|
Net financing
charges
|
|
—
|
|
—
|
|
(81,497)
|
|
(81,497)
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
239,385
|
|
—
|
|
(22,982)
|
|
216,403
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
72,188
|
|
—
|
|
147
|
|
72,335
|
Add (deduct) the
impact of the following:
|
|
|
|
|
|
|
|
|
|
Stock based
compensation
|
|
—
|
|
—
|
|
4,616
|
|
4,616
|
|
(Gain) loss from
investments
|
|
(8,572)
|
|
—
|
|
13,217
|
|
4,645
|
|
Reversal of
impairment of intangibles assets and assets held for
sale
|
|
(5,043)
|
|
—
|
|
(2,268)
|
|
(7,311)
|
|
Other costs
(income)
|
|
9,428
|
|
—
|
|
(2,576)
|
|
6,852
|
Total adjusting
items
|
|
(4,187)
|
|
—
|
|
12,989
|
|
8,802
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
307,386
|
|
—
|
|
(9,846)
|
|
297,540
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
In thousands of U.S.
Dollars (except per share amounts)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net (loss)
earnings
|
|
(154,824)
|
|
70,483
|
|
(80,463)
|
|
136,236
|
Add (deduct) the
impact of the following:
|
|
|
|
|
|
|
|
|
|
Interest
accretion
|
|
12,726
|
|
12,147
|
|
24,777
|
|
24,940
|
|
Loss on debt
extinguishment
|
|
124,976
|
|
—
|
|
124,976
|
|
—
|
|
Acquisition-related
costs and deal contingent forwards
|
|
95,627
|
|
—
|
|
110,818
|
|
—
|
|
Amortization of
acquisition intangibles
|
|
31,482
|
|
31,075
|
|
62,858
|
|
62,150
|
|
Deferred income tax
recovery
|
|
(4,890)
|
|
(4,098)
|
|
(5,814)
|
|
(4,732)
|
|
Stock based
compensation
|
|
3,265
|
|
2,452
|
|
5,649
|
|
4,616
|
|
(Gain) loss from
investments and associates
|
|
(1,333)
|
|
4,491
|
|
(821)
|
|
4,645
|
|
Impairment (reversal
of impairment) of intangibles assets and assets held for
sale
|
|
958
|
|
(629)
|
|
1,074
|
|
(7,311)
|
|
Other costs
(income)
|
|
23,036
|
|
(1,893)
|
|
26,731
|
|
6,852
|
Adjusted net
earnings
|
|
131,023
|
|
114,028
|
|
269,785
|
|
227,396
|
Adjusted net
earnings attributable to
|
|
|
|
|
|
|
|
|
Shareholders of The
Stars Group Inc.
|
|
129,237
|
|
114,028
|
|
269,469
|
|
227,396
|
Non-controlling
interest
|
|
1,786
|
|
—
|
|
316
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
Weighted average
diluted number of shares
|
|
215,380,175
|
|
203,467,303
|
|
212,449,078
|
|
201,969,186
|
Adjusted Diluted
Net Earnings per Share attributable to Shareholders of The Stars
Group Inc
|
|
0.60
|
|
0.56
|
|
1.27
|
|
1.13
|
The table below presents certain items comprising "Other costs"
in the reconciliation tables above:
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
In thousands of U.S.
Dollars
|
|
$000's
|
|
$000's
|
|
$000's
|
|
$000's
|
Integration
costs
|
|
11,467
|
|
—
|
|
11,467
|
|
—
|
Financial expenses
(income)
|
|
4,370
|
|
(6,622)
|
|
2,049
|
|
(9,066)
|
Termination of
employment agreements
|
|
1,387
|
|
682
|
|
2,058
|
|
2,808
|
AMF and other
investigation professional fees
|
|
2,875
|
|
2,764
|
|
4,659
|
|
5,153
|
Lobbying (US and
Non-US) and other legal expenses
|
|
2,665
|
|
4,598
|
|
5,658
|
|
9,318
|
Non-recurring
professional fees
|
|
102
|
|
842
|
|
553
|
|
1,504
|
Retention
bonuses
|
|
117
|
|
615
|
|
234
|
|
1,230
|
Loss on disposal of
assets
|
|
41
|
|
202
|
|
41
|
|
261
|
Austria gaming
duty
|
|
—
|
|
(5,000)
|
|
—
|
|
(5,000)
|
Termination of
affiliate agreements
|
|
—
|
|
—
|
|
—
|
|
407
|
Other
|
|
12
|
|
26
|
|
12
|
|
237
|
Other
costs
|
|
23,036
|
|
(1,893)
|
|
26,731
|
|
6,852
|
The table below presents a reconciliation of Free Cash Flow to
net cash flows from operating activities, which is the nearest IFRS
measure:
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
In thousands of U.S.
Dollars
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net cash inflows from
operating activities
|
|
164,011
|
|
130,426
|
|
296,080
|
|
225,973
|
Customer deposit
liability movement
|
|
(14,090)
|
|
9,053
|
|
(13,901)
|
|
25,282
|
|
|
149,921
|
|
139,479
|
|
282,179
|
|
251,255
|
Capital
Expenditure:
|
|
|
|
|
|
|
|
|
|
Additions to deferred
development costs
|
|
(9,759)
|
|
(6,013)
|
|
(16,190)
|
|
(10,426)
|
|
Additions to property
and equipment
|
|
(5,676)
|
|
(1,398)
|
|
(9,261)
|
|
(2,254)
|
|
Additions to
intangible assets
|
|
(9,415)
|
|
(212)
|
|
(11,842)
|
|
(919)
|
Interest
paid
|
|
(34,790)
|
|
(31,017)
|
|
(66,278)
|
|
(65,064)
|
Debt principal
repayments
|
|
(5,425)
|
|
(5,982)
|
|
(11,493)
|
|
(12,870)
|
Free Cash
Flow
|
|
84,856
|
|
94,857
|
|
167,115
|
|
159,722
|
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
Diluted Net Earnings per 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 Q2 2018 MD&A, including under the
headings "Management's Discussion and Analysis", "Limitations of
Key Metrics, Other Data and Non-IFRS Measures" and "Key Metrics and
Non-IFRS Measures".
About The Stars Group
The Stars Group is a 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, BetEast, Sky Bet, Sky Vegas,
Sky Casino, Sky Bingo, and Sky
Poker, as well as live poker tour and event brands, including the
PokerStars Players No Limit Hold'em Championship, European Poker
Tour, PokerStars Caribbean Adventure, Latin American Poker Tour,
Asia Pacific Poker Tour, PokerStars Festival and PokerStars
MEGASTACK. The Stars Group is one of the world's most licensed
online gaming operators with its subsidiaries collectively holding
licenses or approvals in 19 jurisdictions throughout the world,
including in Europe, Australia, and the Americas. The Stars Group's
vision is to become the world's favorite iGaming destination and
its mission is to provide its customers with winning moments.
Cautionary Note Regarding Forward Looking Statements
This news release contains forward-looking statements and
information within the meaning of the Private Securities Litigation
Reform Act of 1995 and applicable securities laws, including,
without limitation, certain financial and operational expectations
and projections, such as 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 "seek", "anticipate",
"plan", "continue", "estimate", "expect", "may", "will", "project",
"predict", "potential", "targeting", "intend", "could", "might",
"would", "should", "believe", "objective", "ongoing", "imply",
"assumes", "goal", "likely" and similar references to future
periods or the negatives of these words or variations or synonyms
of these words or comparable terminology and similar expressions.
These statements and information, other than statements of
historical fact, are based on management's current expectations and
are subject to a number of risks, uncertainties, and assumptions,
including market and economic conditions, business prospects or
opportunities, future plans and strategies, projections,
technological developments, anticipated events and trends and
regulatory changes that affect The Stars Group, its subsidiaries,
and its and their respective customers and industries. Although The
Stars Group and management believe the expectations reflected in
such forward-looking statements and information are reasonable and
are based on reasonable assumptions and estimates as of the date
hereof, there can be no assurance that these assumptions or
estimates are accurate or that any of these expectations will prove
accurate. Forward-looking statements are inherently subject to
significant business, regulatory, economic and competitive risks,
uncertainties and contingencies that could cause actual events to
differ materially from those expressed or implied in such
statements. Specific risks and uncertainties include, but are not
limited to: the heavily regulated industry in which The Stars Group
carries on its business; risks associated with interactive
entertainment and online and mobile gaming generally; current and
future laws or regulations and new interpretations of existing laws
or regulations, or potential prohibitions, with respect to
interactive entertainment or online gaming or activities related to
or necessary for the operation and offering of online gaming;
potential changes to the gaming regulatory framework; legal and
regulatory requirements; ability to obtain, maintain and comply
with all applicable and required licenses, permits and
certifications to offer, operate and market its product offerings,
including difficulties or delays in the same; significant barriers
to entry; competition and the competitive environment within
addressable markets and industries; impact of inability to complete
future or announced acquisitions or to integrate businesses
successfully; 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; The Stars Group's
exposure to greater than anticipated tax liability; risks of
foreign operations generally; protection of proprietary technology
and intellectual property rights; ability to recruit and retain
management and other qualified personnel, including key technical,
sales and marketing personnel; defects in product offerings; losses
due to fraudulent activities; management of growth; contract
awards; potential financial opportunities in addressable markets
and with respect to individual contracts; ability of technology
infrastructure to meet applicable demand and reliance on online and
mobile telecommunications operators; systems, networks,
telecommunications or service disruptions or failures or
cyber-attacks and failure to protect customer data, including
personal and financial information; regulations and laws that may
be adopted with respect to the Internet and electronic commerce or
that may otherwise impact The Stars Group in the jurisdictions
where it is currently doing business or intends to do business,
particularly those related to online gaming or that could impact
the ability to provide online product offerings, including, without
limitation, as it relates to payment processing; ability to obtain
additional financing or to complete any refinancing on reasonable
terms or at all; customer and operator preferences and changes in
the economy; dependency on customers' acceptance of its product
offerings; consolidation within the gaming industry; litigation
costs and outcomes; expansion within existing and into new markets;
relationships with vendors and distributors; and natural events;
contractual relationships of Sky Betting & Gaming or The Stars
Group with Sky plc and/or its subsidiaries; counterparty risks;
failure of systems and controls of The Stars Group to restrict
access to its products; reliance on scheduling and live
broadcasting of major sporting events; macroeconomic conditions and
trends in the gaming and betting industry; bookmaking risks; an
ability to realize projected financial increases attributable to
acquisitions and The Stars Group's business strategies; and an
ability to realize all or any of The Stars Group's estimated
synergies and cost savings in connection with acquisitions. Other
applicable risks and uncertainties include, but are not limited to,
those identified in The Stars Group's annual information form for
the year ended December 31, 2017,
including under the heading "Risk Factors and Uncertainties", in
The Stars Group's prospectus supplement dated June 21, 2018 to the short form base shelf
prospectus dated January 16, 2018
under the heading "Risk Factors", and in the Q2 2018 MD&A,
including under the headings "Risk Factors and Uncertainties",
"Limitations of Key Metrics, Other Data and Non-IFRS Measures" and
"Key Metrics and Non-IFRS Measures", each available on SEDAR at
www.sedar.com, EDGAR at www.sec.gov and The Stars Group's website
at www.starsgroup.com, and in other filings that The Stars Group
has made and may make 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 Measures
This news release references non-IFRS financial measures,
including QNY, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted
Net Earnings, Adjusted Diluted Net Earnings per Share, and Free
Cash Flow. The Stars Group believes these non-IFRS financial
measures will provide investors with useful supplemental
information about the financial performance of its business, enable
comparison of financial results between periods where certain items
may vary independent of business performance, and allow for greater
transparency with respect to key metrics used by management in
operating its business. Although management believes these
financial measures are important in evaluating The Stars Group,
they are not intended to be considered in isolation or as a
substitute for, or superior to, financial information prepared and
presented in accordance with IFRS. They are not recognized measures
under IFRS and do not have standardized meanings prescribed by
IFRS. These measures may be different from non-IFRS financial
measures used by other companies, limiting its usefulness for
comparison purposes. Moreover, presentation of certain of these
measures is provided for year-over-year comparison purposes, and
investors should be cautioned that the effect of the adjustments
thereto provided herein have an actual effect on The Stars Group's
operating results. In addition to QNY, which is defined below under
"Key Metrics and Other Data", The Stars Group provides the
following non-IFRS measures in this news release:
Adjusted EBITDA means net earnings before financial
expenses, income taxes expense (recovery), depreciation and
amortization, stock-based compensation, restructuring, net earnings
(loss) on associate and certain other items as set out in the
reconciliation tables under "Reconciliation of Non-IFRS Measures to
Nearest IFRS Measures" above.
Adjusted EBITDA Margin means Adjusted EBITDA as a
proportion of total revenue.
Adjusted Net Earnings means net earnings before interest
accretion, amortization of intangible assets resulting from
purchase price allocations following acquisitions, deferred income
taxes, stock-based compensation, restructuring and certain other
items as set out in the reconciliation tables under "Reconciliation
of Non-IFRS Measures to Nearest IFRS Measures" above.
Adjusted Diluted Net Earnings per Share means Adjusted
Net Earnings attributable to the Shareholders of The Stars Group
Inc. divided by Diluted Shares. Diluted Shares means the
weighted average number of Common Shares on a fully diluted basis,
including options, other equity-based awards, warrants and the
Preferred Shares. The effects of anti-dilutive potential
Common Shares are ignored in calculating Diluted Shares. Diluted
Shares used in the calculation of diluted earnings per share may
differ from diluted shares used in the calculation of Adjusted
Diluted Net Earnings per Share where the dilutive effects of the
potential Common Shares differ. See note 7 in the Q2 2018 Financial
Statements. For the three and six months ended June 30, 2018, Diluted Shares used for the
calculation of Adjusted Diluted Net Earnings per Share equaled
215,380,175 and 212,449,178, respectively, compared with
203,467,303 and 201,969,186 for the same periods in 2017. For the
purposes of the full year 2018 financial guidance provided in this
news release, Diluted Shares equals between 241,000,000 and
243,000,000 for the high and low ends of the Adjusted Net Earnings
per Diluted Share range, respectively.
Free Cash Flow means net cash flows from operating
activities after adding back customer deposit liability movements,
and after capital expenditures and debt servicing cash flows
(excluding voluntary prepayments). The Stars Group believes that
removing movements in customer deposit liabilities provides a more
meaningful understanding of its free cash flows as customer
deposits are not available funds for The Stars Group to use for
financial or operational purposes.
To calculate revenue on a constant currency basis, The Stars
Group translated revenue for the three and six months ended
June 30, 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 Q2 2018 MD&A, including under the headings
"Management's Discussion and Analysis", "Limitations of Key
Metrics, Other Data and Non-IFRS Measures" and "Key Metrics and
Non-IFRS Measures".
Key Metrics and Other Data
The Stars Group provides the following key metrics in this news
release:
QAUs means 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 online rake or placed a real-money online bet
or wager on during the applicable quarterly period. The Stars Group
defines unique 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).
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.
QNY means combined revenue for its lines of operation
(i.e., Poker, Gaming and/or Betting), excluding Other revenues, as
reported during the applicable quarterly period (or as adjusted to
the extent any accounting reallocations are made in later periods)
divided by the total QAUs during the same period. The Stars Group
provides QNY on a U.S. dollar and constant currency basis. QNY is a
non-IFRS measure.
Net Deposits means the aggregate of gross deposits or
transfer of funds made by customers into their real-money online
accounts less withdrawals or transfer of funds by such customers
from such accounts, in each case during the applicable quarterly
period. Gross deposits exclude (i) any deposits, transfers or other
payments made by such customers into The Stars Group's play-money
and social gaming offerings, and (ii) any real-money funds (cash
and cash equivalents) deposited by The Stars Group into such
customers' previously funded accounts as promotions to increase
their lifetime value.
Stakes means betting amounts wagered on The Stars Group's
applicable online betting product offerings, and is also an
industry term that represents the aggregate amount of funds wagered
by customers within the Betting line of operation for the period
specified.
Betting Net Win Margin is calculated as Betting revenue
as a proportion of Stakes.
The Stars Group is in the process of the integration and
migration of customers and platforms with respect to the Australian
acquisitions and once complete, The Stars Group intends to report
certain key metrics for the Australia segment in addition to Stakes and
Betting Net Margin.
For additional information on The Stars Group's key metrics and
other data, see the Q2 2018 MD&A, including under the headings
"Limitations of Key Metrics, Other Data and Non-IFRS Measures",
"Key Metrics and Non-IFRS Measures" and "Segment Results of
Operations".
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
In thousands of U.S.
Dollars (except per share amounts)
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Revenues
|
|
|
|
|
411,512
|
|
|
|
305,305
|
|
|
|
804,403
|
|
|
|
622,625
|
|
Cost of
revenue
|
|
|
|
|
(83,637)
|
|
|
|
(52,668)
|
|
|
|
(163,901)
|
|
|
|
(115,129)
|
|
Gross
profit
|
|
|
|
|
327,875
|
|
|
|
252,637
|
|
|
|
640,502
|
|
|
|
507,496
|
|
General and
administrative
|
|
|
|
|
(262,786)
|
|
|
|
(110,395)
|
|
|
|
(404,093)
|
|
|
|
(213,250)
|
|
Sales and
marketing
|
|
|
|
|
(54,899)
|
|
|
|
(31,342)
|
|
|
|
(104,319)
|
|
|
|
(65,360)
|
|
Research and
development
|
|
|
|
|
(9,126)
|
|
|
|
(5,383)
|
|
|
|
(17,160)
|
|
|
|
(12,483)
|
|
Operating
income
|
|
|
|
|
1,064
|
|
|
|
105,517
|
|
|
|
114,930
|
|
|
|
216,403
|
|
Net financing
charges
|
|
|
|
|
(160,360)
|
|
|
|
(39,052)
|
|
|
|
(198,710)
|
|
|
|
(81,497)
|
|
Net earnings from
associates
|
|
|
|
|
1,068
|
|
|
|
—
|
|
|
|
1,068
|
|
|
|
—
|
|
(Loss) earnings
before income taxes
|
|
|
|
|
(158,228)
|
|
|
|
66,465
|
|
|
|
(82,712)
|
|
|
|
134,906
|
|
Income tax
recovery
|
|
|
|
|
3,404
|
|
|
|
4,018
|
|
|
|
2,249
|
|
|
|
1,330
|
|
Net (loss)
earnings
|
|
|
|
|
(154,824)
|
|
|
|
70,483
|
|
|
|
(80,463)
|
|
|
|
136,236
|
|
Net (loss)
earnings attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders of The
Stars Group Inc.
|
|
|
|
|
(153,645)
|
|
|
|
70,494
|
|
|
|
(78,194)
|
|
|
|
135,905
|
|
|
Non-controlling
interest
|
|
|
|
|
(1,179)
|
|
|
|
(11)
|
|
|
|
(2,269)
|
|
|
|
331
|
|
Net (loss)
earnings
|
|
|
|
|
(154,824)
|
|
|
|
70,483
|
|
|
|
(80,463)
|
|
|
|
136,236
|
|
(Loss) earnings
per Common Share (U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$
|
(1.01)
|
|
|
$
|
0.48
|
|
|
$
|
(0.52)
|
|
|
$
|
0.93
|
|
|
Diluted
|
|
|
|
$
|
(1.01)
|
|
|
$
|
0.35
|
|
|
$
|
(0.52)
|
|
|
$
|
0.67
|
|
Weighted Average
Common Shares Outstanding (thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
152,788
|
|
|
|
146,703
|
|
|
|
150,523
|
|
|
|
146,136
|
|
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
|
|
|
|
As at
June 30,
|
|
|
As at December
31,
|
|
In thousands of U.S.
Dollars
|
|
|
|
2018
|
|
|
2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents - operational
|
|
|
|
|
1,052,146
|
|
|
|
283,225
|
|
|
Cash and cash
equivalents - customer deposits
|
|
|
|
|
274,862
|
|
|
|
227,098
|
|
Total cash and cash
equivalents
|
|
|
|
|
1,327,008
|
|
|
|
510,323
|
|
Restricted cash
advances and collateral
|
|
|
|
|
12,077
|
|
|
|
7,862
|
|
Prepaid expenses and
other current assets
|
|
|
|
|
32,058
|
|
|
|
29,695
|
|
Current investments -
customer deposits
|
|
|
|
|
106,074
|
|
|
|
122,668
|
|
Accounts
receivable
|
|
|
|
|
96,071
|
|
|
|
100,409
|
|
Income tax
receivable
|
|
|
|
|
16,161
|
|
|
|
16,540
|
|
Derivatives
|
|
|
|
|
-
|
|
|
|
2,037
|
|
Total current
assets
|
|
|
|
|
1,589,449
|
|
|
|
789,534
|
|
Non-current
assets
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
advances and collateral
|
|
|
|
|
45,739
|
|
|
|
45,834
|
|
Prepaid expenses and
other non-current assets
|
|
|
|
|
29,892
|
|
|
|
26,551
|
|
Non-current accounts
receivable
|
|
|
|
|
12,472
|
|
|
|
11,818
|
|
Property and
equipment
|
|
|
|
|
54,405
|
|
|
|
44,837
|
|
Income tax
receivable
|
|
|
|
|
19,013
|
|
|
|
14,061
|
|
Deferred income
taxes
|
|
|
|
|
6,110
|
|
|
|
5,141
|
|
Goodwill and
intangible assets
|
|
|
|
|
4,950,655
|
|
|
|
4,477,350
|
|
Total non-current
assets
|
|
|
|
|
5,118,286
|
|
|
|
4,625,592
|
|
Total
assets
|
|
|
|
|
6,707,735
|
|
|
|
5,415,126
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and
other liabilities
|
|
|
|
|
265,439
|
|
|
|
194,187
|
|
Customer
deposits
|
|
|
|
|
380,936
|
|
|
|
349,766
|
|
Current
provisions
|
|
|
|
|
22,227
|
|
|
|
17,590
|
|
Derivatives
|
|
|
|
|
60,347
|
|
|
|
—
|
|
Income tax
payable
|
|
|
|
|
71,881
|
|
|
|
35,941
|
|
Due to related
party
|
|
|
|
|
926
|
|
|
|
—
|
|
Current portion of
long-term debt
|
|
|
|
|
21,700
|
|
|
|
4,990
|
|
Total current
liabilities
|
|
|
|
|
823,456
|
|
|
|
602,474
|
|
Non-current
liabilities
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
|
|
2,705,179
|
|
|
|
2,353,579
|
|
Long-term
provisions
|
|
|
|
|
3,145
|
|
|
|
3,093
|
|
Derivatives
|
|
|
|
|
61,868
|
|
|
|
111,762
|
|
Other long-term
liabilities
|
|
|
|
|
88,777
|
|
|
|
—
|
|
Due to related
party
|
|
|
|
|
35,124
|
|
|
|
—
|
|
Income tax
payable
|
|
|
|
|
6,676
|
|
|
|
24,277
|
|
Deferred income
taxes
|
|
|
|
|
105,098
|
|
|
|
16,510
|
|
Total non-current
liabilities
|
|
|
|
|
3,005,867
|
|
|
|
2,509,221
|
|
Total
liabilities
|
|
|
|
|
3,829,323
|
|
|
|
3,111,695
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
|
|
2,644,866
|
|
|
|
1,884,219
|
|
Reserves
|
|
|
|
|
(336,980)
|
|
|
|
(142,340)
|
|
Retained
earnings
|
|
|
|
|
527,019
|
|
|
|
561,519
|
|
Equity
attributable to the Shareholders of The Stars Group
Inc.
|
|
|
|
|
2,834,905
|
|
|
|
2,303,398
|
|
Non-controlling
interest
|
|
|
|
|
43,507
|
|
|
|
33
|
|
Total
equity
|
|
|
|
|
2,878,412
|
|
|
|
2,303,431
|
|
Total liabilities
and equity
|
|
|
|
|
6,707,735
|
|
|
|
5,415,126
|
|
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
Six Months Ended
June 30,
|
|
In thousands of U.S.
Dollars
|
|
2018
|
|
|
2017
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net (loss)
earnings
|
|
|
(80,463)
|
|
|
|
136,236
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
Income taxes
recognized in net earnings
|
|
|
(2,249)
|
|
|
|
(1,330)
|
|
Net financing
charges
|
|
|
198,710
|
|
|
|
81,638
|
|
Depreciation and
amortization
|
|
|
83,843
|
|
|
|
72,335
|
|
Unrealized loss
(gain) on foreign exchange
|
|
|
68,996
|
|
|
|
(6,512)
|
|
Unrealized gain on
investments
|
|
|
(164)
|
|
|
|
(779)
|
|
Impairment (reversal
of impairment) of intangible assets and assets held for
sale
|
|
|
1,074
|
|
|
|
(7,312)
|
|
Net earnings from
associates
|
|
|
(1,068)
|
|
|
|
—
|
|
Realized loss (gain)
on current investments and promissory note
|
|
|
28
|
|
|
|
(7,127)
|
|
Income taxes
paid
|
|
|
(15,772)
|
|
|
|
(7,025)
|
|
Changes in non-cash
operating elements of working capital
|
|
|
18,525
|
|
|
|
(11,357)
|
|
Customer deposit
liability movement
|
|
|
13,901
|
|
|
|
(25,282)
|
|
Other
|
|
|
10,719
|
|
|
|
2,488
|
|
Net cash inflows
from operating activities
|
|
|
296,080
|
|
|
|
225,973
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
|
|
(310,563)
|
|
|
|
(6,513)
|
|
Additions to
intangible assets
|
|
|
(11,842)
|
|
|
|
(919)
|
|
Additions to property
and equipment
|
|
|
(9,261)
|
|
|
|
(2,254)
|
|
Additions to deferred
development costs
|
|
|
(16,190)
|
|
|
|
(10,426)
|
|
Net sale of
investments utilizing customer deposits
|
|
|
16,044
|
|
|
|
6,682
|
|
Settlement of
promissory note
|
|
|
—
|
|
|
|
8,084
|
|
Net investment in
associates
|
|
|
1,068
|
|
|
|
—
|
|
Other
|
|
|
(3,850)
|
|
|
|
(3,584)
|
|
Net cash outflows
from investing activities
|
|
|
(334,594)
|
|
|
|
(8,930)
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
Issuance of common
shares
|
|
|
646,000
|
|
|
|
—
|
|
Transaction costs on
issuance of common shares
|
|
|
(24,225)
|
|
|
|
—
|
|
Issuance of common
shares in relation with exercised employee stock options
|
|
|
27,627
|
|
|
|
7,222
|
|
Issuance of
debt
|
|
|
425,041
|
|
|
|
—
|
|
Repayment of
debt
|
|
|
(106,493)
|
|
|
|
(12,870)
|
|
Transaction costs on
long-term debt
|
|
|
(23,061)
|
|
|
|
(4,719)
|
|
Loan from related
party
|
|
|
30,918
|
|
|
|
—
|
|
Interest
paid
|
|
|
(66,278)
|
|
|
|
(65,064)
|
|
Payment of deferred
consideration
|
|
|
—
|
|
|
|
(197,510)
|
|
Gain on settlement of
derivatives
|
|
|
—
|
|
|
|
13,904
|
|
Acquisition of
further interest in subsidiaries
|
|
|
(48,240)
|
|
|
|
—
|
|
Other
|
|
|
-
|
|
|
|
(7,602)
|
|
Net cash inflows
(outflows) from financing activities
|
|
|
861,289
|
|
|
|
(266,639)
|
|
Increase (decrease)
in cash and cash equivalents
|
|
|
822,775
|
|
|
|
(49,596)
|
|
Unrealized foreign
exchange difference on cash and cash equivalents
|
|
|
(6,090)
|
|
|
|
9,346
|
|
Cash and cash
equivalents – beginning of period
|
|
|
510,323
|
|
|
|
267,684
|
|
Cash and cash
equivalents - end of period
|
|
|
1,327,008
|
|
|
|
227,434
|
|
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SOURCE The Stars Group Inc.