TORONTO, Sept. 17, 2018 /CNW/ - The Stars Group Inc.
(NASDAQ: TSG)(TSX: TSGI) today filed a business acquisition report
with respect to its acquisition of Sky Betting & Gaming ("SBG")
and is providing certain supplemental historic financial
information and additional highlights and updates for SBG. The
business acquisition report includes, among other information,
SBG's audited financial statements for its fiscal year ended
June 30, 2018, as well as certain pro
forma unaudited financial statements and information of The Stars
Group. Unless otherwise noted, all dollar ($) amounts are in
U.S. dollars and all references to "£" and "Pound Sterling" are to
Great Britain pound sterling.
"2018 is a transformative year for the business, with three
acquisitions and related financings and other significant changes
to our corporate and capital structure," said Rafi Ashkenazi, The
Stars Group's Chief Executive Officer. "We've executed on these
transactions and looking forward into 2019, are now focused on
integration and we are confident that we will deliver on our plans
to grow market share both globally and in key markets. SBG is a key
component of this plan and we are excited about its potential as
the fastest growing and one of the largest online and mobile sports
betting and gaming businesses in the UK, the world's largest
regulated online gaming market," concluded Mr. Ashkenazi.
"The 2018 fiscal year was another strong year for SBG, with
continued product leadership and innovation," said Richard Flint, Chief Executive Officer of SBG.
"We enjoyed another year of growth, extending our leadership as the
UK's most popular online betting and gaming brand. We also
continued our investment in brand, technology and people, and
continued delivering innovative products that meet the needs of our
customers, all of which we believe combined to drive strong
operating results," continued Mr. Flint.
"I am also particularly pleased with the progress we made to
deliver a safer gambling environment to our customers and to
continue our record of job creation and investment in Yorkshire, as well as our contribution to
regional and national taxation in the UK," said Mr. Flint.
"The transaction with The Stars Group will allow us to offer our
best-in-class products to a truly global audience. We enter the
rest of 2018 and head into 2019 as part of one of the world's
largest publicly listed online gaming companies, and I am excited
about the opportunities that this combination presents," concluded
Mr. Flint.
SBG Fiscal Year 2018 Financial Summary
|
|
Fiscal year ended
June,
|
|
In thousands of Pound
Sterling
(except percentages
or otherwise noted)
|
|
2018
|
|
|
2017
|
|
|
%
Change
|
|
Stakes
(millions)
|
|
|
3,859
|
|
|
|
3,417
|
|
|
|
13%
|
|
Betting Net Win
Margin (%)
|
|
|
10.5%
|
|
|
|
8.7%
|
|
|
1.8
ppts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Betting
revenue
|
|
|
406,510
|
|
|
|
297,399
|
|
|
|
36.7%
|
|
Gaming
revenue
|
|
|
239,244
|
|
|
|
200,949
|
|
|
|
19.1%
|
|
Other
revenue
|
|
|
24,712
|
|
|
|
17,417
|
|
|
|
41.9%
|
|
Total
revenue
|
|
|
670,466
|
|
|
|
515,765
|
|
|
|
30.0%
|
|
Gross
profit
|
|
|
500,132
|
|
|
|
375,533
|
|
|
|
33.2%
|
|
Operating
profit
|
|
|
86,719
|
|
|
|
68,574
|
|
|
|
26.5%
|
|
Net loss
|
|
|
(15,282)
|
|
|
|
(5,995)
|
|
|
|
154.9%
|
|
Adjusted EBITDA
¹
|
|
|
208,623
|
|
|
|
145,812
|
|
|
|
43.1%
|
|
Adjusted EBITDA
Margin ¹
|
|
|
31.1%
|
|
|
|
28.3%
|
|
|
2.8 ppts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
|
|
200,584
|
|
|
|
141,751
|
|
|
|
41.5%
|
|
Capital
Expenditure
|
|
|
28,233
|
|
|
|
32,673
|
|
|
|
(13.6%)
|
|
SBG Fiscal Year 2018 Quarterly Financial Summary
|
|
Fiscal quarter
ended September,
|
|
|
Fiscal quarter
ended December,
|
In millions of Pound
Sterling (except
percentages or
otherwise noted)
|
|
2017
|
|
|
2016
|
|
|
%
Change
|
|
|
2017
|
|
|
2016
|
|
|
%
Change
|
Stakes
(millions)
|
|
|
923
|
|
|
|
686
|
|
|
|
35%
|
|
|
|
910
|
|
|
|
731
|
|
|
|
24%
|
Betting Net Win
Margin (%)
|
|
|
9.0%
|
|
|
|
10.2%
|
|
|
(1.2)ppts
|
|
|
|
14.0%
|
|
|
|
8.6%
|
|
|
5.4ppts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Betting
|
|
|
83
|
|
|
|
70
|
|
|
|
18%
|
|
|
|
128
|
|
|
|
63
|
|
|
|
103%
|
|
Gaming
|
|
|
58
|
|
|
|
43
|
|
|
|
35%
|
|
|
|
59
|
|
|
|
46
|
|
|
|
28%
|
|
Other
|
|
|
5
|
|
|
|
4
|
|
|
|
25%
|
|
|
|
6
|
|
|
|
4
|
|
|
|
53%
|
Total
Revenue
|
|
|
146
|
|
|
|
117
|
|
|
|
25%
|
|
|
|
193
|
|
|
|
113
|
|
|
|
71%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
109
|
|
|
|
86
|
|
|
|
26%
|
|
|
|
147
|
|
|
|
83
|
|
|
|
78%
|
Gross Profit Margin
(%)
|
|
|
74%
|
|
|
|
74%
|
|
|
0.6ppts
|
|
|
|
76%
|
|
|
|
73%
|
|
|
3.1ppts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Profit
|
|
|
24
|
|
|
|
22
|
|
|
|
7%
|
|
|
|
58
|
|
|
|
5
|
|
|
|
960%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA ¹
|
|
|
42
|
|
|
|
39
|
|
|
|
9%
|
|
|
|
77
|
|
|
|
23
|
|
|
|
230%
|
Adjusted EBITDA
Margin (%) ¹
|
|
|
28.6%
|
|
|
|
32.8%
|
|
|
(4.2)ppts
|
|
|
|
39.7%
|
|
|
|
20.5%
|
|
|
19.2ppts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly Active
Uniques (QAUs) (millions)
|
|
|
1.6
|
|
|
|
1.3
|
|
|
|
21%
|
|
|
|
1.6
|
|
|
|
1.3
|
|
|
|
19%
|
Quarterly Net Yield
(QNY) (£)
|
|
|
88
|
|
|
|
86
|
|
|
|
2%
|
|
|
|
116
|
|
|
|
81
|
|
|
|
43%
|
|
|
Fiscal quarter
ended March,
|
|
|
Fiscal quarter
ended June,
|
In millions of Pound
Sterling (except
percentages or
otherwise noted)
|
|
2018
|
|
|
2017
|
|
|
%
Change
|
|
|
2018
|
|
|
2017
|
|
|
%
Change
|
Stakes
(millions)
|
|
|
1,005
|
|
|
|
933
|
|
|
|
8%
|
|
|
|
1,022
|
|
|
|
1,068
|
|
|
|
(4%)
|
Betting Net Win
Margin (%)
|
|
|
9.2%
|
|
|
|
8.2%
|
|
|
1.0ppts
|
|
|
|
10.2%
|
|
|
|
8.3%
|
|
|
1.9ppts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Betting
|
|
|
92
|
|
|
|
76
|
|
|
|
21%
|
|
|
|
104
|
|
|
|
88
|
|
|
|
18%
|
|
Gaming
|
|
|
59
|
|
|
|
54
|
|
|
|
10%
|
|
|
|
63
|
|
|
|
58
|
|
|
|
8%
|
|
Other
|
|
|
6
|
|
|
|
3
|
|
|
|
74%
|
|
|
|
8
|
|
|
|
6
|
|
|
|
29%
|
Total
Revenue
|
|
|
157
|
|
|
|
133
|
|
|
|
18%
|
|
|
|
174
|
|
|
|
152
|
|
|
|
15%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
116
|
|
|
|
96
|
|
|
|
21%
|
|
|
|
128
|
|
|
|
111
|
|
|
|
16%
|
Gross Profit Margin
(%)
|
|
|
74%
|
|
|
|
72%
|
|
|
2.1ppts
|
|
|
|
74%
|
|
|
|
73%
|
|
|
0.9ppts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit
(Loss)
|
|
|
19
|
|
|
|
13
|
|
|
|
47%
|
|
|
|
(15)
|
|
|
|
28
|
|
|
|
(152%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
¹
|
|
|
38
|
|
|
|
32
|
|
|
|
21%
|
|
|
|
52
|
|
|
|
52
|
|
|
|
(1%)
|
Adjusted EBITDA
Margin (%) ¹
|
|
|
24.3%
|
|
|
|
23.7%
|
|
|
0.6ppts
|
|
|
|
29.8%
|
|
|
|
34.5%
|
|
|
(4.6)ppts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QAUs
(millions)
|
|
|
1.8
|
|
|
|
1.6
|
|
|
|
10%
|
|
|
|
2.0
|
|
|
|
1.7
|
|
|
|
16%
|
QNY (£)
|
|
|
83
|
|
|
|
79
|
|
|
|
5%
|
|
|
|
83
|
|
|
|
85
|
|
|
|
(2%)
|
|
__________________________________________________
|
1 Non-IFRS
measure. For important information on SBG's non-IFRS measures, see
below under "Non-IFRS Measures" and the tables under
"Reconciliation of Non-IFRS Measures to Nearest IFRS
Measures".
|
SBG Fiscal Year 2018 and Subsequent Financial
Highlights
- Total Revenues – Revenues for the year increased 30%
year-over-year to £670 million. All segments contributed to the
revenue growth.
- Betting Revenues – Betting revenue for the year was £407
million, or an increase of 37% year-over-year, primarily the result
of increased Stakes and Betting Net Win Margin. Stakes growth was
primarily driven by product enhancement and innovation, with
Betting Net Win Margin primarily influenced by a sustained run of
operator-favorable sporting results, particularly with respect to
European football. SBG betting revenue includes revenue from
real-money online sports betting products.
- Gaming Revenues – Gaming revenue for the year was £239
million, or an increase of 19% year-over-year, primarily the result
of ongoing product innovation as noted below, continued strong
promotions, and further exclusive content launches. SBG gaming
revenue includes revenue from real-money online poker, casino and
bingo products.
- Adjusted EBITDA and Adjusted EBITDA Margin – Adjusted
EBITDA for the year was £209 million, or an increase of 43%
year-over-year. The increase was primarily driven by increased
total revenue as noted above, which was partially offset by a 25%
year-over-year increase in total operating costs (excluding
depreciation, amortization and transaction-related costs). Adjusted
EBITDA Margin for the year increased by 2.8 percentage points
year-over-year to 31%, primarily the result of improvements related
to the increased scale of the business, including more efficient
payment processing and content sourcing, as well as the
flow-through of revenues from the sustained run of
operator-favorable sporting results to Adjusted EBITDA. Staff costs
increased broadly in line with revenue as the business continued to
invest in technology, product and content, while marketing costs
increased by 23%, below revenue growth, with the marketing to
revenue ratio decreasing from 23% to 22% as a result of more
efficient marketing spend and the impact of the operator-favorable
sporting results in the period.
SBG Fiscal Year 2018 and Subsequent Operational
Highlights
- Stakes and Betting Net Win Margin – Stakes increased 13%
year-over-year, while Betting Net Win Margin increased 1.8
percentage points year-over-year. While variability in sports
results is a natural factor in a sports betting business, SBG's
fiscal year 2018 saw a sustained run of operator-favorable sporting
results, particularly on European football, resulting in its
Betting Net Win Margin for the year being 10.5% as compared to its
expected level of approximately 9%.
- Quarterly Active Uniques (QAUs) – Average QAUs were
1.8 million, which represents an increase of 17% year-over-year.
This increase was primarily the result of market share gains driven
by product enhancements and new products, leading SBG to hold its
position as the most popular online and mobile sports betting and
gaming brand in the UK. For example, during the past year, SBG
introduced the following product and promotional innovations and
enhancements:
-
- "Soccer Saturday Super Boost", which gives customers superior
pricing on the top teams and is part of a broader marketing and
customer engagement plan to enhance loyalty
- "MyBets", which gives customers a quick, simple and intuitive
way to track all their bets, including live tracking of SBG's
popular "RequestABet" product
- "Bonus Time", which is SBG exclusive content that leverages its
real time data capability and control of its front-end technology
to randomly award players bonus games if they play on Sky Vegas during certain times.
- "Fast Withdrawals", which gives customers the ability to
receive their withdrawals almost instantly. This feature was
initially rolled out in partnership with one UK national bank and
could be expanded to more banks and customers in the future.
- "ITV7", which is a horse racing prediction game that SBG
launched in partnership with ITV, the largest commercial
terrestrial TV channel in the UK. The product leverages SBG's
expertise in free-to-play games, generates engaging content for
ITV's racing show, provides a chance to win life-changing prizes
for free, and creates a new source of customer acquisition and
retention for SBG.
- Quarterly Net Yield (QNY) – Average QNY was £93, an
increase of 12% year-over-year. The increase was primarily a result
of increased Betting Net Win Margin.
- World Cup 2018 – SBG experienced a successful World Cup
with 1.3 million active unique customers on its sportsbook,
generating revenue (before any offsets for bonuses, promotions or
incentives) of approximately £33 million across the
tournament. A majority of such revenue was generated prior to
The Stars Group's acquisition of SBG on July
10, 2018 and thus will not be included in The Stars Group's
consolidated results for the third quarter of 2018.
- Safer Gambling – During the year, SBG accelerated
investments in the business to promote a safer betting and gaming
environment for its customers. This included enhanced use of
customer data, increased promotion and accessibility of self-help
tools, greater interaction with customers and increased
interventions, including through appropriate blocking or limiting
of play. SBG believes these investments will deliver long-term
benefits and support ongoing market share gains, despite the
negative impact of the same on SBG's revenues during the past
year.
SBG Fiscal Year 2018 Quarterly Financial and Operational
Highlights
- First Quarter: Revenues for the first quarter increased
to £146 million, primarily driven by an increase in betting
revenues and gaming revenues of 18% and 35% year-over-year,
respectively. The increase in betting revenues was primarily due to
strong customer growth resulting from a successful customer
retention campaign at the start of the European football season,
including the launch of "Soccer Saturday Super Boost". The increase
in gaming revenues was primarily the result of strong cross selling
from betting into gaming, coupled with the launches of new
products, content and promotions. Adjusted EBITDA for the first
quarter increased 9% year-over-year to £42 million, with Adjusted
EBITDA Margin for the same period decreasing by 4.2 percentage
points year-over-year primarily due to higher than normal Betting
Net Win Margin in the comparative period and increased investment
in promotions at the start of the 2018 European football
season.
- Second Quarter: Revenues for the second quarter
increased to £193 million, primarily driven by an increase in
betting revenues and gaming revenues of 103% and 28%
year-over-year, respectively. The increase in betting revenues was
primarily due to Stakes growth of 24% and a sustained run of
operator-favorable sports results, particularly within European
football, resulting in a Betting Net Win Margin for the period of
14%, which was approximately 50% above SBG's normal expected level.
The increase in gaming revenues was primarily driven by strong
player volumes and cross-selling, together with promotions and new
content. Adjusted EBITDA for the second quarter increased by 230%
year-over-year to £77 million, primarily due to the high Betting
Net Win Margin noted above, and decreased marketing costs, as these
were phased more towards the first quarter and the start of the
European football season. Adjusted EBITDA Margin for the same
period increased by over 19 percentage points year-over-year as the
cost base is more closely managed to player volumes and activity,
rather than revenue, meaning the increased Betting Net Win Margin
during the period had a significant flow-through impact on Adjusted
EBITDA.
- Third Quarter: Revenues for the third quarter increased
to £157 million, primarily driven by an increase in betting
revenues and gaming revenues of 21% and 10% year-over-year,
respectively. The increase in betting revenues was primarily due to
Stakes growth of 8%, and an increase in Betting Net Win Margin to
9.2%, which is closer to expected levels. The Stakes growth rate
was lower than it has been in previous quarters primarily due to
the impact of the sustained run of operator-favorable sports
results noted above resulting in customers having smaller account
balances. The increase in gaming revenues was primarily due to
continued product and promotion enhancements, but was partially
offset by lower cross-selling due to, among other things, the
impact of the prior quarter's run of sporting results and SBG's
safer gambling initiatives. Adjusted EBITDA for the third quarter
increased to £38 million, with Adjusted EBITDA Margin for the same
period remaining relatively stable, with ongoing investment in
brand, technology and people offsetting some operational leverage
from the revenue growth.
- Fourth Quarter: Revenues for the fourth quarter
increased to £174 million, primarily driven by an increase in
betting revenues and gaming revenues of 18% and 8% year-over-year,
respectively. The increase in betting revenues was primarily due to
continued strong customer growth, the first 14 days of the World
Cup and higher year-over-year Betting Net Win Margin. Despite
strong customer growth, Stakes were 4% lower year-over-year
primarily due to lower Stakes per player as customers continued to
feel the effects of the run of sporting results noted above, as
well as the comparative period including a vibrant end to the
previous European football season. The increase in gaming revenues
was primarily due to the same reasons as noted for the third
quarter. Adjusted EBITDA for the fourth quarter was relatively flat
at £52 million, with Adjusted EBITDA Margin for the same period
decreasing 4.6 percentage points year-over-year as SBG invested
heavily in marketing ahead of the World Cup, with the comparative
period having lower marketing spend due to a lack of major sporting
tournaments or events during such period.
2018 Full Year Guidance
- Full Year Guidance –The Stars Group continues to expect
the following 2018 full year financial guidance ranges:
-
- Revenues of between $1.995
and $2.145 billion;
- Adjusted EBITDA of between $755 and $810
million;
- Adjusted Net Earnings of between $485 and $545
million;
- Adjusted Net Earnings per Diluted Share of between
$1.99 and $2.22; and
- Capital Expenditures of between $110 and $150
million.
- Full Year Pro Forma Guidance – The Stars Group is also
providing certain pro forma 2018 full year financial guidance
ranges on a consolidated basis to reflect the SBG and Australian
acquisitions (CrownBet and William Hill Australia, now collectively
known as BetEasy) as if they had been consolidated from
January 1, 2018:
-
- Revenues of between $2.537
and $2.687 billion;
- Adjusted EBITDA of between $897 and $952
million; and
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, 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, and the Proforma 2018
Guidance includes pre-acquisition actual results using historical
foreign exchange rates and forward guidance post-acquisition for
each of the three acquisitions using the foreign exchange rates in
the assumptions above. Such guidance is also based on 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, and certain accounting assumptions.
Capital Expenditures include
estimated spend on intangible assets, property, plant and equipment
and certain development costs.
Business Acquisition Report and Additional
Information
The Stars Group's business acquisition report with respect to
its acquisition of SBG, as well as additional information relating
to The Stars Group, SBG and their businesses, can be found on SEDAR
at www.sedar.com, Edgar at www.sec.gov and The Stars Group's
website at 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.
Investor Conference Call and Webcast
The Stars Group will host an investor conference call today,
September 17, 2018 at 8:30 a.m. ET to discuss the information presented
in this news release and the business acquisition report. 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 13683167. To access
the webcast please use the following link:
http://public.viavid.com/index.php?id=131264
Reconciliation of Non-IFRS Measures to Nearest IFRS
Measures
The tables below present reconciliations of Adjusted EBITDA of
SBG to operating profit, which is the nearest IFRS measure:
|
Fiscal quarter
ended
|
|
|
September
|
|
September
|
|
December
|
|
December
|
|
March
|
|
March
|
|
June
|
|
June
|
|
In millions of Pound
Sterling
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Operating
profit
|
|
23.7
|
|
|
22.2
|
|
|
58.1
|
|
|
5.5
|
|
|
19.5
|
|
|
13.2
|
|
|
(14.5)
|
|
|
27.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
18.2
|
|
|
16.3
|
|
|
18.4
|
|
|
17.7
|
|
|
18.8
|
|
|
18.5
|
|
|
17.8
|
|
|
18.4
|
|
Impairment of
intangible assets
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
6.3
|
|
Transaction-related
costs
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
48.8
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
1
|
|
41.9
|
|
|
38.5
|
|
|
76.5
|
|
|
23.2
|
|
|
38.2
|
|
|
31.7
|
|
|
52.0
|
|
|
52.4
|
|
__________________________________________________
|
1 Fiscal
Year 2018 includes disposals of £1.9.
|
For additional information on SBG's non-IFRS measures, see below
under "Non-IFRS Measures" and "Key Metrics and Other Data".
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 or full year 2018 pro forma 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.
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, BetEasy, 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 certain future operational and growth
plans and strategies, including as it relates to SBG and full year
2018 financial guidance. 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, including SBG, 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 SBG 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 June 21, 2018 prospectus supplement to the short
form base shelf prospectus dated January 16,
2018 (the "Prospectus Supplement") under the heading "Risk
Factors", and in The Stars Group's management's discussion and
analysis for the three and six months ended June 30, 2018 (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 of SBG,
including QNY, Adjusted EBITDA and Adjusted EBITDA Margin, and of
The Stars Group, including Adjusted EBITDA, Adjusted Net Earnings
and Adjusted Diluted Net Earnings per Share. The Stars Group
believes these non-IFRS financial measures will provide investors
with useful supplemental information about the financial
performance of its and SBG's 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 and
SBG, 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, in each case as
they relate solely to SBG:
Adjusted EBITDA means profit/(loss) for the period
attributable to equity shareholders before tax expense/(credit),
finance costs, investment income, revaluation of financial
instruments measured at fair value, depreciation, amortization,
impairment and exceptional items (being transaction-related costs,
which are adjusted for in this news release but are not adjusted
for in SBG's audited financial statements for its fiscal year ended
June 30, 2018). See the
reconciliation table presented above within this news release for
additional information.
Adjusted EBITDA Margin means Adjusted EBITDA as a
proportion of total revenue.
For additional information on SBG's non-IFRS measures, see
elsewhere in this news release and the Prospectus Supplement,
including under the headings "Cautionary Note Regarding Use of
Non-GAAP Measures" and "Management's Discussion and Analysis of Sky
Betting & Gaming".
The Stars Group provides the following non-IFRS measures in this
news release, in each case as they relate solely to The Stars Group
on a consolidated basis and as it relates to full year 2018
financial guidance and full year 2018 pro forma financial guidance
provided 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.
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.
Adjusted Diluted Net Earnings per Share means Adjusted
Net Earnings attributable to the shareholders of The Stars Group
divided by Diluted Shares. Diluted Shares means the weighted
average number of common shares of The Stars Group ("Common
Shares") on a fully diluted basis, including options, other
equity-based awards, warrants and preferred shares. The effects of
anti-dilutive potential Common Shares are ignored in calculating
Diluted Shares. For the purposes of the full year 2018 financial
guidance and full year 2018 pro forma 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.
For additional information on The Stars Group's non-IFRS
measures, see elsewhere in this news release 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".
Key Metrics and Other Data
The Stars Group provides the following key metrics in this news
release, in each case as they relate solely to SBG:
QAUs means active unique customers (online, mobile and
desktop client) who have settled a stake on any betting or gaming
product within the relevant quarterly period. SBG 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 more than one vertical (betting
and gaming). QAUs are disclosed in this news release on a combined
basis for SBG's real-money online gaming and betting brands. The
average QAU numbers provided in this news release reflect a simple
average for the respective periods presented.
QNY is calculated by dividing the quarterly betting and
gaming revenue (total revenue less other revenue generated by SBG's
Oddschecker and international divisions) generated by SBG by the
number of QAUs in the period indicated. QNY is a non-IFRS measure.
The Stars Group does not provide a reconciliation for the numerator
of QNY as the revenue components thereof (i.e., betting and gaming
revenues) are set forth in this news release.
Stakes means betting amounts wagered on SBG's 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.
Capital Expenditure for SBG specifically means the
purchase of property, plant and equipment and the purchase of
intangible assets.
For additional information on SBG's key metrics and other data,
see the Prospectus Supplement, including under the heading
"Management's Discussion and Analysis of Sky Betting &
Gaming".
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SOURCE The Stars Group Inc.