TORONTO, Aug. 9, 2017 /PRNewswire/ - The Stars Group Inc.,
formerly Amaya Inc. (NASDAQ: TSG; TSX: TSGI), today reported its
financial results for the second quarter ended June 30, 2017, revised certain full year 2017
financial guidance ranges and provided certain additional
highlights and updates. Unless otherwise noted, all dollar ($)
amounts are in U.S. dollars.
"Our evolution and transformation into The Stars Group continued
as we completed our name change and head office move, while our
second quarter saw the strengthening of our core senior management
team and continued solid revenue growth led by our real money
online casino offering," said Rafi Ashkenazi, Chief Executive
Officer. "We plan to use this momentum to continue improving and
strengthening our business and pursuing our strategic
objectives."
Second Quarter and First Half 2017 Financial
Summary(1)
|
|
Three Months Ended
June 30,
|
|
Year
-over-Year
Change
|
|
Six Months
Ended
June 30,
|
|
Year
-over-Year
Change
|
$000's, except
percentages and per share
amounts
|
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
|
|
Total
Revenue
|
|
305,305
|
|
285,762
|
|
6.8%
|
|
622,625
|
|
574,280
|
|
8.4%
|
Adjusted
EBITDA
|
|
146,539
|
|
129,891
|
|
12.8%
|
|
297,540
|
|
253,325
|
|
17.5%
|
Net cash inflows from
operating activities
|
|
130,426
|
|
69,728
|
|
87.0%
|
|
225,973
|
|
114,948
|
|
96.6%
|
Adjusted Cash Flow
from Operations
|
|
139,479
|
|
107,373
|
|
29.9%
|
|
251,255
|
|
193,146
|
|
30.1%
|
Net
earnings
|
|
70,483
|
|
22,497
|
|
213.3%
|
|
136,236
|
|
77,988
|
|
74.7%
|
Adjusted Net
Earnings
|
|
114,029
|
|
89,740
|
|
27.1%
|
|
227,396
|
|
174,707
|
|
30.2%
|
Diluted earnings per
common share
|
|
$ 0.35
|
|
$ 0.12
|
|
199.0%
|
|
$ 0.67
|
|
$ 0.41
|
|
64.1%
|
Adjusted Net Earnings
per Diluted Share
|
|
$ 0.56
|
|
$ 0.46
|
|
22.0%
|
|
$ 1.13
|
|
$ 0.92
|
|
23.0%
|
____________________________________________
(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".
Second Quarter 2017 and Subsequent Financial
Highlights
- Revenues - Total revenues for the quarter increased
approximately 6.8% year-over-year. Excluding the impact of
year-over-year changes in foreign exchange rates, total revenues
for the quarter would have increased by approximately 7.9%.
Real-money online poker revenues and real-money online casino and
sportsbook combined revenues represented approximately 66.5% and
29.3% of total revenues for the quarter, respectively, as compared
to approximately 75.5% and 20.9% for the prior year period.
- Poker Revenues – Real-money online poker revenues for
the quarter were $202.9 million, or a
decrease of approximately 5.9% year-over-year. Excluding the impact
of year-over-year changes in foreign exchange rates, real-money
online poker revenues would have decreased by approximately 5.6%
for the quarter.
- Casino & Sportsbook Revenues – Real-money online
casino and sportsbook combined revenues for the quarter were
$89.6 million, or an increase of
approximately 50.2% year-over-year. 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 54.3% for the quarter.
- Debt – Total long term debt outstanding at the end of
the quarter was $2.55 billion with a
weighted average interest rate of 4.7%. On August 8, The Stars Group prepaid without penalty
approximately $40 million under its
second lien term loan using cash flow from operations, which it
expects to result in approximately $3
million in annual interest savings. Following this
prepayment, the principal balance of the second lien term loan as
of the date hereof is $170
million.
- Deferred Purchase Price – In May, The Stars Group made
its final payment on the outstanding balance of the deferred
purchase price for its acquisition of the Rational Group (now known
as Stars Interactive) in August 2014,
which included the remaining balance of $47.5 million and approximately $870,000 of associated fees. As previously
announced, The Stars Group paid $200
million of the deferred purchase price in November 2016, $75
million in February 2017 and a
further $75 million in April 2017.
Second Quarter 2017 and Subsequent Operational
Highlights
- Quarterly Real-Money Active Uniques (QAUs) – As a result
of management's continued review and assessment of certain key
metrics and to provide a more accurate understanding of its
customers, The Stars Group has adjusted the prior definition of
QAUs as described below under "Key Metrics and Other Data" and has
recalculated all historical QAUs accordingly. Based on this
adjustment, total combined QAUs were approximately 2.1 million, a
decrease of approximately 2% year-over-year primarily led by a
decline on the Full Tilt platform, the new customer
registration process in the Czech
Republic and the cessation of operations in certain small
jurisdictions, partially offset by the re-launch of
PokerStars in Portugal in
late 2016 and the growth and expansion of The Stars Group's
real-money online casino and sportsbook offerings. Excluding the
impact of Full Tilt, total combined QAUs would have
increased approximately 1% year-over-year. Approximately 2.0
million of such QAUs played online poker during the quarter, a
decrease of approximately 4% year-over-year or a decrease of
approximately 1% excluding the impact of Full Tilt. The
Stars Group's online casino offerings had approximately 547,000
QAUs, an increase of approximately 33% year-over-year, which The
Stars Group continues to estimate is one of the largest casino
player bases among its competitors, while its emerging online
sportsbook offerings had approximately 251,000 QAUs, an 8% increase
year-over-year.
- Quarterly Net Yield (QNY) – Total QNY was $137, an increase of 8.2% year-over-year, and QNY
excluding the impact of year-over-year changes in foreign exchanges
rates was $139, an increase of 9.4%
year-over-year. QNY is a non-IFRS measure and was also recalculated
for applicable historical periods as a result of the adjustment to
QAUs noted above.
- Customer Registrations – Customer Registrations
increased by 2.1 million during the quarter to approximately 113
million.
- Launch of Stars Rewards – In July, The Stars Group
launched the Stars Rewards program, which is an integrated
cross vertical loyalty program focused on customer engagement and
experience. This program seeks to offer an exciting, personalized
gaming experience that rewards players for their overall gameplay
across poker, casino and sportsbook, in each case where available.
The Stars Group believes that Stars Rewards will enhance the
player experience as it introduces new ways of earning rewards that
are intended to be more exciting for its recreational players and
distributes such rewards based on player contributions to the
overall ecosystem. To date, Stars Rewards has positively
impacted the overall product ecosystem across verticals and has
received positive feedback from most players.
- Appointment of Executive Officers – During the second
quarter, The Stars Group announced the appointment of Brian Kyle as Chief Financial Officer,
Jerry Bowskill as Chief Technology
Officer, and Robin Chhabra as Chief
Corporate Development Officer, effective September 2017. These appointments are the most
recent additions to a strong management team that has been
bolstered over the last year with the hiring of Bo Wänghammar as
Managing Director of PokerStars Casino and Zeno Ossko as Managing Director of BetStars, and
the promotion of Guy Templer as
Chief Operating Officer of Stars Interactive (formerly, Rational
Group).
- Election of Directors – At The Stars Group's 2017 annual
and special meeting of shareholders in June, the shareholders
elected two new directors, Peter E.
Murphy and Mary Turner, and
re-elected Divyesh (Dave) Gadhia,
Harlan Goodson, Alfred F. Hurley, Jr. and David Lazzarato. Following the meeting, Mr.
Gadhia was re-appointed as Chairman of the Board.
- Corporate Name Change and Continuance - On August 1, 2017, The Stars Group completed its
previously announced corporate name change, continuance under the
Business Corporations Act (Ontario) such that it is now an Ontario corporation, and corporate head office
move to Toronto. On the same date,
The Stars Group's common shares began trading under the ticker
symbol "TSG" on the Nasdaq Global Select Market and "TSGI" on the
Toronto Stock Exchange.
Full Year Guidance
- Full Year Guidance – The Stars Group revised certain of
its previously announced 2017 full year financial guidance ranges
and currently expects the following:
-
- Revenues of $1,200 to
$1,260 million remains unchanged,
with revenues currently expected to fall at the upper end of the
range;
- Adjusted EBITDA of $560 to $580
million remains unchanged;
- Adjusted Net Earnings of $400 to $430
million is revised upward to $413 to
$437 million; and
- Adjusted Net Earnings per Diluted Share of $1.94 to $2.13 is revised upward to $2.01 to $2.15.
These estimates reflect
management's view of current and future market and business
conditions, including assumptions of (i) anticipated negative
operating conditions in Poland
primarily related to constraints on processing payments in that
jurisdiction, the cessation of real-money online poker in
Australia by mid-September 2017 (previously believed to be the
end of June 2017), and the cessation
of real-money online gaming in Colombia, (ii) the introduction of Stars
Rewards, The Stars Group's previously disclosed cross-vertical
customer loyalty program, (iii) no other material adverse
regulatory events and (iv) no material foreign currency exchange
rate fluctuations, particularly against the Euro which is the
primary depositing currency of The Stars Group's customers, that
could impact customer purchasing power as it relates to The Stars
Group's U.S. dollar denominated product offerings. Such guidance is
also now based on a Euro to U.S. dollar exchange rate of 1.12 to
1.00 for the second half of 2017, unaudited expected results and
certain accounting assumptions.
Financial Statements, Management's Discussion and Analysis
and Additional Information; Internal Control Over Financial
Reporting
For an update regarding The Stars Group's internal control over
financial reporting, including its remediation efforts with respect
to the same, see "Disclosure Controls and Procedures and Internal
Control Over Financial Reporting" in The Stars Group's management's
discussion and analysis for the year ended December 31, 2016 (the "2016 MD&A") and in
The Stars Group's management's discussion and analysis for the
three and six months ended June 30,
2017 (the "Q2 2017 MD&A").
The Stars Group's unaudited condensed consolidated financial
statements for the three and six months ended June 30, 2017 (the "Q2 2017 Financial
Statements"), Q2 2017 MD&A and 2016 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.
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 9, 2017 at 8:30
a.m. ET to discuss its financial results for the second
quarter 2017 and related matters. To access via tele-conference,
please dial +1 877-407-0789 or +1 201-689-8562 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 13666480. To access the
webcast please use the following link:
http://public.viavid.com/index.php?id=125442
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
June 30,
|
|
|
Six Months Ended
June 30,
|
|
$000's, except per
share amounts
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net
earnings
|
|
|
70,483
|
|
|
|
22,497
|
|
|
|
136,236
|
|
|
|
77,988
|
|
Financial
expenses
|
|
|
41,697
|
|
|
|
27,363
|
|
|
|
82,286
|
|
|
|
52,276
|
|
Income taxes
(recovery) expense
|
|
|
(4,018)
|
|
|
|
2,516
|
|
|
|
(1,330)
|
|
|
|
4,478
|
|
Depreciation of
property and equipment
|
|
|
2,217
|
|
|
|
2,033
|
|
|
|
4,378
|
|
|
|
3,990
|
|
Amortization of
intangible and deferred development costs
|
|
|
34,383
|
|
|
|
32,267
|
|
|
|
67,957
|
|
|
|
63,593
|
|
EBITDA
|
|
|
144,762
|
|
|
|
86,676
|
|
|
|
289,527
|
|
|
|
202,325
|
|
Stock-based
compensation
|
|
|
2,452
|
|
|
|
3,352
|
|
|
|
4,616
|
|
|
|
6,418
|
|
Termination of
employment agreements
|
|
|
682
|
|
|
|
7,210
|
|
|
|
2,808
|
|
|
|
8,318
|
|
Termination of
affiliate agreements
|
|
|
—
|
|
|
|
1,196
|
|
|
|
407
|
|
|
|
2,333
|
|
Loss on disposal of
assets
|
|
|
202
|
|
|
|
94
|
|
|
|
261
|
|
|
|
316
|
|
(Gain) loss from
investments and earnings from associates
|
|
|
(4,775)
|
|
|
|
12,895
|
|
|
|
(5,210)
|
|
|
|
3,270
|
|
Acquisition-related
costs
|
|
|
—
|
|
|
|
15
|
|
|
|
—
|
|
|
|
199
|
|
(Reversal of)
Impairment on investment in associates
|
|
|
(628)
|
|
|
|
6,758
|
|
|
|
(7,312)
|
|
|
|
6,758
|
|
Other
costs
|
|
|
3,844
|
|
|
|
11,695
|
|
|
|
12,443
|
|
|
|
23,388
|
|
Adjusted
EBITDA
|
|
|
146,539
|
|
|
|
129,891
|
|
|
|
297,540
|
|
|
|
253,325
|
|
Current income tax
expense
|
|
|
(80)
|
|
|
|
(3,599)
|
|
|
|
(3,402)
|
|
|
|
(5,472)
|
|
Depreciation and
amortization (excluding amortization of purchase
price allocation intangibles)
|
|
|
(5,525)
|
|
|
|
(4,077)
|
|
|
|
(10,185)
|
|
|
|
(7,990)
|
|
Interest (excluding
interest accretion and non-refundable late
payment fees related to the unpaid balance of the deferred purchase
price)
|
|
|
(26,905)
|
|
|
|
(32,475)
|
|
|
|
(56,557)
|
|
|
|
(65,156)
|
|
Adjusted Net
Earnings
|
|
|
114,029
|
|
|
|
89,740
|
|
|
|
227,396
|
|
|
|
174,707
|
|
Diluted
Shares
|
|
|
203,467,303
|
|
|
|
195,404,703
|
|
|
|
201,969,186
|
|
|
|
190,878,095
|
|
Adjusted Net
Earnings per Diluted Share
|
|
$
|
0.56
|
|
|
$
|
0.46
|
|
|
$
|
1.13
|
|
|
$
|
0.92
|
|
The table below presents certain items comprising "Other costs"
in the reconciliation table above:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
$000's
|
|
|
$000's
|
|
|
$000's
|
|
|
$000's
|
Non-U.S. lobbying and
legal expenses
|
|
|
1,085
|
|
|
|
1,016
|
|
|
|
1,826
|
|
|
|
1,825
|
U.S. lobbying and
legal expenses
|
|
|
3,513
|
|
|
|
3,473
|
|
|
|
7,492
|
|
|
|
6,827
|
Strategic review
professional fees
|
|
|
—
|
|
|
|
1,414
|
|
|
|
125
|
|
|
|
5,136
|
Retention
bonuses
|
|
|
615
|
|
|
|
1,110
|
|
|
|
1,230
|
|
|
|
2,220
|
Non recurring
professional fees
|
|
|
842
|
|
|
|
2,979
|
|
|
|
1,504
|
|
|
|
4,420
|
AMF and other
investigation professional fees
|
|
|
2,764
|
|
|
|
904
|
|
|
|
5,153
|
|
|
|
1,904
|
Austria gaming
duty
|
|
|
(5,000)
|
|
|
|
—
|
|
|
|
(5,000)
|
|
|
|
—
|
Office restructuring
and legacy business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unit shutdown
costs
|
|
|
25
|
|
|
|
799
|
|
|
|
113
|
|
|
|
1,056
|
Other
costs
|
|
|
3,844
|
|
|
|
11,695
|
|
|
|
12,443
|
|
|
|
23,388
|
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
June 30,
|
|
|
Six Months Ended
June 30,
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
$000's
|
|
|
$000's
|
|
|
$000's
|
|
|
$000's
|
Net cash inflows from
operating activities
|
|
130,426
|
|
|
|
69,728
|
|
|
|
225,973
|
|
|
|
114,948
|
Customer deposit
liability movement
|
|
(9,053)
|
|
|
|
(37,645)
|
|
|
|
(25,282)
|
|
|
|
(78,198)
|
Adjusted Cash Flow
from Operations
|
|
139,479
|
|
|
|
107,373
|
|
|
|
251,255
|
|
|
|
193,146
|
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., total 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
June,
|
|
|
2017
|
|
|
2016
|
|
|
$000's
|
|
|
$000's
|
Total
revenue
|
|
|
305,305
|
|
|
|
285,762
|
Corporate
revenue
|
|
|
(92)
|
|
|
|
(46)
|
Other
business-to-consumer revenue
|
|
|
(12,762)
|
|
|
|
(10,479)
|
Real-money online
poker revenue and real-money online casino
|
|
|
|
|
|
|
|
|
and sportsbook
combined revenue
|
|
|
292,451
|
|
|
|
275,237
|
The Stars Group has not provided a reconciliation of the
non-IFRS measures to the nearest IFRS measures included in its full
year 2017 financial guidance provided in this 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 Q2 2017 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
products and services in the global gaming and interactive
entertainment industries. Through its Stars Interactive division,
The Stars Group ultimately owns gaming and related consumer
businesses and brands, including PokerStars, PokerStars Casino,
BetStars, Full Tilt, StarsDraft, and the PokerStars Championship,
PokerStars Festival and PokerStars Megastack live poker tour brands
(incorporating aspects of the European Poker Tour, PokerStars
Caribbean Adventure, Latin American Poker Tour and the Asia Pacific
Poker Tour). These brands together have more than 113 million
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 brands, also offers non-poker gaming products,
including casino, sportsbook and daily fantasy sports. The Stars
Group, through certain of its subsidiaries, is licensed or approved
to offer, or offers under third party licenses or approvals, its
products and services in various jurisdictions throughout the
world, including in Europe, both
within and outside of the European Union, the Americas and
elsewhere. In particular, PokerStars is the world's most licensed
online gaming brand, holding licenses or related operating
approvals in 17 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 2017 financial guidance, and
certain future operational and growth plans and strategies.
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" and similar
references to future periods or the negatives of these words and
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 us, our customers and our
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, 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 business; interactive entertainment and
online and mobile gaming generally; current and future laws or
regulations and new interpretations of existing laws or regulations
with respect to online and mobile 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 distribute and
market its products and services, including difficulties or delays
in the same; significant barriers to entry; competition and the
competitive environment within The Stars Group's addressable
markets and industries; impact of inability to complete future
acquisitions or to integrate businesses successfully; ability to
develop and enhance existing products and services and new
commercially viable products and services; 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
products or services; 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
and that may otherwise impact The Stars Group in the jurisdictions
where it is currently doing business or intends to do business;
ability to obtain additional financing on reasonable terms or at
all; refinancing risks; customer and operator preferences and
changes in the economy; dependency on customers' acceptance of its
products and services; 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, 2016, including under the heading
"Risk Factors and Uncertainties", and in the Q2 2017 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 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 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
release:
Adjusted EBITDA means net earnings (loss) before interest and
financing costs, income taxes, depreciation and amortization,
stock-based compensation, restructuring and certain other
items.
Adjusted Cash Flow from Operations means net cash inflows from
operating activities net of customer deposit liability
movements.
Adjusted Net Earnings means net earnings (loss) 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 5 to the Q2 2017 Financial
Statements. For the three and six months ended June 30, 2017, Diluted Shares equaled 203,467,303
and 201,969,186, respectively. For the purposes of the full year
2017 financial guidance provided in this release, Diluted Shares
now equals between 203,000,000 and 205,000,000 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 June 30, 2017 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 2017 MD&A, including under the headings
"Management's Discussion and Analysis" and "Selected Financial
Information—Other Financial Information".
Key Metrics and Other Data
As disclosed in the Q2 2017 MD&A under the heading "Key
Metrics", following continued review and assessment of its key
metrics, management has determined that the prior definition of
QAUs required further adjustment to remove those customers who were
active during the applicable quarterly period by taking advantage
of certain customer acquisition promotional incentives, but had not
yet made a deposit or transferred funds into their real-money
accounts with The Stars Group for further gameplay, and to clarify
the inclusions in and exclusions from the definition, particularly
relating to free play, bonuses and promotions. As a result, The
Stars Group now 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 (e.g., both poker and
casino). For further clarity, 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 continues to define QNY as combined real-money
online gaming and related revenue (excluding certain other
revenues, such as revenues from play-money offerings, live events
and branded poker rooms) 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.
QAUs and QNY (as QAUs serve as the denominator for QNY) for each
applicable quarterly period since the fourth quarter of 2014 have
been re-calculated as of the result of the adjustments noted above
and are provided in the Q2 2017 MD&A under the heading "Key
Metrics".
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.
For additional information on The Stars Group's key metrics and
other data, see the Q2 2017 MD&A, including under the headings
"Limitations of Key Metrics and Other Data" and "Key Metrics".
SOURCE The Stars Group Inc.