2020.05.08

The Stars Group Witnesses Record Revenue in Q1 from Online Poker and Casino

Takeaway- As per a business update on Friday, The Stars Group has reported an international year-over-year growth of about 44% in March, which has largely mitigated the shutdown of sporting events because of the COVID-19 outbreak. TSG is expecting a revenue gain of about $735M for Q1, which has gone up from USD 580 M for Q1 2019. There will be a meeting of TSG shareholders who will vote on the merger deal with Flutter on April 24 using a purely virtual format.

The Stars Group (ultimate owners of leading brands like PokerStars, PokerStars Casino, BetStars, Full Tilt, and PokerStars Live) reported that it had observed record revenue during its first quarter because of the increase in online casino and poker games caused by the coronavirus outbreak.  The-year-over-year international growth in revenue has been about 44%, and this has more than compensated for the disruption, which was caused by the cancellation/ postponement of sporting events meant to be held at that time. It also said that it had observed a continuous increase in online activity in the realm of online poker and casino business that was carried well into the second quarter,  with consolidating daily revenues during the first two weeks of this quarter, approximately 33% higher YoY.

The company also said on Friday that it is expecting a revenue of approximately USD 735 million- a revenue much higher than the 2019 collection of 580 million, which was realized in the first quarter of that year.

International revenues were seen to be about 75% higher, since they greatly benefitted from an increase in activity in online poker as well as Casinos, whereas the revenues of United Kingdom turned approximately 30% lower, whereas the growth in the gaming mitigated the reduction of 65% that was seen in the Stakes. As far as the Australian segment is concerned- the racing events continued with very little disturbance, with the growth of racing revenues completely mitigating the loss of any sports revenues in the short period.

 The company maintains its books in U.S. dollars and expects a net loss between USD 69 million and USD 79 million; it could also lie somewhere between 23-27% per diluted shares, as compared to the net income of $28 million from a year ago.

After having adjusted its revenues, the Stars Group hopes for a profit lying between USD 185 million and USD 192 million for one quarter, otherwise put as 63-65% per share, that has gone up from the adjusted profit amounting to USD 106 million in the very first quarter of F.Y. 2019.

We saw record revenues in the first quarter with 27% year-over-year growth and are continuing to see strong momentum into April, with strong growth in poker and gaming revenues, helping to mitigate the cancellation of sporting events. With these encouraging trends, a well-diversified and cash-generative business, and our strong balance sheet, we believe that we remain well-positioned to navigate further headwinds related to the COVID-19 pandemic in 2020, and remain fully committed to our combination with Flutter, which we now expect to close in the second quarter and are confident will enhance and accelerate our growth strategy," said Rafi Ashkenazi, Chief Executive Officer of The Stars Group. "During these exceptional times, our top priority, however, is the health and safety of our employees and customers, which includes enhancing our responsible and safer gambling measures as well as ensuring that we provide our customers with all the help and support they may need."

If the SARS-CoV2 pandemic is not controlled within the coming times, it will lead to certain continued global macro-economic uncertainty. The company has claimed that it might be possible for spendings by consumers across the Stars Group's offered products may also be "adversely impacted." In a similar manner, if sporting events are returned earlier than is anticipated, it could greatly benefit TSG's sports revenues in betting- however, it will also negatively impact the increased activity across the online casino and poker products.

The Stars Group has currently estimated that each month the cancellation of horse and dog racing along with other major sporting events will reduce the operational income by almost €10 to €15 million in the U.K. segment and as much as A$10 million in the segment under Australia- showing no net negative impact on the overall international segment.

The Stars Group signed a deal that will lead to its acquisition by Flutter entertainment to create a combination that will lead to the creation of one of the world's biggest online gambling and betting companies. There will be a meeting of all-Star Group shareholders who shall together vote on the deal on April 24 using a format that will stay purely virtual. It was announced by the U.K. Competition and Markets Authority at the end of March that it had succeeded in completely clearing the combination, which followed its Phase 1 review as per the Enterprise Act 2002. The Stars Group is currently expecting a closing of this combination to occur at the time of the second quarter of 2020, which will be subject to regulatory and shareholders' approval, among other things.

Further, The Stars Group has also increased its investment and focus into safer and more responsible gambling measures through a process that encouraged its customers to make use of its numerous safe gambling tools (for instance, setting deposit limits, using reality checks and cool-off periods), In addition to asking the customers to control and monitor their own activity, TSG has also said that it shall strive to intervene every time customer data suggests that there will be an increased risk of harm by setting deposit limits or choosing to restrict game-play. Other than this, the firm has been supporting the range of free-to-play games that customers may enjoy during the pandemic.