12.08.2019 – 13:34
The Stars Group Reports Second Quarter 2019 Results; Updates 2019 Full Year Guidance; Appoints New Independent Director
The Stars Group Inc. (NASDAQ: TSG) (TSX: TSGI) today reported its financial results for the second quarter ended June 30, 2019, provided updated 2019 full year guidance ranges, announced the appointment of an additional independent director to its Board of Directors, and provided certain additional highlights and updates. Unless otherwise noted, all dollar ($) amounts are in U.S. dollars.
"The second quarter underpinned the success of last year's acquisitions, particularly with the record performance of Sky Betting & Gaming and our increasing product and geographic diversification, as we continue to transform and position the business to execute on our strategy for strong, sustainable future growth," said Rafi Ashkenazi, The Stars Group's Chief Executive Officer.
"2019 has been and remains a year of integration, execution and debt reduction," said Mr. Ashkenazi. "We are committed to those key strategic priorities for the rest of the year while we also build our foundation and momentum to become a market leader in the U.S. We are confident that the actions we have taken over the last year, and are pursuing now, including to reassess our fixed cost base, put us in a strong position to deliver our mid-term growth targets from the end of 2019," concluded Mr. Ashkenazi.
Second Quarter 2019 Summary Consolidated Three Six Months Months Ended Ended June June 30, 30, In thousands 2019 2018 % 2019 2018 % Change of U.S. Change Dollars(except percentages and per share amounts) Total revenue 637,618 411,512 54.9 % 1,218,002 804,403 51.4 % Gross profit 463,708 327,875 41.4 % 881,456 640,502 37.6 % (excluding depreciation and amortization) Operating 93,955 1,064 8,730.4 % 155,492 114,931 35.3 % income Net earnings 4,629 (154,824) 103.0 % 32,287 (80,463) 140.1 % (loss) Adjusted Net 137,469 131,023 4.9 % 243,069 269,785 (9.9) % Earnings ¹ Adjusted 236,734 168,271 40.7 % 432,089 343,293 25.9 % EBITDA ¹ Adjusted 37.1 % 40.9 % (9.3) % 35.5 % 42.7 % (16.9) % EBITDA Margin ¹ Diluted 0.02 (1.01) 101.7 % 0.12 (0.52) 122.6 % earnings (loss) per Common Share ($/Share) Adjusted 0.48 0.60 (19.4) % 0.87 1.27 (31.6) % Diluted Net Earnings per Share ($/Share) ¹ Net cash 173,208 164,011 5.6 % 283,593 296,080 (4.2) % inflows from operating activities Free Cash Flow 84,820 84,856 - % 47,307 167,115 (71.7) % ¹
As at June 30, December % 2019 31, 2018 Change Long-term 5,195,398 5,666,075 (8.3) % debt - principal Long-term 5,088,915 5,446,958 (6.6) % debt - carrying value Cash - 339,239 392,853 (13.6) % operational
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".
- Revenue - Revenue for the quarter increased primarily as a result of the contribution from Sky Betting & Gaming, which The Stars Group acquired in July 2018. During the quarter, online sports betting was The Stars Group's largest product vertical (36% versus 20% in 2018), followed by online casino (31% versus 25% in 2018) and online poker (30% versus 53% in 2018), while 79% of consolidated revenues were derived from locally regulated or taxed markets (61% in 2018). Additional segment specific factors impacting revenue are described below. - Debt and Cash - During the quarter, The Stars Group prepaid $250 million outstanding on its USD first lien term loan, and ended the quarter with approximately $339.2 million in operational cash and $5.1 billion of debt on its balance sheet, resulting in Net Debt of $4.7 billion. - FOX Bet - In May, The Stars Group and FOX Sports announced plans to launch FOX Bet, the first-of-its kind national media and sports wagering partnership in the United States. In addition to a commercial agreement of up to 25 years and associated product launches, including real-money and free-to-play games, FOX also acquired 4.99% of The Stars Group's then-issued and outstanding common shares for aggregate proceeds of $236.0 million. FOX Bet currently remains on track to launch in applicable states prior to the start of the NFL season. - U.S. Market Access Update - In July, The Stars Group announced agreements with Penn National Gaming and the Akwesasne Mohawk Casino Resort in New York, providing market access for online betting and gaming in up to ten states and extending The Stars Group's aggregate market access to up to 20 states, subject to license availability, state law and regulatory approvals. - Appointment of Independent Director - The Board appointed John Schappert, effective August 12, 2019, as a new independent director and member of the Board's Compensation and Technology Committees. Mr. Schappert, 49, has served as the Chairman and Chief Executive Officer of Shiver Entertainment, a private company that develops video game software for consoles (PlayStation 4, Xbox One, Nintendo Switch), PC, and mobile phones and tablets, since 2012. Mr. Schappert also currently serves as the Chairman of Motorsport Games, a private company that develops and publishes video games, and Pipeworks Studios, a private company that develops video games and software, since 2019 and 2018, respectively. Prior to this, Mr. Schappert served as the Chief Operating Officer for Zynga Inc. (Nasdaq: ZNGA) from 2011 to 2012 and served on its board of directors during that time. Mr. Schappert also previously served as the Chief Operating Officer for Electronic Arts Inc. (Nasdaq: EA) from 2009 to 2011, and was Corporate Vice President of Microsoft Corporation's (Nasdaq: MSFT) Interactive Entertainment Business unit from 2007 to 2009. From 1998 until 2007, Mr. Schappert held several positions for various divisions of EA, including Vice President and General Manager of Electronic Arts Tiburon from 1998 until 2002, Senior Vice President and Group General Manager of Electronic Arts Canada from 2002 until 2006, and Executive Vice President and Chief Operating Officer of Worldwide Studios from 2006 until 2007. Mr. Schappert founded Tiburon Entertainment, the developer of the Madden NFL video game franchise, in 1994 and served as President and Chief Executive Officer until 1998, when it was acquired by EA. From 1991 until 1994, Mr. Schappert was a software engineer and game developer for Visual Concepts. Mr. Schappert earned an Associates of Arts degree from Miami Dade Community College in Miami, Florida. - Technology Committee of the Board - On August 8, 2019, the Board established a standing Technology Committee of independent directors, which will have certain oversight and monitoring responsibilities with respect to technology-related risks and the overall role of technology in executing The Stars Group's business strategy. The Technology Committee is currently comprised of Eugene Roman, John Schappert and Mary Turner, with Mr. Roman serving as the chair.
Three Six Months Months Ended Ended June June 30, 30, In thousands 2019 2018 % 2019 2018 % of U.S. Change Change Dollars (except otherwise noted) Stakes 249,276 248,572 0.3 % 524,535 471,557 11.2 % Betting Net 7.3 % 7.9 % (7.6) % 7.3 % 7.7 % (5.2) % Win Margin (%) Revenue Poker 191,496 216,986 (11.7) % 405,645 462,856 (12.4) % Poker Constant 201,830 216,986 (7.0) % 436,686 462,856 (5.7) % Currency Revenue Gaming 104,300 101,941 2.3 % 203,208 208,651 (2.6) % Gaming 111,058 101,941 8.9 % 219,170 208,651 5.0 % Constant Currency Revenue Betting 18,284 19,635 (6.9) % 38,333 36,321 5.5 % Betting 18,425 19,635 (6.2) % 40,330 36,321 11.0 % Constant Currency Revenue Other 7,792 11,673 (33.2) % 15,299 24,173 (36.7) % Other Constant 10,126 11,673 (13.3) % 18,299 24,173 (24.3) % Currency Revenue Total revenue 321,872 350,235 (8.1) % 662,485 732,001 (9.5) % Constant 341,439 350,235 (2.5) % 714,485 732,001 (2.4) % Currency Revenue QAUs 1.9 2.0 (4.9) % (millions) QNY ($/QAU) 163 167 (2.4) % Constant 172 167 2.9 % Currency Revenue QNY Gross profit 248,911 281,076 (11.4) % 509,353 585,922 (13.1) % (excluding depreciation and amortization) Gross profit 77.3 % 80.3 % (3.7) % 76.9 % 80.0 % (3.9) % margin (%) General and 107,259 106,447 0.8 % 206,234 211,667 (2.6) % administrative Sales and 36,863 42,255 (12.8) % 77,145 87,224 (11.6) % marketing ¹ Research and 9,287 8,358 11.1 % 15,889 16,177 (1.8) % development Operating 95,502 124,016 (23.0) % 210,085 270,854 (22.4) % income Adjusted 143,223 164,467 (12.9) % 302,563 350,874 (13.8) % EBITDA 2 Adjusted 44.5 % 46.9 % (5.1) % 45.7 % 47.9 % (4.6) % EBITDA Margin (%) 2 Net Deposits 307 322 (4.7) % (millions)
1 Sales and marketing includes $1.2 million and $2.7 million for the three and six months ended June 30, 2019, respectively, that the Corporation excluded from its consolidated results as it related to certain non-gaming related transactions with the United Kingdom segment.
2 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".
- Poker - Poker revenue for the quarter decreased year-over-year primarily as a result of adverse foreign exchange fluctuations and continued disruptions and regulatory headwinds in certain markets, including reduced deposits by customers as a result of local restrictions on some methods of payment processing and on certain methods of downloading The Stars Group's poker applications, which was partially offset by continued organic growth in most other markets. - Gaming - Gaming revenue for the quarter increased year-over-year primarily as a result of organic growth in most markets, but was adversely impacted by foreign exchange fluctuations. Organic growth from recently launched products, including "Spin of the Day" and the continued roll-out of new casino games, more than offset the impact of exited markets, notably Switzerland (gaming and betting) and Slovakia (gaming, betting and poker) during the first quarter, and regulatory disruptions in certain markets, including local restrictions on some methods of payment processing. - Betting - Betting revenues for the quarter decreased year-over-year primarily as a result of a lower Betting Net Win Margin and adverse foreign exchange fluctuations. Stakes, however, were stable year-over-year with underlying growth offset by the positive impact of the FIFA World Cup in the prior year period and adverse foreign exchange fluctuations. - Customers - QAUs decreased primarily due to reduced activity in certain markets and the closure of certain markets, each as noted above. - International Senior Management Appointments - In July, The Stars Group appointed Gino Appiotti as President of the International segment, having previously served as its Managing Director of Poker. Mr. Appiotti has served The Stars Group in various senior capacities since 2011 and will report to Mr. Ashkenazi. In addition, Severin Rasset was appointed Managing Director & Commercial Officer of Poker, previously serving as Director of Poker Innovation and Operations, and Asaf Noifeld was appointed Managing Director of Casino, previously serving as Director of Casino Product, Innovation and Operations, and succeeding Bo Wanghammar, who will assume a new, broader strategic advisor role to the International segment.
Three Six Months Months Ended Ended June 30, June 30, In thousands 2019 2018 % 2019 2018 % of U.S. Change Change Dollars (except otherwise noted) Stakes 1,507,379 - - % 3,012,351 - - % Betting Net 9.7 % - % - % 7.3 % - % - % Win Margin (%) Revenue Poker 2,714 - - % 6,004 - - % Gaming 92,591 - - % 182,894 - - % Betting 146,443 - - % 220,940 - - % Other ¹ 11,128 - - % 22,135 - - % Total revenue 252,876 - - % 431,973 - - % QAUs 2.2 - - % (millions) QNY ($/QAU) 112 - - % Gross profit 177,621 - - % 299,146 - - % (excluding depreciation and amortization) Gross profit 70.2 % - % - % 69.3 % - % - % margin (%) General and 108,488 - - % 217,075 - - % administrative Sales and 30,717 - - % 65,311 - - % marketing Research and 3,535 - - % 7,871 - - % development Operating 34,881 - - % 8,889 - - % income Adjusted 101,053 - - % 143,272 - - % EBITDA 2 Adjusted 40.0 % - % - % 33.2 % - % - % EBITDA Margin (%) 2
1 Other revenue includes $1.2 million and $2.7 million for the three and six months ended June 30, 2019, respectively, that the Corporation excluded from its consolidated results as it related to certain non-gaming related transactions with the International segment.
2 Non-IFRS measure. For important information on The Stars Group's non-IFRS measures, see below under "Non-IFRS Measures" and the tables under "Reconciliation of Non-IFRS Measures to Nearest IFRS Measures".
- Revenue - Revenue for the quarter, which on a local currency (Great Britain pound sterling) basis was a Sky Betting & Gaming record, was primarily driven by strong growth in QAUs and Stakes, largely as a result of the success of investments in promotional activity in the first quarter, including during the Cheltenham Festival, one of the U.K.'s most popular horse racing events. Betting Net Win Margin was 9.7%, slightly above the historical long-term average of approximately 9%. - Customers - Record QAUs and Stakes in the quarter, which were primarily a result of the successful promotional activity and ongoing product innovation and improvements across betting and gaming offerings, in each case exceeding the positive impact of the FIFA World Cup in the prior year period. Stakes continued to see strong growth from increased new customer engagement, while QAUs also continued to benefit from the on-going roll-out of personalized promotions and new and exclusive content across the Sky Betting & Gaming brands, including the recent launches of Sky Bingo Arcade and Sky Lotto, a new free-to-play game.
Three Six Months Months Ended Ended June June 30, 30, In thousands 2019 2018 ¹ % 2019 2018 % of U.S. Change ¹ Change Dollars (except otherwise noted) Stakes 742,312 710,269 4.5 % 1,496,638 867,726 72.5 % Betting Net 8.5 % 8.6 % (1.2) % 8.3 % 8.3 % - % Win Margin (%) Revenue Betting 63,226 61,277 3.2 % 124,346 72,402 71.7 % Other 844 - - % 1,898 - - % Total revenue 64,070 61,277 4.6 % 126,244 72,402 74.4 % QAUs 0.21 - - % (millions) QNY ($/QAU) 295 - - % Gross profit 38,376 46,799 (18.0) % 75,657 54,435 39.0 % (excluding depreciation and amortization) Gross profit 59.9 % 76.4 % (21.6)) % 59.9 % 75.2 % (20.3) % margin (%) General and 28,821 40,270 (28.4) % 54,903 44,607 23.1 % administrative Sales and 13,304 12,262 8.5 % 24,068 16,473 46.1 % marketing Research and 576 768 (25.0) % 2,149 984 118.4 % development Operating loss (4,325) (6,501) 33.5 % (5,463) (7,629) 28.4 % Adjusted 7,192 13,489 (46.7) % 15,822 12,643 25.1 % EBITDA 2 Adjusted 11.2 % 22.0 % (49.1) % 12.5 % 17.4 % (28.2) % EBITDA Margin (%) 2
1 The Stars Group acquired 62% of BetEasy on February 27, 2018 and a further 18% on April 24, 2018, with BetEasy acquiring William Hill Australia on the same day.
2 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".
- Revenue - Revenue for the quarter increased year-over-year primarily as a result of Stakes growth driven by the migration of customers of the former William Hill Australia business to the BetEasy platform and the launch of MyRewards towards the end of the first quarter. This was partially offset by the positive impact of the FIFA World Cup in the prior year period. Betting Net Win Margin of 8.5% was in line with the long-term historical average. - Customers - QAUs improved from the prior quarter driven by continued player acquisition, but decreased from the prior year period primarily as a result of the migration of customers of the former William Hill Australia business to the BetEasy platform beginning in August 2018, and an increased focus on high-value, recreational customers. QNY benefited from encouraging results from the continued roll-out of MyRewards, allowing for targeted, personalized promotions. - Kayo Sports - In May 2019, BetEasy announced a new partnership with Kayo Sports to become the exclusive wagering partner of the Australian multi-sport streaming service. Under the two-year agreement, BetEasy and Kayo will work together to deliver innovative content, statistics and promotional integrations that deepen engagement and enhance the wagering and viewing experience for Australian customers.
For additional information regarding The Stars Group's reporting segments and major lines of operations, please see The Stars Group's interim condensed consolidated financial statements for the three and six months ended June 30, 2019 (the "Q2 2019 Financial Statements"), including note 5 therein, and management's discussion and analysis thereon (the "Q2 2019 MD&A").
2019 Updated Full Year Guidance
The Stars Group is updating its 2019 full year consolidated financial guidance ranges as follows:
- Revenue of between $2,500 and $2,575 million (previously $2,640 and $2,765 million); - Adjusted EBITDA of between $905 and $930 million (previously $960 and $1,010 million); and - Adjusted Diluted Net Earnings per Share of between $1.68 and $1.83 (previously $1.87 and $2.11).
In addition to the updated assumptions detailed below, the expected revenue and Adjusted EBITDA ranges reflect the impact of negative foreign exchange fluctuations, a historically low Betting Net Win Margin in the first quarter for the United Kingdom segment, the slower than planned recovery in certain disrupted markets and some delays in launching The Stars Group's newly licensed operations in certain jurisdictions, such as Switzerland.
In addition to approximately $15 million for negative foreign exchange fluctuations, the expected Adjusted EBITDA range also reflects the impact of the following factors:
- Approximately $40 million for The Stars Group's investment in FOX Bet and its U.S. operations; and - An offsetting underlying improvement in operations, primarily driven by an operational excellence program to streamline certain fixed costs and currently expected sequential improvements in disrupted markets.
The Stars Group continues to expect to achieve the medium-term financial and leverage target ranges set out in its news release on March 27, 2019, but now over the three to five year period from the updated 2019 financial guidance ranges above.
In addition, to provide further clarity with respect to certain key assumptions and the impact of its 2018 acquisitions on its full year 2019 expected results, The Stars Group is also updating information for certain financial items, which unless noted below remain unchanged from the previously announced ranges:
- Depreciation and amortization (excluding purchase price allocation amortization) of between $75 and $85 million; - Cash interest expense of between $280 and $290 million (previously between $290 and $300 million); - Effective tax rate (applied to Adjusted EBITDA less cash interest expense and non-purchase price allocation related depreciation and amortization) of approximately 10% (previously between 8% and 10%); - Diluted Shares of 283 million (previously 277 million); and - Capital expenditures, which includes estimated spend on intangible assets, property, plant and equipment and certain development costs, of approximately $150 million (previously between $110 and $150 million)
These unaudited expected results, targets and other information reflect management's view of current and future market and business conditions, including certain accounting assumptions and, other than as noted directly above or below, assumptions of (i) expected Betting Net Win Margin of approximately 8.5% (with the remainder of the year and the medium-term targets unchanged from the previous estimates of approximately 9%), (ii) no further material changes in the current challenging operating conditions in certain markets from prior regulatory changes, including constraints on payment processing and accessing certain products, and no material changes to current expectations with respect to certain macroeconomic or political events, including Brexit, (iii) no other material regulatory events or material changes in applicable taxes or duty rates, (iv) no other material investments associated with the entry into new markets and no material change in The Stars Group's current estimate of its aggregate addressable U.S. market size of approximately 23 states and $9.3 billion by 2025, (v) other than as updated below, no further material foreign currency exchange rate fluctuations, particularly against the Euro, Great Britain pound sterling and Australian dollar, (vi) no material impairment or write-down of the assets to which depreciation and amortization relates, (vii) no material change in the prevailing EURIBOR or LIBOR rates as at June 30, 2019 (previously December 31, 2018) and no material adverse impact on applicable hedging counterparties, (viii) no material change in the mix of taxable income by jurisdiction, rate of corporate tax or tax regimes in the jurisdictions in which The Stars Group currently operates; (ix) no material change in the mix of geographies where The Stars Group currently offers its products, and (x) no material change in The Stars Group's Diluted Shares.
Such guidance, targets and information are also now based on an updated Euro to U.S. dollar exchange rate of 1.12 to 1.00 (previously 1.135 to 1.00), a Great Britain pound sterling to U.S. dollar exchange rate of 1.22 to 1.00 (previously 1.31 to 1.00) and an Australian dollar to U.S. dollar exchange rate of 0.69 to 1.00 (previously 0.712 to 1.00), for the second half of 2019.
Consolidated Financial Statements, Management's Discussion and Analysis and Additional Information
The Stars Group's Q2 2019 Financial Statements, Q2 2019 MD&A, and 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 2019 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 Details
The Stars Group will host a conference call today, August 12, 2019 at 8:30 a.m. ET to discuss its financial results for the second quarter 2019 and related matters, and provide additional detail with respect to the information in this news release, its webcast presentation and related filings. 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 13693490. To access the webcast please use the following link: http://public.viavid.com/index.php?id=134939.
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 earnings (loss), which is the nearest IFRS measure. For additional information, see "Reconciliations" in the Q2 2019 MD&A.
Three Months Ended June 30, 2019 In thousands International United Australia Corporate Consolidated of U.S. Kingdom Dollars Net earnings 95,502 34,881 (4,325) (121,429) 4,629 (loss) Income tax - - - (21,081) (21,081) expense Net - - - (68,245) (68,245) financing charges Operating 95,502 34,881 (4,325) (32,103) 93,955 income (loss) Depreciation 39,377 60,146 9,404 154 109,081 and amortization Add (deduct) the impact of the following: Stock-based - - - 4,726 4,726 compensation (Gains) (463) 44 - 93 (326) losses from investments (Recovery) (1) 2,499 - - 2,498 impairment of intangible assets Other costs 8,808 3,483 2,113 12,396 26,800 Total 8,344 6,026 2,113 17,215 33,698 adjusting items Adjusted 143,223 101,053 7,192 (14,734) 236,734 EBITDA
Six Months Ended June 30, 2019 In thousands International United Australia Corporate Consolidated of U.S. Kingdom Dollars Net earnings 210,085 8,889 (5,463) (181,224) 32,287 (loss) Income tax - - - (7,983) (7,983) expense Net - - - (115,222) (115,222) financing charges Operating 210,085 8,889 (5,463) (58,019) 155,492 income (loss) Depreciation 77,356 121,817 18,846 356 218,375 and amortization Add (deduct) the impact of the following: Stock-based - - - 7,462 7,462 compensation (Gains) (530) 44 - 93 (393) losses from investments Impairment 11 2,641 - - 2,652 of intangible assets Other costs 15,641 9,881 2,439 20,540 48,501 Total 15,122 12,566 2,439 28,095 58,222 adjusting items Adjusted 302,563 143,272 15,822 (29,568) 432,089 EBITDA
Three Months Ended June 30, 2018 In thousands of International United Australia Corporate Consolidated U.S. Dollars Kingdom Net earnings (loss) 125,084 - (6,501) (273,407) (154,824) Income tax recovery - - - 3,404 3,404 Net financing - - - (160,360) (160,360) charges Net earnings from 1,068 - - - 1,068 associates Operating income 124,016 - (6,501) (116,451) 1,064 (loss) Depreciation and 35,987 - 8,588 10 44,585 amortization Add (deduct) the impact of the following: Acquisition-related - - - 95,627 95,627 costs and deal contingent forwards Stock-based - - - 3,265 3,265 compensation (Gain) loss from (270) - 5 - (265) investments Impairment of 959 - - - 959 intangible assets Other costs 3,775 - 11,397 7,864 23,036 Total adjusting 4,464 - 11,402 106,756 122,622 items Adjusted EBITDA 164,467 - 13,489 (9,685) 168,271
Six Months Ended June 30, 2018 In thousands of International United Australia Corporate Consolidated U.S. Dollars Kingdom Net earnings (loss) 271,922 - (7,629) (344,756) (80,463) Income tax recovery - - - 2,249 2,249 Net financing - - - (198,711) (198,711) charges Net earnings from 1,068 - - - 1,068 associates Operating income 270,854 - (7,629) (148,294) 114,931 (loss) Depreciation and 73,956 - 9,868 19 83,843 amortization Add the impact of the following: Acquisition-related - - - 110,818 110,818 costs and deal contingent forwards Stock-based - - - 5,648 5,648 compensation Loss from 247 - - - 247 investments Impairment of 1,074 - - - 1,074 intangible assets Other costs 4,743 - 10,404 11,585 26,732 Total adjusting 6,064 - 10,404 128,051 144,519 items Adjusted EBITDA 350,874 - 12,643 (20,224) 343,293
Three Six Months Months Ended June Ended 30, June 30, In thousands of 2019 2018 2019 2018 U.S. Dollars (except per share amounts) Net earnings (loss) 4,629 (154,824) 32,287 (80,463) Income tax expense 21,081 (3,404) 7,983 (2,249) (recovery) Earnings (loss) 25,710 (158,228) 40,270 (82,712) before income taxes Add (deduct) the impact of the following: Interest accretion 14,088 9,029 22,357 21,080 Loss on debt - 124,976 - 124,976 extinguishment Re-measurement of (3,335) 3,697 (12,713) 3,697 contingent consideration Re-measurement of (12,200) - (34,800) - embedded derivative Unrealized foreign (292) - 1,340 - exchange (gain) loss on financial instruments associated with financing activities Ineffectiveness on 5,708 - 7,564 - cash flow hedges Acquisition-related - 95,627 - 110,818 costs and deal contingent forwards Amortization of 87,789 31,482 177,744 62,858 acquisition intangibles Stock-based 4,726 3,265 7,462 5,648 compensation Gain from (326) (1,333) (393) (821) investments and earnings from associates Impairment of 2,498 959 2,652 1,074 intangible assets Other costs 26,800 23,036 48,501 26,732 Adjust for income (13,697) (1,487) (16,915) (3,565) tax expense Adjusted Net 137,469 131,023 243,069 269,785 Earnings Adjusted Net Earnings attributable to Shareholders of The 136,584 129,237 241,410 269,469 Stars Group Inc. Non-controlling 885 1,786 1,659 316 interest Diluted Shares 282,399,213 215,380,175 278,181,337 212,449,078 Adjusted Diluted 0.48 0.60 0.87 1.27 Net Earnings per Share
The table below presents certain items comprising "Other costs" in the reconciliation tables above:
Three Six Months Months Ended Ended June June 30, 30, In thousands 2019 2018 2019 2018 of U.S. Dollars Integration 4,899 11,467 12,922 11,467 costs of acquired businesses Financial 1,083 4,330 2,113 2,049 expenses Restructuring 2,320 1,426 6,229 2,058 expenses AMF, foreign 6,511 2,875 9,220 4,659 payments and other investigation and related professional fees Lobbying 3,290 2,665 6,562 5,658 (U.S. and Non-U.S.) and other legal expenses Professional 8,643 102 10,463 553 fees in connection with non-core activities Retention - 117 - 234 bonuses (Gain) loss (393) 41 (393) 41 on disposal of assets Other 447 13 1,385 13 Other costs 26,800 23,036 48,501 26,732
The table below presents a reconciliation of Free Cash Flow to net cash flows from operating activities, which is the nearest IFRS measure:
Three Six Months Months Ended Ended June 30, June 30, In thousands 2019 2018 2019 2018 of U.S. Dollars Net cash 173,208 164,011 283,593 296,080 inflows from operating activities Customer 12,995 (14,090) (2,346) (13,901) deposit liability movement 186,203 149,921 281,247 282,179 Capital expenditure: Additions to (18,887) (9,759) (39,033) (16,190) deferred development costs Additions to (4,131) (5,676) (8,178) (9,261) property and equipment Additions to (13,971) (9,415) (18,505) (11,842) intangible assets Interest (50,524) (34,790) (142,285) (66,278) paid Debt (13,870) (5,425) (25,939) (11,493) servicing cash flows (excluding voluntary prepayments) Free Cash 84,820 84,856 47,307 167,115 Flow
The table below presents a reconciliation of Net Debt:
In thousands of U.S. Dollars As at June 30, 2019 Current portion of long-term debt 35,750 Long-term debt 5,053,165 Less: Cash and cash equivalents - operational 339,239 Net Debt 4,749,676
The table below presents a reconciliation of The Stars Group's updated 2019 financial guidance ranges for Adjusted EBITDA and Adjusted Diluted Net Earnings per Share to their corresponding 2018 historical balances. Reconciliations of such 2018 historical balances to their nearest non-IFRS measures are as presented in the news release issued by The Stars Group on March 6, 2019, under the heading "Reconciliation of Non-IFRS Measures to Nearest IFRS Measures".
2018 2019 2019 Actual Full Full Year Year In millions of Guidance Guidance U.S. Dollars Low1 High1 (except per share amounts) Operating 253 330 355 Income (loss) Depreciation 283 450 430 and amortization Add (deduct) the impact of the following: Adjusting 136 10 20 items2 Other 109 115 125 costs3 Total 245 125 145 Adjustments Adjusted EBITDA 781 905 930 Depreciation 41 85 75 and amortization4 Interest5 184 290 280 Taxes6 22 50 53 Adjusted Net 534 480 522 Earnings Adjusted Net Earnings attributable to Shareholders of 531 475 518 Stars Group Inc. Non-controlling 3 5 4 Interest Diluted Shares 243 283 283 Adjusted 2.19 1.68 1.83 Diluted Net Earnings per Share
1 For relevant assumptions, see above under "2019 Updated Financial Guidance". Note that certain reconciling or adjusting items and costs for 2019 cannot be projected or predicted with reasonable certainty without unreasonable effort due to a number of factors, including variability from potential foreign exchange fluctuations impacting financial expenses, the nature and timing of other non-recurring or one-time costs (such as impairment of intangibles assets and certain professional fees), which could vary materially based on actual events or transactions or unknown or unpredictable variables, as well as the typical variability arising from the preparation and completion of annual financial statements, including, without limitation, certain income tax provision accounting, annual impairment testing and other accounting matters. Other adjusting items and costs (such as stock-based compensation, acquisition and integration-related costs, operational efficiency-related costs and other strategy-related expenses) may otherwise reveal commercially or competitively sensitive information. The Stars Group has also not provided a reconciliation of the non-IFRS measures to the nearest IFRS measures included in its updated full year 2019 guidance provided in this news release because of these reasons.
2 With respect to the relevant adjusting items for 2018, see the Adjusted EBITDA reconciliation in the news release issued by The Stars Group on March 6, 2019, under the heading "Reconciliation of Non-IFRS Measures to Nearest IFRS Measures". With respect to 2019, The Stars Group currently expects to incur and adjust for substantially similar items as it did in 2018 except for "acquisition-related costs and deal contingent forwards", which related to the acquisitions of Sky Betting & Gaming and BetEasy and comprised the majority of such adjusting items in that year.
3 With respect to the Other costs for 2018, see the "Other costs" reconciliation in the news release issued by The Stars Group on March 6, 2019, under the heading "Reconciliation of Non-IFRS Measures to Nearest IFRS Measures". With respect to 2019, The Stars Group currently expects to incur and adjust for substantially similar costs as it did in 2018.
4 "Depreciation and amortization" means total depreciation and amortization, excluding amortization of acquisition intangibles, which is not adjusted for in this measure.
5 "Interest" means total net financing charges, including interest on long term debt and other interest (income) expense but excluding interest accretion, ineffectiveness on cash flow hedges, re-measurement of deferred contingent consideration, and re-measurement of embedded derivatives, each of which is not adjusted for in this measure.
6 "Taxes" means total income tax expense, excluding the impact of tax on "Adjusting items" and "Other costs" included in the calculation of Adjusted EBITDA for each period.
For additional information on The Stars Group's non-IFRS measures, see the Q2 2019 MD&A, including under the headings "Management's Discussion and Analysis", "Non-IFRS Measures, Key Metrics and Other Data", "Segment Results of Operations" and "Reconciliations".
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, FOX Bet, BetEasy, Sky Bet, Sky Vegas, Sky Casino, Sky Bingo, Sky Poker, and Oddschecker, as well as live poker tour and events 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 21 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, and certain financial items relating to the full year 2019 results. 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 and its customers, partners, suppliers and industries in which it operates or may operate in the future. 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: customer and operator preferences and changes in the economy; reputation and brand growth; competition and the competitive environment within addressable markets and industries; macroeconomic conditions and trends in the gaming and betting industry; ability to predict fluctuations in financial results from quarter to quarter; ability to mitigate tax risks and adverse tax consequences, including, without limitation, changes in tax laws or administrative policies relating to tax and the imposition of new or additional taxes, such as value-added and point of consumption taxes, and gaming duties; The Stars Group's substantial indebtedness requires that it use a significant portion of its cash flow to make debt service payments; impact of inability to complete future or announced acquisitions or to integrate businesses successfully, including, without limitation, Sky Betting & Gaming and BetEasy; contractual relationships of The Stars Group with FOX Corporation and Sky plc and/or their respective subsidiaries; an ability to realize all or any of The Stars Group's estimated synergies and cost savings in connection with acquisitions, including, without limitation, the acquisition of Sky Betting & Gaming and the Australian acquisitions; ability to mitigate foreign exchange and currency risks; legal and regulatory requirements; potential changes to the gaming regulatory framework, including without limitation, those that may impact The Stars Group's ability to access and operate in certain jurisdictions, whether directly or through arrangements with locally based operators; the heavily regulated industry in which The Stars Group carries on its business; 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; social responsibility concerns and public opinion; protection of proprietary technology and intellectual property rights; intellectual property infringement or invalidity claims; and systems, networks, telecommunications or service disruptions or failures or cyber-attacks and failure to protect customer data, including personal and financial information. These factors are not intended to represent a complete list of the factors that could affect The Stars Group; however, these factors as well as other applicable risks and uncertainties include, but are not limited to, those identified in its most recently filed annual information form, including under the heading "Risk Factors and Uncertainties", and in its most recently filed management's discussion and analysis, including under the headings "Caution Regarding Forward-Looking Statements", "Risk Factors and Uncertainties" and "Non-IFRS Measures, Key Metrics and Other Data", 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 in the future with applicable securities authorities in the future, should be considered carefully. Investors are cautioned not to put undue reliance on forward-looking statements or information. Any forward-looking statement or information in this news release are expressly qualified by this cautionary statement. 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.
This news release references non-IFRS financial measures. The Stars Group believes these non-IFRS financial measures will provide investors with useful supplemental information about the financial and operational 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, identifying and evaluating trends, and making decisions. The Stars Group believes that such non-IFRS financial measures provide useful information about its underlying, core operating results and trends, enhance the overall understanding of its past performance and future prospects and allow for greater transparency with respect to metrics and measures used by management in its financial and operational decision-making.
Although management believes these non-IFRS 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 any may not be comparable to similar meanings prescribed by other companies, limiting its usefulness for comparison purposes. Moreover, presentation of certain of these measures is provided for period-over-period 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 tax 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, stock-based compensation, restructuring, net earnings (loss) on associate, and certain other items. In addition, as previously disclosed, The Stars Group makes adjustments for (i) the re-measurement of contingent consideration, which was previously included in, and adjusted for through, interest accretion, but starting with The Stars Group's interim condensed consolidated financial statements and related notes for the three and nine months ended September 30, 2018 (the "Q3 2018 Financial Statements"), it is a separate line item, (ii) the re-measurement of embedded derivatives and ineffectiveness on cash flow hedges, each of which were new line items in the Q3 2018 Financial Statements, and (iii) certain non-recurring tax adjustments and settlements. Each adjustment to net earnings is then adjusted for the tax impact, where applicable, in the respective jurisdiction to which the adjustment relates. Adjusted Net Earnings and any other non-IFRS measures used by The Stars Group that relies on or otherwise incorporates Adjusted Net Earnings that was reported for previous periods have not been restated under the updated definition on the basis that The Stars Group believes that the impact of the change to those periods would not be material.
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 such as warrants and any convertible preferred shares of The Stars Group then outstanding. 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 8 in the Q2 2019 Financial Statements. For the three and six months ended June 30, 2019, Diluted Shares used for the calculation of Adjusted Diluted Net Earnings per Share equaled 282,399,213 and 278,181,337, respectively, compared with 215,380,175 and 212,449,078 for the prior year periods, respectively.
Constant Currency Revenue means IFRS reported revenue for the relevant period calculated using the applicable prior year period's monthly average exchange rates for its local currencies other than the U.S. dollar. Currently, The Stars Group provides Constant Currency Revenue for the International segment and its applicable lines of operations. It does not currently provide Constant Currency Revenue for the United Kingdom and Australia segments because The Stars Group does not yet have full reported comparative periods for these segments as a result of the respective acquisition dates of Sky Betting & Gaming and BetEasy, and with respect to BetEasy, the Corporation had not yet completed the previously announced migration of the former William Hill Australia customers onto the BetEasy platform. The Corporation intends to provide information on the impact of foreign exchange rates for these segments either individually or on a consolidated basis when applicable reported comparative period information is available that the Corporation believes would be reasonably comparable to the current periods as noted above.
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).
Net Debt means total long-term debt less operational cash.
For additional information on certain of The Stars Group's non-IFRS measures and the reasons why it believes such measures are useful, see above and the Q2 2019 MD&A, including under the headings "Management's Discussion and Analysis", "Non-IFRS Measures, Key Metrics and Other Data", "Segment Results of Operations" and "Reconciliations".
Key Metrics and Other Data
The Stars Group provides the following key metrics in this news release:
QAUs for the International and Australia reporting segments means 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 during the applicable quarterly period. The Stars Group defines "active unique customer" 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) within the applicable reporting segment. 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.
QAUs for the United Kingdom reporting segment (which currently includes the Sky Betting & Gaming business operations only) means active unique customers (online and mobile) who have settled a Stake (as defined below) or made a wager on any betting or gaming product within the applicable quarterly period. The Stars Group defines "active unique customer" for the United Kingdom reporting segment 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 line of operation.
QNY means combined revenue for its lines of operation (i.e., Poker, Gaming and/or Betting, as applicable) for each reporting segment, excluding Other revenue, 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.
Net Deposits for the International segment 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 means Betting revenue as a proportion of Stakes.
The Stars Group is also continuing the process of integrating its recent acquisitions, as applicable, and implementing its recently changed operating and reporting segments, and once complete, The Stars Group may revise or remove currently presented key metrics or report certain additional or other measures in the future.
For additional information on The Stars Group's key metrics and other data, see the Q2 2019 MD&A, including under the headings "Non-IFRS Measures, Key Metrics and Other Data" and "Segment Results of Operations".
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) Three Six Months Months Ended Ended June 30, June 30, In thousands of 2019 2018 2019 2018 U.S. Dollars (except per share and share amounts) Revenue 637,618 411,512 1,218,002 804,403 Cost of revenue (173,910) (83,637) (336,546) (163,901) (excluding depreciation and amortization) Gross profit 463,708 327,875 881,456 640,502 (excluding depreciation and amortization) General and (276,440) (262,786) (535,797) (404,093) administrative Sales and (79,915) (54,899) (164,258) (104,317) marketing Research and (13,398) (9,126) (25,909) (17,161) development Operating 93,955 1,064 155,492 114,931 income Gain (loss) on 3,335 (3,697) 12,713 (3,697) re-measurement of deferred contingent payment Gain on 12,200 - 34,800 - re-measurement of embedded derivative Unrealized 292 - (1,340) - foreign exchange gain (loss) on financial instruments associated with financing activities Other net (84,072) (156,663) (161,395) (195,014) financing charges Net financing (68,245) (160,360) (115,222) (198,711) charges Net earnings - 1,068 - 1,068 from associates Earnings (loss) 25,710 (158,228) 40,270 (82,712) before income taxes Income tax (21,081) 3,404 (7,983) 2,249 (expense) recovery Net earnings 4,629 (154,824) 32,287 (80,463) (loss) Net earnings (loss) attributable to Shareholders of 4,757 (153,645) 32,670 (78,194) The Stars Group Inc. Non-controlling (128) (1,179) (383) (2,269) interest Net earnings 4,629 (154,824) 32,287 (80,463) (loss) Earnings (loss) per Common Share (U.S. dollars) Basic $0.02 ($1.01) $0.12 ($0.52) Diluted $0.02 ($1.01) $0.12 ($0.52) Weighted average Common Shares outstanding (thousands) Basic 281,689 152,788 277,557 150,523 Diluted 282,399 152,788 278,181 150,523
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at June As at 30, December 31, In thousands of 2019 2018 U.S. Dollars ASSETS Current assets Cash and cash 339,239 392,853 equivalents - operational Cash and cash 326,628 328,223 equivalents - customer deposits Total cash and 665,867 721,076 cash equivalents Restricted cash 9,239 10,819 advances and collateral Prepaid 45,296 43,945 expenses and other current assets Current 105,196 103,153 investments - customer deposits Accounts 121,190 136,347 receivable Income tax 25,074 26,085 receivable Total current 971,862 1,041,425 assets Non-current assets Restricted cash 10,677 10,630 advances and collateral Prepaid 31,605 32,760 expenses and other non-current assets Non-current 15,418 14,906 accounts receivable Property and 139,532 85,169 equipment Income tax 24,686 15,611 receivable Deferred income 8,405 1,775 taxes Derivatives 62,518 54,583 Intangible 4,590,758 4,742,699 assets Goodwill 5,256,819 5,265,980 Total 10,140,418 10,224,113 non-current assets Total assets 11,112,280 11,265,538 LIABILITIES Current liabilities Accounts 439,349 424,007 payable and other liabilities Customer 421,084 423,739 deposits Current 29,556 39,189 provisions Derivatives 10,051 16,493 Income tax 60,419 72,796 payable Current portion 18,764 - of lease liability Current portion 35,750 35,750 of long-term debt Total current 1,014,973 1,011,974 liabilities Non-current liabilities Lease liability 44,121 - Long-term debt 5,053,165 5,411,208 Long-term 3,637 4,002 provisions Derivatives 40,675 6,068 Other long-term - 79,716 liabilities Income tax 11,659 18,473 payable Deferred income 574,392 580,697 taxes Total 5,727,649 6,100,164 non-current liabilities Total 6,742,622 7,112,138 liabilities EQUITY Share capital 4,355,902 4,116,287 Reserves (525,270) (469,629) Retained 535,431 502,761 earnings Equity 4,366,063 4,149,419 attributable to the Shareholders of The Stars Group Inc. Non-controlling 3,595 3,981 interest Total equity 4,369,658 4,153,400 Total 11,112,280 11,265,538 liabilities and equity
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, In thousands of 2019 2018 U.S. Dollars Operating activities Net earnings 32,287 (80,463) (loss) Add (deduct): Income tax 7,983 (2,249) expense (recovery) recognized in net earnings (loss) Net financing 115,222 198,710 charges Depreciation 218,375 83,843 and amortization Stock-based 7,462 5,948 compensation Unrealized loss 656 68,996 on foreign exchange Unrealized gain (485) (164) on investments Impairment of 2,652 1,074 property and equipment and intangible assets Net earnings - (1,068) from associates Realized (gain) (292) 28 loss on current investments and promissory note Income taxes (46,512) (15,772) paid Changes in (57,433) 18,525 non-cash operating elements of working capital Customer 2,346 13,901 deposit liability movement Other 1,332 4,771 Net cash 283,593 296,080 inflows from operating activities Investing activities Acquisition of - (310,563) subsidiaries, net of cash acquired Additions to (18,505) (11,842) intangible assets Additions to (8,178) (9,261) property and equipment Additions to (39,033) (16,190) deferred development costs Net (purchase) (2,043) 16,044 sale of investments utilizing customer deposits Settlement of (675) (2,713) minimum revenue guarantee Net investments - 1,068 in associates Other (356) (1,137) Net cash (68,790) (334,594) outflows from investing activities Financing activities Issuance of 235,963 646,000 Common Shares Transaction - (24,225) costs on issuance of Common Shares Issuance of 1,784 27,627 Common Shares in relation to stock options Issuance of - 425,041 long-term debt Repayment of (367,875) (106,493) long-term debt Transaction - (23,061) costs on long-term debt Repayment of (8,064) - lease liability principal Interest paid (142,285) (66,278) Acquisition of - (48,240) further interest in subsidiaries Proceeds on 4,894 30,918 loan issued to the holders of non-controlling interest Net cash (275,583) 861,289 (outflows) inflows from financing activities (Decrease) (60,780) 822,775 increase in cash and cash equivalents Unrealized 5,571 (6,090) foreign exchange difference on cash and cash equivalents Cash and cash 721,076 510,323 equivalents - beginning of period Cash and cash 665,867 1,327,008 equivalents - end of period
Original content of: The Stars Group, transmitted by news aktuell