The Stars Group grows 27% in Q1 and the first two weeks of April would have had additional boost from its poker and casino products improving 33%

 The Stars Group provided last friday a general business update, including expectations for its financial results for the first quarter of 2020.  “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.”

The Stars Group saw strong momentum across its segments since the start of 2020, and now expects record revenues for the first quarter of 2020 of approximately $735 million, an increase of approximately 27% as compared to $580 million in the first quarter of 2019. This performance was supported by continued strong underlying momentum in customer activity in the United Kingdom and Australia segments, a sequential improvement in the International segment, and a year-over-year increase in Betting Net Win Margin at approximately 12.1% compared to 6.1% in the first quarter of 2019. Additional segment specific factors impacting revenue are described below.



The Stars Group saw increased customer activity across its online poker and casino product offerings largely beginning in March, with year-over-year International revenue growth of approximately 44% for the month, which more than mitigated the disruption from the cancellation or postponement of sporting events during that time. The Stars Group has continued to see increased activity in online poker and casino into the second quarter of 2020, with consolidated average daily revenues in the first two weeks of the quarter approximately 33% higher as compared to the first quarter of 2020. On the same basis, International revenues were approximately 75% higher, benefiting from increased activity in online poker and casino, and United Kingdom revenues were approximately 30% lower, with growth in gaming partly mitigating a reduction of approximately 65% in Stakes. In the Australian segment, as racing has continued with minimal disruption, the growth in racing revenues fully mitigated the loss of sports revenues in this short period.

If the COVID-19 pandemic continues for a prolonged period causing continued global macro-economic uncertainty, it is possible that consumer spending across The Stars Group’s product offerings may also become adversely impacted. Similarly, the return of sporting events earlier than currently anticipated could benefit The Stars Group’s sports betting revenues, but could negatively impact the current increased activity across its online poker and casino products.

However, the operating environment is evolving rapidly, and it remains difficult for The Stars Group to predict the scope, timing and length of the current COVID-19 pandemic and related restrictions and sports postponements and cancellations, and the impact that this will have on The Stars Group’s business for the remainder of 2020. The Stars Group currently estimates that each month that horse and dog racing and major sporting events are cancelled would reduce operating income by approximately £10 to £15 million in the United Kingdom segment and by up to A$10 million in the Australian segment, with no material negative impact on the International segment.



A key area of focus for The Stars Group, particularly during this unprecedented time, has been to enable customers to enjoy its games in a safe and fair manner. To this end, The Stars Group has further increased its investment and focus into its safer and responsible gambling measures by, among other initiatives, encouraging customers to take advantage of its various safer gambling tools, such as setting deposit limits, using cool-off periods and using “reality checks” where available. In addition to encouraging customers to monitor and control their own activity, The Stars Group strives to intervene where customer data suggests a heightened risk of harm, setting mandatory deposit limits or otherwise restricting gameplay. The Stars Group is also supporting its range of free-to-play games for customers to enjoy during these challenging times.

The Stars Group continues to maintain a strong liquidity position and healthy balance sheet. As previously disclosed, The Stars Group prepaid an additional $100 million of its USD first lien term loan in February 2020. As of March 31, 2020, The Stars Group had cash and cash equivalents of $285 million. In addition, The Stars Group has access to its revolving credit facility, among other potential sources of liquidity, that together with its current cash and cash equivalents continues to provide approximately $1 billion of liquidity.

Last week, two independent proxy advisory firms, Institutional Shareholder Services Inc. (ISS) and Glass Lewis & Co., each recommended that shareholders vote FOR the proposed all-share combination with Flutter at the upcoming special meeting of The Stars Group shareholders, which will now be held virtually on April 24, 2020 at 10:00 a.m. EDT. At the end of March, the UK Competition & Markets Authority also announced that it had unconditionally cleared the combination with Flutter Entertainment plc following its Phase 1 review under the Enterprise Act 2002. The Stars Group currently expects closing of the combination to occur during the second quarter of 2020 subject to, among other things, shareholder and remaining regulatory approvals.