27% YoY growth and "strong momentum" into April

The Stars Group sees record revenue in Q1 driven by online poker and casino

"During these exceptional times, our top priority, however, is the health and safety of our employees and customers," said Rafi Ashkenazi, Chief Executive Officer of The Stars Group.
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In a business update Friday, the company reported year-over-year International revenue growth of nearly 44% in March, “which more than mitigated" the sporting events shutdown due to the coronavirus pandemic. TSG expects revenue of approximately USD 735 M for Q1, up from USD 580 M in 2019 Q1. A meeting of TSG shareholders to vote on the Flutter merger deal is set for April 24 using a virtual-only format.

The Stars Group said it saw record revenue in its first quarter as COVID-19 led to an increase in online poker and casino games starting 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.” And it said it has continued to see increased activity in its online poker and casino business into the second quarter, with consolidated average daily revenues in the first two weeks of the quarter approximately 33% higher YoY.

In an update to its expectations for the three-month period ended March 31, the company said Friday it expects revenue of approximately USD 735 million, up from USD 580 million in the first quarter of 2019. 

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.

The company, which keeps its books in U.S. dollars, also expects a net loss between USD 69 million and USD 79 million or between 23 and 27 cents per diluted share, compared with net income of USD 28 million a year ago.

On an adjusted basis, the Stars Group expects a profit between USD 185 million and USD 192 million for the quarter or between 63 and 65 cents per share, up from an adjusted profit of USD 106 million in the first quarter of 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 COVID-19 pandemic continues for a prolonged period causing continued global macro-economic uncertainty, the company said 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 TSG's sports betting revenues, but could negatively impact the current increased activity across its online poker and casino products.

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.

The Stars Group has signed a deal to be acquired by Flutter Entertainment in a combination that will create one of the world's largest online betting and gambling companies. A meeting of the Stars Group shareholders to vote on the deal is set for April 24 using a virtual only format. At the end of March, the UK Competition & Markets Authority announced that it had unconditionally cleared the combination 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.

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, TSG said it strives to intervene where customer data suggests a heightened risk of harm, setting mandatory deposit limits or otherwise restricting gameplay. The firm is also supporting its range of free-to-play games for customers to enjoy during the pandemic.

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