The Stars Group Reports First Quarter 2018 Results

The Stars Group Reports First Quarter 2018 Results

PR Newswire

TORONTO, May 10, 2018

TORONTO, May 10, 2018 /PRNewswire/ --

The Stars Group Inc. (NASDAQ: TSG; TSX: TSGI) today reported its financial results for the first quarter ended March 31, 2018 and provided certain additional highlights and updates. Unless otherwise noted, all dollar ($) amounts are in U.S. dollars.

"The Stars Group's strong first quarter results continued our organic growth trajectory," stated Rafi Ashkenazi, The Stars Group's Chief Executive Officer. "We are pleased with the performance of each of our verticals, poker, casino and sportsbook, which are benefiting not only from the continued success of Stars Rewards, but also from our strategy of focusing on the customer and continued improvements to our product offerings."

"Moving forward, the exceptional foundation of our existing business will be complemented by our acquisitions of CrownBet and William Hill Australia, and expected completion of the Sky Betting & Gaming acquisition. These acquisitions will help diversify our revenue base, increase our exposure to regulated markets, and transform our combined sportsbook into a second customer acquisition channel. These new additions will accelerate not only the organic growth we are seeing in our existing business, but also our progress towards realizing our vision of becoming the world's favorite iGaming destination."

First Quarter 2018 Financial Summary[1]


   
                                           Three Months Ended        Year-over-Year
                                               March 31,                 Change
    $000's, except percentages
    and per share amounts              2018                2017

    Revenue                         392,891             317,320           23.8%
    Net earnings                     74,361              65,753           13.1%
    Diluted net earnings
    per common share             $     0.36         $      0.33            9.1%
    Adjusted EBITDA                 175,022             151,001           15.9%
    Adjusted Net Earnings           139,207             113,367           22.8%
    Adjusted Net Earnings
    per Diluted Share            $     0.66         $      0.56           17.9%             
    Net cash inflows from
    operating activities            132,069              95,547           38.2%
    Adjusted Cash Flow from
    Operations                      132,258             111,776           18.3%

[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". The financial information presented in this news release was derived from the Q1 2018 Financial Statements (as defined below).

First Quarter 2018 and Subsequent Financial Highlights 

First Quarter 2018 and Subsequent Operational Highlights 

2018 Full Year Guidance 

These unaudited expected results reflect The Stars Group's existing business, excluding CrownBet, William Hill Australia and Sky Betting & Gaming. These expectations also reflect management's view of current and future market and business conditions, including assumptions of (i) potential negative operating conditions in Russia expected to begin in late-May 2018, (ii) no other material regulatory events, and (iii) no material foreign currency exchange rate fluctuations, particularly against the Euro. Such guidance is also based on a Euro to U.S. dollar exchange rate of 1.20 to 1.00, Diluted Shares of between 207,000,000 and 209,000,000 for the high and low ends of the Adjusted Net Earnings per Diluted Share range, respectively, and certain accounting assumptions.

Financial Statements, Management's Discussion and Analysis and Additional Information 

The Stars Group's unaudited interim condensed consolidated financial statements for the three months ended March 31, 2018 (the "Q1 2018 Financial Statements"), management's discussion and analysis thereon (the "Q1 2018 MD&A"), as well as additional information relating to The Stars Group and its business, can be found on SEDAR at http://www.sedar.com, Edgar at http://www.sec.gov and The Stars Group's website at http://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, May 10, 2018 at 8:30 a.m. ET to discuss its financial results for the first quarter ended 2018 and related matters. 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 13678731. To access the webcast please use the following link: http://public.viavid.com/index.php?id=129256

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 March 31,
    $000's, except per share
    amounts                                         2018                        2017
    Net earnings                                  74,361                      65,753
    Financial expenses                            45,015                      40,589
    Income taxes expense                           1,155                       2,688
    Depreciation of property and
    equipment                                      2,744                       2,161
    Amortization of intangible
    and deferred development costs                36,514                      33,574
    EBITDA                                       159,789                     144,765
    Stock-based compensation                       2,383                       2,164
    Termination of employment agreements             672                       2,126
    Termination of affiliate agreements                -                         407
    Loss on disposal of assets                         -                          59
    Gain from investments                         (1,023)                       (435)
    Acquisition-related costs                      7,739                           -
    Impairment of (reversal of
    impairment of) intangible assets
    and assets held for sale                         115                      (6,684)
    Other costs (see table below)                 5, 347                       8,599
    Adjusted EBITDA                              175,022                     151,001
    Current income tax expense                    (2,420)                     (3,322)
    Depreciation and amortization
    (excluding amortization of purchase
    price allocation intangibles)                 (7,096)                     (4,660)
    Interest *                                   (26,299)                    (29,652)
    Adjusted Net Earnings                        139,207                     113,367
    Diluted Shares                           209,495,673                 200,656,549
    Adjusted Net Earnings per
    Diluted Share                                   0.66                        0.56

* Excluding interest accretion and non-refundable late payment fees related to the unpaid balance of the deferred purchase price for the Stars Interactive Group Acquisition.

The table below presents certain items comprising "Other costs" in the reconciliation table above:


   
                                                     Three Months Ended March 31,

                                                 2018                         2017
                                               $000's                       $000's
    Non-U.S. lobbying and legal expenses        1,138                          741
    U.S. lobbying and legal expenses            1,855                        3,978
    Strategic review professional fees              -                          125
    Retention bonuses                             117                          615
    Non-recurring professional fees               451                          662
    AMF and other investigation professional
    fees (net of insurance proceeds)            1,784                        2,390
    Office restructuring and legacy business
    unit shutdown costs                             2                           88 
    Other costs                                 5,347                        8,599

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 March 31,

                                                 2018                          2017
                                               $000's                        $000's
    Net cash inflows from operating
    activities                                132,069                        95,547
    Customer deposit liability movement           189                        16,229
    Adjusted Cash Flow from Operations        132,258                       111,776

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., 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 March 31,

                                                        2018                 2017
                                                      $000's               $000's
    Revenue                                          392,891              317,320
    Corporate revenue                                   (294)                 (22)
    Other gaming revenue                             (12,209)             (11,854)
    Real-money online poker revenue and real-money
    online casino
     and sportsbook combined revenue (including
    CrownBet revenue)                                380,388              305,444
    CrownBet revenue                                  11,124                    -
    Real-money online poker revenue and
    and real-money online casino
    and sportsbook combined revenue
    (excluding CrownBet revenue)                     369,264              305,444

The Stars Group has not provided a reconciliation of the non-IFRS measures to the nearest IFRS measures included in its full year 2018 financial guidance provided in this news 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 Q1 2018 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 product offerings in the global gaming and interactive entertainment industries. The Stars Group directly or indirectly, including through its Stars Interactive Group division, owns gaming and related consumer businesses and brands, such as PokerStars, PokerStars Casino, BetStars, Full Tilt, and 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 live poker tour and event brands. These brands together have millions of 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 and other brands, also offers non-poker gaming product offerings, including casino and sportsbook. The Stars Group, through certain of its subsidiaries, is licensed or approved to offer, or offers under third party licenses or approvals, its product offerings in various jurisdictions throughout the world, including in Europe, both within and outside of the European Union, Australia, the Americas and elsewhere. In particular, as of the date hereof, The Stars Group holdings gaming licenses or related operating approvals in 18 jurisdictions, and PokerStars, the world's most licensed online gaming brand, holds gaming licenses or related operating approvals in 17 of those 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 2018 financial guidance, and certain future operational and growth plans and strategies, including as it relates to certain recently announced acquisitions. 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", "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, its subsidiaries, and its and their respective customers and 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 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 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 its business; interactive entertainment and online and mobile gaming generally; current and future laws or regulations and new interpretations of existing laws or regulations, or potential prohibitions, with respect to interactive entertainment or online gaming or activities related to or necessary for the operation and offering of online 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 offer, operate and market its product offerings, including difficulties or delays in the same; impact of inability to complete future acquisitions or to integrate businesses successfully; significant barriers to entry; competition and the competitive environment within The Stars Group's addressable markets and industries; ability to obtain additional financing on reasonable terms or at all; refinancing risks; The Stars Group's substantial indebtedness requires that it use a significant portion of its cash flow to make debt service payments; The Stars Group's secured credit facilities contain covenants and other restrictions that may limit its flexibility in operating its business; risks associated with advancements in technology, including artificial intelligence; ability to develop and enhance existing product offerings and new commercially viable product offerings; 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 product offerings; 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 or that may otherwise impact The Stars Group in the jurisdictions where it is currently doing business or intends to do business, particularly those related to online gaming or that could impact the ability to provide online product offerings, including, without limitation, as it relates to payment processing; customer and operator preferences and changes in the economy; dependency on customers' acceptance of its product offerings; 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, 2017, including under the heading "Risk Factors and Uncertainties", and in the Q1 2018 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 http://www.sedar.com, EDGAR at http://www.sec.gov and The Stars Group's website at http://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 news release:

Adjusted EBITDA means net earnings before financial expenses, income taxes expense (recovery), depreciation and amortization, stock-based compensation, restructuring and certain other items.

Adjusted Cash Flow from Operations means net cash inflows from operating activities after adding back customer deposit liability movements. 

Adjusted Net Earnings means net earnings 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 7 to the Q1 2018 Financial Statements. For the three months ended March 31, 2018 and 2017, Diluted Shares equaled 209,495,673 and 200,656,549, respectively. For the purposes of the full year 2018 financial guidance provided in this news release, Diluted Shares equals between 207,000,000 and 209,000,000 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 March 31, 2018 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 Q1 2018 MD&A, including under the headings "Management's Discussion and Analysis" and "Selected Financial Information-Other Financial Information".

Key Metrics and Other Data  

The Stars Group 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 (poker, casino and/or sportsbook). 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 defines QNY as combined real-money online gaming and related revenue (excluding certain other revenues, such as revenues that are included in "other gaming" revenues) 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.

The Stars Group defines Net Deposits as 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. 

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.

To ensure consistency in The Stars Group's key metrics for the three months ended March 31, 2018 presented in this news release, The Stars Group has excluded all QAUs, Net Deposits and Customer Registrations related to CrownBet and has excluded CrownBet revenues from QNY. The Stars Group will continue to review and analyze applicable data and information available to it and will consider including key metrics from CrownBet in its own key metrics, including QAUs, QNY, Net Deposits and Customer Registrations, once it has had sufficient time to evaluate, confirm and record the same.

For additional information on The Stars Group's key metrics and other data, see the Q1 2018 MD&A, including under the headings "Limitations of Key Metrics and Other Data" and "Key Metrics".

THE STARS GROUP INC.
CONSOLIDATED STATEMENTS OF EARNINGS  


   
                                           Three Months Ended March 31,

                                    2018                               2017
                                   $000's                             $000's
    U.S. dollars        (except per share amounts)          (except per share amounts)
    Revenues                              392,891                             317,320
    Expenses
    Selling                                61,297                              43,051
    General and administrative            161,395                             131,141
    Financial                              45,015                              40,589
    Gaming duty                            42,952                              34,533
    Acquisition-related costs               7,739                                   -
    Total expenses                        318,398                             249,314
    Gain from investments                   1,023                                 435
    Net earnings before income taxes       75,516                              68,441
    Income taxes                            1,155                               2,688
    Net earnings                           74,361                              65,753
    Net earnings (loss) attributable
    to Shareholders of The Stars
    Group Inc.                             75,451                              65,411
    Non-controlling interest              (1,090)                                 342
    Net earnings                           74,361                              65,753
    Basic earnings per
    Common Share                     $       0.51                        $       0.45
    Diluted earnings per
    Common Share                     $       0.36                        $       0.33

THE STARS GROUP INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 


   
                                                 As at March 31,      As at December 31,
                                                       2018                  2017
    U.S. dollars                                      $000's                $000's
    ASSETS
    Current assets
       Cash and cash equivalents - operational       256,647                283,225
       Cash and cash equivalents -
       customer deposits                             255,939                227,098
    Total cash and cash equivalents                  512,586                510,323
    Restricted cash advances and collateral            5,962                  7,862
    Current investments - customer deposits          109,650                122,668
    Accounts receivable                              103,924                100,409
    Inventories                                          245                    302
    Prepaid expenses and deposits                     30,214                 29,393
    Income tax receivable                             17,038                 16,540
    Derivatives                                        3,706                  2,037
    Total current assets                             783,325                789,534
    Non-current assets
    Restricted cash advances and collateral           50,215                 45,834
    Prepaid expenses and deposits                     16,929                 16,514
    Long-term accounts receivable                     13,243                 11,818
    Long-term investments                              9,298                  6,981
    Property and equipment                            52,647                 44,837
    Investment tax credits receivable                  3,881                  3,056
    Income tax receivable                             17,411                 14,061
    Deferred income taxes                              5,278                  5,141
    Goodwill and intangible assets                 4,611,579              4,477,350
    Total non-current assets                       4,780,481              4,625,592
    Total assets                                   5,563,806              5,415,126
    LIABILITIES
    Current liabilities
    Accounts payable and accrued
    liabilities                                      170,553                151,473
    Other payables                                    52,688                 42,714
    Provisions                                        17,709                 17,590
    Customer deposits                                364,587                349,766
    Income tax payable                                43,220                 35,941
    Current maturity of long-term debt                24,274                  4,990
    Derivatives                                        7,452                      -
    Total current liabilities                        680,483                602,474
    Non-current liabilities
    Long-term accounts payable and accrued
    liabilities                                        2,646                      -
    Long-term debt                                 2,316,023              2,353,579
    Provisions                                         3,140                  3,093
    Derivatives                                      130,149                111,762
    Income tax payable                                20,518                 24,277
    Deferred income taxes                             29,366                 16,510
    Total non-current liabilities                  2,501,842              2,509,221
    Total liabilities                              3,182,325              3,111,695
    EQUITY
    Share capital                                  1,895,788              1,884,219
    Reserves                                        (182,839)              (142,340)
    Retained earnings                                667,755                561,519
    Equity attributable to the Shareholders
    of The Stars Group Inc.                        2,380,704              2,303,398
    Non-controlling interest                             777                     33
    Total equity                                   2,381,481              2,303,431
    Total liabilities and equity                   5,563,806              5,415,126

THE STARS GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS 


   
                                                            Three Months Ended March 31,

                                                             2018                  2017
                                                            $000's                $000's
    U.S. dollars
    Operating activities
    Net earnings                                            74,361                65,753
    Dormant accounts recognized as income                   (1,866)                 (886)
    Stock-based compensation                                 2,383                 2,164
    Interest accretion                                      12,485                 8,978
    Interest expense                                        25,130                33,683
    Income tax expense recognized in net earnings            1,155                 2,688
    Depreciation of property and equiptment                  2,744                 2,161
    Amortization of intangible assets                       32,462                31,697
    Amortization of deferred development costs               4,052                 1,877
    Unrealized gain on foreign exchange                     (4,425)               (2,099)
    Unrealized gain on investments                          (1,033)                 (226)
    Impairment of (reversal of impairment
    of) intangible assets and assets held for sale             115                (6,684)
    Realized loss (gain) on current investments,
    promissory note and other                                  437                (2,122)    
    Income taxes paid                                       (1,370)               (1,128)
    Changes in non-cash operating elements of
    working capital                                        (13,308)              (24,139)      
    Customer deposit liability movement                       (189)              (16,229)
    Other                                                   (1,064)                   59
    Net cash inflows from operating activities             132,069                95,547                                       
    Financing activities
    Issuance of common shares in relation to
    exercised employee stock options                         9,737                 1,710
    Settlement of brokerage margin account                       -                (7,602)  
    Payment of deferred consideration                            -               (75,000)
    Repayment of long-term debt                             (6,068)               (6,888)
    Transaction costs on repricing of
    long-term debt                                               -                (4,719)
    Interest paid                                          (31,488)              (34,047)
    Gain on settlement of derivative                             -                13,904
    Net cash outflows from financing activities            (27,819)             (112,642)
    Investing activities
    Acquisition of subsidiaries, net of
    cash acquired                                         (101,703)                    -
    Additions in deferred development costs                 (6,431)               (4,413)
    Purchase of property and equiptment                     (3,585)                 (856)
    Acquired intangible assets                              (2,427)                 (707)
    Sale of investments                                          -                   149
    Cash movement from (into) restricted cash
    advances and collateral                                  1,126                  (546)
    Settlement of minimum revenue guarantee                 (2,713)               (1,707)
    Net sale of investments utilizing
    customer deposits                                       12,447                 5,169
    Other                                                     (551)                   (4)
    Net cash outflows from investing activities           (103,837)               (2,915)
    Increase (decrease) in cash and cash equivalents           413               (20,010)
    Cash and cash equivalents - beginning of period        510,323               267,684
    Unrealized foreign exchange difference on
    cash and cash equivalents                                1,850                  (265)
    Cash and cash equivalents - end of period              512,586               247,409

For investor relations, please contact: Tim Foran, Tel: +1-437-371-5730, ir@starsgroup.com; For media inquiries, please contact: Eric Hollreiser, Press@starsgroup.com

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