Live blog: The Stars Group H1 2019 financial results
Follow EGR's live blog for all the latest info on the Toronto-listed operator's latest financial report
Full results story here:
Another thing worth noting today would be the announcement that Stars Group has partnered with algorithmic trading firm Banach Technology to work on pricing and product for Fox Bet and US consumers.
According to a release, the deal will see Stars utilise Banach’s advanced mathematical models and high-performance, cloud-based technology solutions to provide customers with an industry leading, pre-match and in-play betting product across US sports.
“As a recognised leader in products such as build-a-bet and player props on all four US professional sports leagues – MLB, NBA, NHL, NFL – Banach are uniquely positioned to work together with The Stars Group to deliver a superior customer experience through minimised suspension times, pricing accuracy, flash markets, and increased customer engagement via innovative and exciting new products,” the release said.
Banach was established by former members of Paddy Power’s quant team.
It’s now time for the Q&A (part 2)…
Ashkenazi went back to plans to combine PokerStars UK and SBG players into one ecosystem at the beginning of next year. Says it will allow customers to transfer funds between one and the other, giving SBG customers access to the best poker offering in the world and allowing PokerStars access to millions of customers in SBG – “this will drive meaningful revenue synergies over time and is quite an exciting opportunity we see”
Ashkenazi: Have launched Sky Bet in Germany under PokerStars ecosystem – have signed a partnership with Sky Deutscheland to integrate with them. We’re quite excited about this market overall.
Will Stars be compliant with App Store changes? Ashkenazi: When it comes to poker, it’s all native so there is no risk. Same for BetEasy. All the rest of the business is doing what it takes to make sure we’re compliant.
Asked why EBITDA loss in US is/will be so high Chhabra says he is positive they will return positive ROI but need to look beyond existing Fox/poker databases for new customers.
Ashkenazi says Q3 started positively with a very good start to PL season. “I genuinely believe it’s [Sky Bet] the best asset in the UK”.
It’s now time for the Q&A (part 1)…
Away from the US and Sky Bet… Stars says it is planning to apply for a sportsbook licence in Russia under the PokerStars brand. Will also launch a UFC-themed marketing campaign on TV.
Ashkenazi: Sky Bet’s ability to retain customers is like no company I’ve ever seen in the gambling industry.
More on the US: More US: Expecting to launch two-four states per year and will target big states or states where Fox is strongest.
Free-to-play games launching very soon in the US. Fox Bet will be live in Pennsylvania and New Jersey ahead of NFL season.
Ashkenazi: Doing some work rebranding the international business – concept is to promote two master brands. So in markets without Sky we will get rid of BetStars and market PokerStars sports and PokerStars Casino – we can get more marketing efficiencies this way. Markets where Sky is known and we can build on relationships with local broadcaster, like Germany and Italy, we’ll invest in those brands.
Ashkenazi asked whether it will continue to invest heavily in SBG – “We’ve been doing a lot of investment for the beginning of the football season – it is in our belief the best asset in the UK and there’s no reason not to continue investing, taking market share and building the customer base”
Asked about US investment, Chhabra says it’s the biggest gaming opportunity in a generation
Guidance update
Fy19 revenue guidance adjusted down by some $160m to $2.5bn-$2.75bn.
A closer look at SBG’s performance…
A few other interesting numbers
Sky Betting & Gaming Q2 revenues up 13% to £197m. Sky Bet (sportsbook) revenues up 9% to £114m. 2.2 million QAUs.
Poker down 7% cc due to market disruptions.
79% of revenue is now from regulated or taxed markets.
Update on Fox Bet and US business
Robin Chhabra says leadership team is in place with great talent from both Fox and Sky Bet.
Says he has been very impressed with commitment from Fox and expect to invets $40m in H2 2019 on customar acquisition, launch in Pennsylvania, relaunch in New Jersey and product development.
Will continue investing next year and anticipates breakeven by end of 2022.
Addresable US market opportunity of $9bn by 2025: “We don’t plan to sit on the sidelines now we have the strongest brands in the world and aim to become market leader across all verticals”.
Here is what Regulus Partners had to say about the results
“Stars has pulled together an impressive roster of regulated betting-led opportunities, significantly reducing its reliance on .com markets and poker (now ‘only’ 30% mix but still a very useful regulated market entry tool and cross-sell driver as well as a strong contributor in its own right).
While there are still plenty of headwinds (especially Germany), the overall strategic positioning of the group is now highly attractive, in our view – the big job now is to execute on it.”
Disrupted markets update
A few nuggets from CEO Rafi Ashkenazi who is currently giving an overview of the numbers
BetEasy has inked a content partnership with Australian sport streaming serviceKayo Sports.
The Stars Group pro forma revenues down “just” 2.5% in constant currency.
Just launched Sky Bet in Germany and will begin cross-selling soon. Going to synch UK accounts in 2020 across PokerStars/Sky Bet with single wallet. Will relaunch Sky Poker as Sky Poker by PokerStars. Rafi ireiterates they are very pleased the Sky Bet acquisition.
Time for The Stars Group to reveal how it’s performed so far this year (a few Twitter threads to help)…
But $TSG also downgraded EBITDA guidance to $905 million to $930 million from $960 million to $1.010 billion. Cut was based on foreign exchange fluctuations, $40 million investment for FOX Bet and historically low betting net win margin in Q1.
— Matthew Waters (@ByMatthewWaters) August 12, 2019
$TSG shares down 15.5% pre-market…
— Alfonso Straffon
(@astraffon) August 12, 2019
We’ve already seen Flutter Entertainment and William Hill announce their H1 2019 numbers in recent days. The Stars Group investor call coming up shortly