BUSINESS

Amaya swings to loss in Q4 as new vertical gains contribute to poker decline

TAGs: Amaya Gaming, Full Tilt, PokerStars

amaya-loss-poker-casinoCanadian online gambling operator Amaya Gaming posted a net loss in Q4 2015 thanks to the declining Canadian dollar and the cost of diversifying beyond its flagship online poker operations.

Amaya lost C$15.8m in Q4, a dramatic swing from a $45.6m profit in Q4 2014, despite revenue rising 15% to $389.5m. However, thanks to the financial wizardry that allows companies to discount numbers they don’t like, those ever-reliable ‘adjusted’ earnings improved 27% to $111.2m.

For the year as a whole, revenue improved 8% to $1.37b while net losses came to $25.9m versus a $125.2m profit in 2014. Here again, adjusted earnings rose 11% to $587m. In a far more definitive computation, Amaya cut its net debt by $569m in 2015.

As a Canadian company, Amaya’s financial accounts have suffered many indignities over the past year via the loonie’s negative trajectory in relation to the US dollar. However, despite what the company says, this really doesn’t make a whole lot of difference to customers in other countries, who are still depositing via their native currencies.

The company did face new value added taxes in a number of European Union markets. Other unwelcome expenses included a bill for nearly $32m in Austrian gaming duties, a “significant” portion of which was incurred prior to Amaya acquiring the Rational Group’s operations in 2014. Amaya says it’s trying to get the Scheinbergs to pick up this tab and has also filed an appeal of the duties themselves with the Austrian government.

NEW VERTICALS, OLD CUSTOMERS
Customer registrations rose nearly 2m to 99m in Q4 but real-money active customers declined 4% to 2.4m. Amaya blamed the customer decline on its forced exits from Greece, Portugal and other markets. Also, PokerStars’ actives inched up 0.6% to 2.3m, meaning the negatives are courtesy of Amaya’s soon to be extinct ‘B’ brand Full Tilt.

Net yield per player fell 2% to $113 but rose 15% to $134m on a constant currency basis. Amaya credited the net gains to its new casino vertical, although it also partly blamed the 4% fall in poker revenue on internal cannibalization from the new casino option.

Amaya said it had around 440k active casino users in Q4, despite relying primarily on crossover from its existing poker player base. Only around 2% of Q4’s casino actives were casino-only customers, so Amaya plans to ramp up digital casino marketing, although a television campaign won’t likely debut until the second half of the year.

The new BetStars sports betting vertical boasted around 131k actives in Q4. The company plans to expand BetStars’ reach to other EU markets – France and Italy, in particular – ahead of this summer’s Euro 2016 tournament, with the hope of reaching 40% of Amaya’s active markets by year’s end.

Amaya offered some interesting stats on the mobile uptake of its different verticals, with 40% of casino revenue coming via mobile channels and sports betting “slightly below” this figure, while mobile accounted for a mere 13% of poker revenue.

VIP CHANGES PAY OFF, MORE CHANGES COMING
Amaya said it enjoyed an $8.7m revenue boost courtesy of the controversial rejigging of its PokerStars VIP player rewards system, but Amaya says it will reinvest these savings to attract more recreational players.

Amaya claimed that net deposits were up and that players’ deposits were lasting longer since the VIP changes took effect. The company is also planning “efforts to prevent data-mining and player targeting” in the near future.

FIRST TWO MONTHS OF 2016
For the first two months of 2016, Amaya says estimated revenue is up 4% year-on-year to $189m. On a constant currency basis, Amaya says the two-month tally is up 14%.

Amaya’s shift away from its pure poker roots is evident in these preliminary 2016 figures, during which poker was responsible for 75% of total revenue, down from 90.5% in the same period last year. Most of the gains were credited to the casino vertical, as CEO David Baazov said sports betting contributed “just a few million dollars.”

NEW MARKET OUTLOOK
Amaya’s geographic revenue profile remains largely unchanged, with 62% generated from 28 EU countries, 18% from other European countries (i.e. Russia), 13% from the Americas and 7% from the rest of the world.

Speaking of Russia, Baazov said he remained optimistic that the country would approve a regulated online poker market in 2016. Baazov also expressed optimism regarding Brazil’s push to launch a regulated online market. Amaya plans to reenter the Portuguese market in Q3 subject to regulatory approval.

Costs associated with obtaining Amaya’s New Jersey online gambling license came to nearly $2m in 2015, reflecting the intense scrutiny the company was required to endure for state regulators to be satisfied there were no lingering negatives associated with PokerStars’ former management.

Amaya is set to soft-launch its New Jersey site on Wednesday (16) followed by a full launch on Monday (21). Baazov called the return of PokerStars to US shores an “eagerly awaited milestone.”

As promised, Amaya offered no earnings guidance for 2016, and Baazov offered no updates on his possible bid to take Amaya private.

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