Online gambling heavyweight The Stars Group (TSG) reported across the board double-digit gains in the second quarter of 2018 thanks to contributions from its recent Australian acquisitions.
On Monday, the Toronto-based TSG reported revenue rising nearly 35% to US$411.5m in the three months ending June 30, although organic growth was a more modest 15%. Adjusted earnings were up 14.8% to $168.3m but operating income tumbled 99% to just $1m as operating expenses spiked following TSG’s acquisition frenzy.
TSG’s Australian business – consisting of the former CrownBet and William Hill Australia operations, now functioning under the BetEasy umbrella – reported online betting revenue of $61.3m, gross profit of $46.8m and adjusted earnings of $13.5m, although the division reported an actual operating loss of $6.5m.
TSG’s international business reported revenue of $350.2m, of which poker accounted for $217m. International revenue was up 6.9% year-on-year, although the gain was only 3.8% in constant currency terms.
Quarterly real-money active unique players (QAUs) at TSG’s flagship PokerStars brand were down 7.3%, despite the launch of shared liquidity between France, Spain and Portugal. TSG chalked up the decline to exits from the poker markets in Australia and Colombia, as well as “continued negative operations” in Poland since that market cracked down on sites lacking a local license.
The online casino vertical continued to shine, rising 26.3% to just under $102m. The casino gains were credited to 150 new game launches since the year began, which partially offset those negative conditions in Poland. TSG plans to rebrand its casino operations under the new CasinoStars moniker, which will be accompanied by a refresh of the website and an increased marketing push through the rest of the year.
International sports betting revenue more than doubled to $19.6m, thanks to new market launches for TSG’s BetStars brand, excitement over the 2018 FIFA World Cup and betting margins improving 1.8 points to 7.9%. BetStars welcomed nearly 200k unique players during the World Cup’s first week of play, many of whom TSG claims to have cross-sold from its other verticals.
The Q2 results don’t include contributions from the UK-facing Sky Betting & Gaming business, which TSG acquired during the quarter but didn’t close until July 10. SB&G’s contributions will make their first appearance in TSG’s Q3 report, and TSG boosted its full year 2018 revenue guidance to between $2b and $2.15b, while adjusted earnings are expected to come in between $755m and $810m.
TSG cautioned that these forecasts relied on a number of assumptions, including a betting margin of between 8% and 10.5%, Poland continuing to suck, plus the effects of Russia’s clampdown on payment processing with unauthorized sites. TSG is also watching out for a potential spike in UK online gaming duty and Australia’s imposition of a national point-of-consumption online betting tax.
TSG assumes “no impact” to its 2018 operations from Italy’s recent decision to prohibit all forms of gambling advertising, which technically doesn’t kick in until January 1, 2019, although Google has already made the necessary adjustments to its search restrictions.
TSG expects great things from the US market’s new legal sports betting rollout, having announced on Friday its deal with Pennsylvania’s Mount Airy casino, which covers online poker, casino and wagering products. TSG also recently announced an expansion of its deal with New Jersey’s Resorts Casino Hotel to include sports betting.
TSG was more restrained in its expectations from its recent launch in India, saying the product was still not ready for prime time, and thus a full marketing push won’t begin in earnest until Q4 at the earliest.
