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Amaya Reports First Quarter 2017 Results; Announces Proposed Corporate Name Change

"We continued our momentum in the first quarter as we execute on our strategy and reinforce the foundation for sustainable and diversified revenue growth, including through the strengthening of our core management team and operations," said Rafi Ashkenazi, Chief Executive Officer. "Our company also continues to evolve through corporate initiatives to deliver the greatest value for our shareholders."

First Quarter 2017 Financial Summary(1)



Three Months Ended March 31,


Year-over-Year
Change

$000's, except percentages and per share amounts


2017


2016



Total Revenue


317,320


288,518


10.0%

Adjusted EBITDA


151,001


123,434


22.3%

Net earnings


65,753


55,491


18.5%

Adjusted Net Earnings


113,367


84,967


33.4%

Diluted earnings per common share


$ 0.33


$ 0.28


16.4%

Adjusted Net Earnings per Diluted Share


$ 0.56


$ 0.43


31.0%

First Quarter 2017 and Subsequent Financial Highlights

  • Revenues - Total revenues for the quarter increased approximately 10.0% year-over-year. Excluding the impact of year-over-year changes in foreign exchange rates, total revenues for the quarter would have increased by approximately 9.9%. Real-money online poker revenues and real-money online casino and sportsbook combined revenues represented approximately 68.9% and 27.3% of total revenues for the quarter, respectively, as compared to approximately 75.0% and 20.8% for the prior year period.
  • Poker Revenues – Real-money online poker revenues for the quarter were $218.7 million, or an increase of approximately 1.1% year-over-year. Excluding the impact of year-over-year changes in foreign exchange rates, real-money online poker revenues would have increased by approximately 0.3% for the quarter.
  • Debt – Total long term debt outstanding at the end of the quarter was $2.53 billion with a weighted average interest rate of 4.5%. In March 2017, Amaya announced the successful repricing and retranching of its U.S. dollar and Euro denominated first lien term loans resulting in the reduction of the applicable interest rate margins by 50 basis points, removing the Euribor floor on the Euro denominated first lien term loans, and raising €100 million of incremental Euro denominated first lien debt and using the same to reduce its U.S. denominated first lien debt. As a result, the weighted average interest rate on the long term debt decreased approximately 0.4% and Amaya currently expects to save approximately 13%, or $15.4 million, of interest expense annually. Amaya and the lenders also amended the credit agreement for its first lien term loans to, among other things, reflect the repricing, retranching, and waive the required 2016 and 2017 excess cash flow repayments (as defined and described in the credit agreement) previously due on March 31, 2017 and March 31, 2018, respectively.
  • Rational Group Deferred Payment – Amaya paid $75 million in January 2017 and an additional $75 million in April 2017 on the outstanding balance of the deferred purchase price for its acquisition of the Rational Group and continues to anticipate paying the remaining $47.5 million by the end of June 2017 using cash on its balance sheet and cash flow from operations.

First Quarter 2017 and Subsequent Operational Highlights

  • Quarterly Real-Money Active Uniques (QAUs) – Total combined QAUs were approximately 2.7 million, an increase of approximately 5% year-over-year primarily led by customer acquisition, engagement and reactivation initiatives. Approximately 2.5 million of such QAUs played online poker during the quarter, an increase of approximately 2% year-over-year, while Amaya's online casino offerings had approximately 664,000 QAUs, an increase of approximately 42% year-over-year, which Amaya continues to estimate is one of the largest casino player bases among its competitors. Amaya's emerging online sportsbook offerings had approximately 277,000 QAUs, a 64% increase year-over-year.
  • Quarterly Net Yield (QNY) – Total QNY and QNY excluding the impact of year-over-year changes in foreign exchanges rates were both $115, an increase of 5.4% year-over-year in each case. QNY is a non-IFRS measure.
  • Customer Registrations – Customer Registrations increased by 3.0 million during the quarter to approximately 111 million.
  • Chief Financial Officer Update – In January 2017, Amaya announced that its CFO, Daniel Sebag, advised it that he will retire as CFO later this year once his successor is identified and appointed, and will assist Amaya in ensuring an orderly transition of his duties. The Board and leading executive recruiting firm Spencer Stuart commenced a global CFO search and Amaya is in the final stages of the hiring process with respect to a potential candidate.
  • Appointment of Chief Corporate Development Officer – On May 11, 2017, Amaya announced the appointment of Robin Chhabra to the newly created position of Chief Corporate Development Officer. Mr. Chhabra is an experienced online gaming executive who most recently served as Group Director of Strategy and Corporate Development for William Hill plc (LSE: WMH). Amaya anticipates Mr. Chhabra will join the company in September 2017 following a brief garden leave from William Hill.

Corporate Name Change and Continuance

Amaya currently intends to include in its management information circular for its upcoming 2017 annual and special meeting of shareholders, among other things, the following special matters:

  • Corporate Name Change –Amaya intends to change its corporate name to "The Stars Group Inc."
  • Continuance – To more effectively manage its business and affairs, Amaya also intends to effect a continuance under the Business Corporations Act (Ontario) such that it will become an Ontario corporation and subject to such act. Following the continuance and appointment of its new CFO, Amaya intends to move its corporate head office to Toronto, Ontario.

Additional information regarding the business of the meeting and the matters to be considered and voted on by the shareholders at the meeting will be provided in the management information circular.

Full Year Guidance

  • Full Year Guidance – Amaya reconfirms its previously announced 2017 full year financial guidance ranges and continues to expect the following:

These estimates reflect management's view of current and future market and business conditions, including assumptions of (i) the cessation of real-money online poker offering in Australia by the end of June 2017 (previously believed to be April 2017), (ii) the introduction of Amaya's previously disclosed cross-vertical customer loyalty program, (iii) no other material adverse regulatory events and (iv) no material foreign currency exchange rate fluctuations, particularly against the Euro which is the primary depositing currency of Amaya's customers, that could negatively impact customer purchasing power as it relates to Amaya's U.S. dollar denominated product offerings. Such guidance is also based on a Euro to U.S. dollar exchange rate of 1.06 to 1.00, unaudited expected results and certain accounting assumptions.

Financial Statements, Management's Discussion and Analysis and Additional Information; Internal Control Over Financial Reporting

As previously disclosed, management identified internal control deficiencies that constitute individually, or in the aggregate, material weaknesses in Amaya's internal control over financial reporting as of December 31, 2016. These deficiencies relate to the operating effectiveness of controls over derivative valuations and hedge accounting, and the design of controls over foreign exchange rate information. Amaya continues to take steps to remediate these deficiencies and currently expects such remediation to be complete by the end of the second quarter of 2017. There were no restatements or adjusting entries required in Amaya's unaudited condensed consolidated financial statements for the three months ended March 31, 2017 (the "Q1 2017 Financial...


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