What drove revenue growth in 2019?

Revenue rose $499.2 million, or 24.6%, to $2,528.4 million, primarily because of the Acquisitions completed in 2018 and organic growth in the United Kingdom and Australia segments, partly offset by lower International segment revenue.

Why did the company report material weaknesses in internal control?

Management identified deficiencies in information technology and business process controls at BetEasy, including user access controls over its betting engine and general ledger, and a deficiency in identifying and recording a third-party pricing services arrangement. Deloitte issued an adverse opinion on ICFR as of December 31, 2019, though the company stated there were no restatements required in the financial statements.

What are the terms of the Flutter Combination?

Stars Group shareholders would receive 0.2253 ordinary shares of Flutter per Common Share. Post-completion, Flutter shareholders would own approximately 54.64% and Stars Group shareholders approximately 45.36% of the combined business. Completion requires shareholder, court, and regulatory and gaming approvals and is expected in Q2 or Q3 2020; either party may terminate if not completed by October 31, 2020, absent agreed extension.

How much debt does the company carry and what did it repay?

Long-term debt totaled $4.93 billion at December 31, 2019, including a USD First Lien Term Loan, a EUR First Lien Term Loan, and $1.00 billion of 7.00% Senior Notes due 2026. The company made $450 million of voluntary prepayments on the USD First Lien Term Loan during 2019 and prepaid another $100 million on February 21, 2020.

What is the status of the Kentucky proceeding?

The Kentucky Court of Appeals reversed the approximately $870 million judgment in December 2018. On April 11, 2019, the Kentucky Supreme Court granted discretionary review. No liability has been recognized because the company does not consider a future outflow probable.

FLUT 10-K FY2019 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 40-F filed February 27, 2020. Cited figures are marked; the original filing is the authoritative source.

The Stars Group Inc. filed this Annual Report on Form 40-F on February 27, 2020, incorporating its Annual Information Form, audited consolidated financial statements (IFRS, audited by Deloitte LLP), and Management's Discussion and Analysis for the year ended December 31, 2019.

Revenue for 2019 was $2,528.4 million^a, up 24.6% from $2,029.2 million, driven primarily by the 2018 Acquisitions of Sky Betting & Gaming and BetEasy, with the International segment declining. Net earnings were $61.9 million, compared with a net loss of $108.9 million in 2018, and Adjusted EBITDA was $921.1 million versus $780.9 million. Betting became the largest product vertical at 34.4% of revenue.

The company reports material weaknesses in internal control over financial reporting as of December 31, 2019, related to information technology and business process controls at BetEasy and the recording of a pricing services arrangement, and Deloitte issued an adverse opinion on ICFR. Long-term debt was $4.93 billion^b at year-end, and the company prepaid $450 million of its USD First Lien Term Loan during 2019 plus a further $100 million in February 2020. The filing also describes the pending all-share Combination with Flutter Entertainment plc announced October 2, 2019, under which Stars Group shareholders would receive 0.2253 Flutter ordinary shares per Common Share, with completion expected in the second or third quarter of 2020.

02—Key points

Key Highlights

Revenue of $2,528.4 million in 2019, up 24.6% from $2,029.2 million, primarily due to the SBG and Australian Acquisitions.
Net earnings of $61.9 million in 2019 versus a net loss of $108.9 million in 2018; diluted EPS of $0.22.
Adjusted EBITDA of $921.1 million (36.4% margin) versus $780.9 million in 2018.
Betting became the largest product vertical at 34.4% of 2019 revenue; Poker revenue fell 11.1% to $793.3 million.
Material weaknesses in ICFR at December 31, 2019 at BetEasy; Deloitte expressed an adverse opinion on internal control.
Pending all-share Combination with Flutter Entertainment plc, expected to close in Q2 or Q3 2020, with a termination fee of £60,140,976 in certain circumstances.
Long-term debt of $4.93 billion at year-end, with $450 million voluntary prepayments in 2019 and a further $100 million prepaid on February 21, 2020.

03—Questions

Frequently Asked Questions

What drove revenue growth in 2019?
Revenue rose $499.2 million, or 24.6%, to $2,528.4 million, primarily because of the Acquisitions completed in 2018 and organic growth in the United Kingdom and Australia segments, partly offset by lower International segment revenue.
Why did the company report material weaknesses in internal control?
Management identified deficiencies in information technology and business process controls at BetEasy, including user access controls over its betting engine and general ledger, and a deficiency in identifying and recording a third-party pricing services arrangement. Deloitte issued an adverse opinion on ICFR as of December 31, 2019, though the company stated there were no restatements required in the financial statements.
What are the terms of the Flutter Combination?
Stars Group shareholders would receive 0.2253 ordinary shares of Flutter per Common Share. Post-completion, Flutter shareholders would own approximately 54.64% and Stars Group shareholders approximately 45.36% of the combined business. Completion requires shareholder, court, and regulatory and gaming approvals and is expected in Q2 or Q3 2020; either party may terminate if not completed by October 31, 2020, absent agreed extension.
How much debt does the company carry and what did it repay?
Long-term debt totaled $4.93 billion at December 31, 2019, including a USD First Lien Term Loan, a EUR First Lien Term Loan, and $1.00 billion of 7.00% Senior Notes due 2026. The company made $450 million of voluntary prepayments on the USD First Lien Term Loan during 2019 and prepaid another $100 million on February 21, 2020.
What is the status of the Kentucky proceeding?
The Kentucky Court of Appeals reversed the approximately $870 million judgment in December 2018. On April 11, 2019, the Kentucky Supreme Court granted discretionary review. No liability has been recognized because the company does not consider a future outflow probable.

04—Continue

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