The first quarter results from Amaya saw revenues rise 2,549 per cent from C$ 12.8 million a year ago to C$ 340 million. Of course, the increase comes following the acquisition of PokerStars, the world’s largest poker website, last year. But, globally, GBGC forecasts that internet poker is a sector in decline, having hit a peak in 2010, and explains Amaya’s desire to diversify into casino and sports betting.
Although the headline revenue figure of C$ 340 million is impressive, net profit before tax comes in at only C$ 23.1 million. One key reason for this conversion rate of 6.8% of revenue to profit is that Amaya paid nearly C$ 65 million in “interest and bank charges” in Q1 2015 (Q1 2014: C$ 1.1 m). Amaya is also spending heavily on marketing and investing in new software for sports and casino with an anticipated full launch and ramp up on marketing for the third quarter of 2015.
Under the previous owners, PokerStars managed to produce profits of US$ 422 million (C$449m) for the year end to 31 December 2013. Online poker does experience seasonal variations, summer (Q3) in particular is not a strong period but winters are better. So it is not unthinkable on a pro rata basis for PokerStars to have produced a quarterly profit equivalent to C$ 112 million in the accounts to 31 December 2013 (i.e. prior to acquisition). If the assumption is correct, Amaya has seen a substantial fall in profits for a business for which it has paid US$4.9 billion.
To be fair, the company is bringing forward substantial investment in online casino and sportsbook. Investment in software, hiring and marketing a new product does not come cheap. Amaya wants to produce a global brand and a one stop shop for the gambler. PokerStars has a huge database of players and lapsed players to farm and reactivate to produce new players for its new services. The sportsbook, casino and 200 slot games will all go live in the third quarter of 2015 with a considerable increase in marketing to go alongside.
Full Tilt has been experimenting with the product mix and, according to CEO David Baazov, has had some success as it has attracted up to 30% of poker players onto other gaming products. Amaya is hoping to replicate this success with PokerStars.
A transitional sport betting site has been launched in Ireland for testing. The site, while basic, is functional and there will be much more to come as it approaches a full launch.
Amaya is now fully committed to legalised gambling jurisdictions where it can licence onshore. No indication was given on the conference call to investors as to how long the process of divesting from “grey” markets would take.