Amaya slammed after third quarter earnings miss, guidance lowered

Shares of Amaya (Amaya Stock Quote, Chart, News: TSX:AYA, Nasdaq:AYA) are taking it on the chin today after the company reported third quarter earnings that included lower guidance.

In its Q3, Amaya posted EBITDA of $141-million on revenue of approximately $325-million, a topline that was up 8% over the same period last year. The street consensus had EBITDA at $154-million and revenue at $361-million. The company’s adjusted earnings came in at $90.54-million or $0.42 per share, well below the consensus of $0.62.

CEO David Baazov focused on the positive.

“Since Amaya’s acquisition of its B2C business, we have consistently delivered shareholder value,” he said. “And, despite multiple recent global challenges to our core business, we believe we are well positioned to increase our cash flow and continue to grow our customer base in 2016 through a number of initiatives.”

But Amaya says a number of factors are creating headwinds that today caused the company to lower its fiscal 2015 guidance. The company now expects revenue will fall between $1.28-billion and $1.33-billion, not the $1.44-billion to $1.56-million it had previously predicted. It also expects a skimpier bottom line, with pro forma adjusted net earnings expected to come in between $345-million and $365-million, not the $367-million to $415-million it had previously expected.

“The general strengthening of the U.S. dollar relative to certain foreign currencies, primarily the euro, has resulted in an approximate 19-per-cent decline in the purchasing power of our customer base and has had a significant negative impact on our revenues, higher than we previously anticipated,” said Baazov. “Other factors negatively impacting our previously anticipated revenues included a recent strategic decision to delay the rollout of significant aspects of our new on-line sportsbook offering across geographies while we enhance the consumer product experience and complete the product offering, as well as the temporary cessation of our operations in Portugal and Greece. Due to this anticipated decline in revenues, we are also projecting less adjusted EBITDA and pro forma adjusted net earnings than our previous guidance.”

In June of 2014, Amaya shocked the markets when it announced it had reached a deal to acquire Oldford Group Ltd., the parent company of Rational Group Ltd., the world’s largest poker business and owner and operator of the PokerStars and Full Tilt Poker for a whopping $4.9-billion. Amaya noted the transaction would result in it becoming the world’s largest publicly traded on-line gaming company. Oldford Group posted revenue of $976-million and $1.1-billion, respectively, and adjusted EBITDA of $342-million and $420-million, in 2012 and 2013 respectively.

In October, shares of Amaya surged today after the company announced that the New Jersey Division of Gaming Enforcement has it to operate the PokerStars and Full Tilt brands in New Jersey. In 2013, New Jersey became the third state, after Nevada and Delaware, to legalize online gambling. Some speculate that several more states, including Rhode Island, Connecticut, Illinois, Ohio, New York and California may join Nevada, Delaware and New Jersey in legalizing online gambling.

At press time, shares of Amaya on the TSX were down 30.1% to $20.83.

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