Amaya Earnings Call - Pokerstars VIP Changes Boost Revenue

Yesterday, (14th March 2016), Amaya Inc. released their latest financial statement and quarterly earnings. Their earnings per share was $0.53, at least $0.10 higher than was previously forecast.

The full transcript of the earnings call is available on SeekingAlpha, but we’ve analysed what we consider to be some of the most important and interesting points from the call.

1) The VIP program changes were the primary reason for beating forecasts.

Daniel Sebag, CFO at Amaya said “This past November we revised our full year 2015 guidance. We've provided a slide with a reconciliation showing that we either met or beat our revised guidance for each measure. For those measures that we beat guidance, it was primarily the result of a revaluation of our frequent player points following the implementation of the previously announced changes to our VIP structure, which positively impacted revenue by approximately $8.7 million.”

This won’t come as a surprise to the thousands of players who took strike action against the VIP changes, citing corporate greed and a lack of care & respect for the professionals and aspiring professional players. A number of Boycotts were organized in protest, the largest being led by ex-PokerStars pro, Ike Haxton.

2) Amaya confirmed a termination of affiliates.

When discussing earnings adjustments in relation to some of the major costs they experienced during the quarter, Sebag notes "$16 millionrelated to the termination of certain affiliate and employment agreements and$12 million of impairment charges"

We previously reported on the issue, but since that time, it seems more affiliates have been cut out entirely as Amaya has looked to minimising their financial obligations to partners.

We also reported on the fact that Full Tilt traffic will be merging with Pokerstars. We’re assuming that at least some of the $16m relates to lay-offs from the Full Tilt poker office.

3) Poker revenues are down, and casino revenues are up

The CFO goes on to say that “Of the total revenue, Real Money Online Poker revenue was US$142 million, representing a 14% decrease over the prior year period and Real Money Online Casino and SportsBook revenue was US$40 million, representing a significant increase over the prior year period.”

The reasons for the drop in poker revenues?

On one hand, we’re being told that the VIP changes have had an early positive impact and that deposits are lasting longer, but on the other hand we’re being told that the casino product is proving successful and cannibalizing poker deposits. I find this a hypocritical point. Essentially they’re justifying the VIP changes which are causing poker player deposits to last longer, but at the same time boasting the success of their rising casino product where these same players are losing their money to the casino.

Are Pokerstars simply ‘giving’ with one hand and taking with the other?

4) BetStars accounts for almost no revenue

When taking questions later on the call, CEO David Baazov confirmed that sportsbook revenues are currently very small, “I will tell you, Ralph, I'll tell you, SportsBook was just a few million dollars.”

Excluding development, Amaya have a team of around 75 staff working solely on the BetStars product. Despite Baazov’s acknowledgement on the call that brand recognition and awareness is important in sportsbook, Betstars still only have a Twitter following of just over 2,000, a paltry return for a brand with so much ambition.

5) Pokerstars will launch in New Jersey next week

There is some good news! David Baazov announced that Pokerstars will officially launch in New Jersey next week, which has good implications for real money online poker in the US. Pokerstars undoubtedly has such a large Worldwide player pool that it may help reach a more critical traffic mass in New Jersey, setting a good example that would surely tempt more US States to follow suit.

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If you’ve got time, I’d strongly recommend reading the transcript in full and forming an opinion. It’s interesting to hear the thoughts and analysis of the men in charge of this gaming behemoth. Clearly, we’re reporting on some of the more ‘negative’ aspects of the call in relation to the interest of the poker players, but we want to give a clearer picture of Amaya’s vision for the future.