The Stars Group Reports First Quarter 2018 Results

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TORONTO, May 10, 2018 – The Stars Group Inc. (NASDAQ: TSG; TSX: TSGI) today reported its financial results for the first quarter ended March 31, 2018 and provided certain additional highlights and updates. Unless otherwise noted, all dollar ($) amounts are in U.S. dollars.


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>-0.40% 600,306 524,093 14.50% Adjusted Net Earnings 111,951 107,013 4.60% 458,940 366,699 25.20% Adjusted Net Earnings per Diluted Share $0.54 $0.53 1.90% $2.25 $1.88 19.70% Net cash inflows from operating activities 123,757 148,295 -16.50% 494,600 349,936 41.30% Adjusted Cash Flow from Operations 132,283 142,806 -7.40% 525,524 420,928 24.80%

(1) For important information on The Stars Group’s non-IFRS measures, see below under "Non-IFRS and Non-U.S. GAAP Measures" and the tables under "Reconciliation of Non-IFRS Measures to Nearest IFRS Measures". The financial information presented in this news release was derived from the 2017 Annual Financial Statements (as defined below).

Fourth Quarter and Full Year 2017 and Subsequent Financial Highlights

Fourth Quarter 2017 and Subsequent Operational Highlights

2018 Full Year Guidance

Full Year Guidance – The Stars Group currently expects the following 2018 full year financial guidance ranges:

These unaudited expected results reflect The Stars Group’s existing business and exclude the recently announced acquisition of a majority interest in CrownBet and the proposed acquisition of William Hill Australia. These expectations also reflect management’s view of current and future market and business conditions, including assumptions of (i) potential negative operating conditions in Russia expected to begin in May 2018, (ii) no other material regulatory events, and (iii) no material foreign currency exchange rate fluctuations, particularly against the Euro. Such guidance is also based on a Euro to U.S. dollar exchange rate of 1.20 to 1.00, Diluted Shares of between 207,000,000 and 209,000,000 for the high and low ends of the Adjusted Net Earnings per Diluted Share range, respectively, and certain accounting assumptions.

Annual Information Form, Financial Statements, Management’s Discussion and Analysis and Additional Information; Internal Control Over Financial Reporting

For an update regarding The Stars Group’s internal control over financial reporting, including its remediation of the same, see "Disclosure Controls and Procedures and Internal Control Over Financial Reporting" in The Stars Group’s management’s discussion and analysis for the year ended December 31, 2017 (the "2017 Annual MD&A").

The Stars Group’s annual information form for the year ended December 31, 2017 (the "2017 AIF"), audited consolidated financial statements for the year ended December 31, 2017 and the notes thereto (the "2017 Annual Financial Statements") and the 2017 Annual MD&A, as well as additional information relating to The Stars Group and its business, can be found on SEDAR at www.sedar.com, Edgar at www.sec.gov and The Stars Group’s website at www.starsgroup.com.

In addition to press releases, securities filings and public conference calls and webcasts, The Stars Group intends to use its investor relations page on its website as a means of disclosing material information to its investors and others and for complying with its disclosure obligations under applicable securities laws. Accordingly, investors and others should monitor the website in addition to following The Stars Group’s press releases, securities filings and public conference calls and webcasts. This list may be updated from time to time.

Conference Call and Webcast

The Stars Group will host a conference call today, March 14, 2018 at 8:30 a.m. ET to discuss its financial results for the fourth quarter and year ended 2017 and related matters. To access via tele-conference, please dial +1 877-451-6152 or +1 201-389-0879 ten minutes prior to the scheduled start of the call. The playback will be made available two hours after the event at +1 844-512-2921 or +1 412-317-6671. The Conference ID number is 13677106. To access the webcast please use the following link: http://public.viavid.com/index.php?id=128615

Reconciliation of Non-IFRS Measures to Nearest IFRS Measures

The table below presents reconciliations of Adjusted EBITDA, Adjusted Net Earnings and Adjusted Net Earnings per Diluted Share to net earnings, which is the nearest IFRS measure:

Three Months Ended December 31, Year Ended December 31,
$000's, except per share amounts 2017 2016 2017 2016
Net earnings 47,175 45,039 259,285 135,550
Financial expenses 39,713 36,565 163,039 138,299
Income taxes expense (recovery) 26,352 (78) 27,208 4,000
Depreciation of property and equipment 2,370 2,072 8,925 8,181
Amortization of intangible and deferred development costs 35,851 34,783 138,261 131,702
EBITDA 151,461 118,381 596,718 417,732
Stock-based compensation 2,708 1,893 10,622 10,289
Termination of employment agreements 1,677 3,643 5,842 15,008
Termination of affiliate agreements — 1,099 407 4,485
Loss on disposal of assets — 361 599 923
(Gain) loss from investments (20,288) 4,749 (34,524) 19,278
Acquisition-related costs — — — 199
Gain on settlement of deferred consideration — (2,466) — (2,466)
Net loss (earnings) from associates and (reversal of) impairment of assets held for sale, associates and intangible assets 1,631 9,646 (4,230) 16,308
Other costs (see table below) 9,813 10,298 24,872 42,337
Adjusted EBITDA 147,002 147,604 600,306 524,093
Current income tax expense (1,224) (2,570) (7,914) (8,384)
Depreciation and amortization (excluding amortization of purchase price allocation intangibles) (7,145) (5,779) (22,885) (18,138)
Interest † (26,682) (32,242) (110,567) (130,872)
Adjusted Net Earnings 111,951 107,013 458,940 366,699
Diluted Shares 206,807,485 200,132,710 203,707,589 195,432,920
Adjusted Net Earnings per Diluted Share $ 0.54 $0.53 $2.25 $1.88

† Excluding interest accretion and non-refundable late payment fees related to the unpaid balance of the deferred purchase price for the Stars Interactive Group Acquisition in 2016.

The table below presents certain items comprising "Other costs" in the reconciliation table above:

Three Months Ended December 31, Year Ended December 31,
2017 2016 2017 2016
$000's $000's $000's $000's
Non-U.S. lobbying and legal expenses 787 765 3,409 3,065
U.S. lobbying and legal expenses 4,074 3,630 13,686 12,793
Strategic review professional fees — 2,965 125 10,338
Retention bonuses 117 615 1,388 3,272
Non-recurring professional fees 2,263 1,188 4,431 6,020
AMF and other investigation professional fees (net of insurance proceeds) 2,544 1,018 6,432 5,509
Austria gaming duty — — (5,000) —
Office restructuring and legacy business 28 117 401 1,340
unit shutdown costs
Other costs 9,813 10,298 24,872 42,337

The table below presents a reconciliation of Adjusted Cash Flow from Operations to net cash inflows from operating activities, which is the nearest IFRS measure:

Three Months Ended December 31, Year Ended December 31,
2017 2016 2017 2016
$000's $000's $000's $000's
Net cash inflows from operating activities 123,757 148,295 494,600 349,936
Customer deposit liability movement 8,526 (5,489) 30,924 70,992
Adjusted Cash Flow from Operations 132,283 142,806 525,524 420,928

The table below presents a reconciliation of the numerator of QNY (i.e., real-money online poker revenue and real-money online casino and sportsbook combined revenue) to the nearest IFRS measure (i.e., revenue) as reported for the applicable period. Unless otherwise noted, any deviation in the reconciliation below to measures presented herein may be the result of immaterial adjustments made in later periods due to certain accounting reallocations.

Three Months Ended December 31,
2017 2016
$000's $000's
Revenue 360,247 310,286
Corporate revenue (358) (3)
Other business-to-consumer revenue (13,031) (12,884)
Real-money online poker revenue and real-money online casino 346,858 297,399

The Stars Group has not provided a reconciliation of the non-IFRS measures to the nearest IFRS measures included in its full year 2018 financial guidance provided in this release, including Adjusted EBITDA, Adjusted Net Earnings and Adjusted Net Earnings per Diluted Share, because certain reconciling items necessary to accurately project such IFRS measures, particularly net earnings (loss), cannot be reasonably projected due to a number of factors, including variability from potential foreign exchange fluctuations impacting financial expenses, and the nature of other non-recurring or one-time costs (which are excluded from non-IFRS measures but included in net earnings (loss)), as well as the typical variability arising from the audit of annual financial statements, including, without limitation, certain income tax provision accounting, and related accounting matters.

For additional information on The Stars Group’s non-IFRS measures, see below and the 2017 Annual MD&A, including under the headings "Management’s Discussion and Analysis" and "Selected Financial Information—Other Financial Information".

About The Stars Group

The Stars Group is a leading provider of technology-based products and services in the global gaming and interactive entertainment industries. The Stars Group directly or indirectly, including through its Stars Interactive Group division, owns gaming and related consumer businesses and brands, such as PokerStars, PokerStars Casino, BetStars, Full Tilt, and the PokerStars Players No Limit Hold’em Championship, European Poker Tour, PokerStars Caribbean Adventure, Latin American Poker Tour, Asia Pacific Poker Tour, PokerStars Festival and PokerStars MEGASTACK live poker tour and event brands. These brands together have millions of registered customers globally and collectively form the largest poker business in the world, comprising online poker games and tournaments, sponsored live poker competitions, marketing arrangements for branded poker rooms in popular casinos in major cities around the world, and poker programming and content created for television and online audiences. The Stars Group, through certain of these and other brands, also offers non-poker gaming products, including casino and sportsbook. The Stars Group, through certain of its subsidiaries, is licensed or approved to offer, or offers under third party licenses or approvals, its products and services in various jurisdictions throughout the world, including in Europe, both within and outside of the European Union, Australia, the Americas and elsewhere. In particular, PokerStars is the world’s most licensed online gaming brand, holding licenses or related operating approvals in 17 jurisdictions.

Cautionary Note Regarding Forward Looking Statements

This news release contains forward-looking statements and information within the meaning of the Private Securities Litigation Reform Act of 1995 and applicable securities laws, including, without limitation, certain financial and operational expectations and projections, such as full year 2018 financial guidance, and certain future operational and growth plans and strategies. Forward-looking statements and information can, but may not always, be identified by the use of words such as “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “would”, “should”, “believe”, “objective”, “ongoing”, “imply”, “assumes”, “goal”, “likely” and similar references to future periods or the negatives of these words and expressions. These statements and information, other than statements of historical fact, are based on management’s current expectations and are subject to a number of risks, uncertainties, and assumptions, including market and economic conditions, business prospects or opportunities, future plans and strategies, projections, technological developments, anticipated events and trends and regulatory changes that affect The Stars Group, its subsidiaries, and its and their customers and industries. Although The Stars Group and management believe the expectations reflected in such forward-looking statements and information are reasonable and are based on reasonable assumptions and estimates as of the date hereof, there can be no assurance that these assumptions or estimates are accurate or that any of these expectations will prove accurate. Forward-looking statements and information are inherently subject to significant business, regulatory, economic and competitive risks, uncertainties and contingencies that could cause actual events to differ materially from those expressed or implied in such statements. Specific risks and uncertainties include, but are not limited to: the heavily regulated industry in which The Stars Group carries on business; interactive entertainment and online and mobile gaming generally; current and future laws or regulations and new interpretations of existing laws or regulations, or potential prohibitions, with respect to interactive entertainment or online gaming or activities related to or necessary for the operation and offering of online gaming; potential changes to the gaming regulatory framework; legal and regulatory requirements; ability to obtain, maintain and comply with all applicable and required licenses, permits and certifications to offer and market its products and services, including difficulties or delays in the same; significant barriers to entry; competition and the competitive environment within The Stars Group’s addressable markets and industries; impact of inability to complete future acquisitions or to integrate businesses successfully; risks associated with advancements in technology, including artificial intelligence; ability to develop and enhance existing products and services and new commercially viable products and services; ability to mitigate foreign exchange and currency risks; ability to mitigate tax risks and adverse tax consequences, including, without limitation, the imposition of new or additional taxes, such as value-added and point of consumption taxes, and gaming duties; risks of foreign operations generally; protection of proprietary technology and intellectual property rights; ability to recruit and retain management and other qualified personnel, including key technical, sales and marketing personnel; defects in The Stars Group’s products or services; losses due to fraudulent activities; management of growth; contract awards; potential financial opportunities in addressable markets and with respect to individual contracts; ability of technology infrastructure to meet applicable demand; systems, networks, telecommunications or service disruptions or failures or cyber-attacks; regulations and laws that may be adopted with respect to the Internet and electronic commerce or that may otherwise impact The Stars Group in the jurisdictions where it is currently doing business or intends to do business, particularly those related to online gaming or that could impact the ability to provide online gaming products and services, including, without limitation, as it relates to payment processing; ability to obtain additional financing on reasonable terms or at all; refinancing risks; customer and operator preferences and changes in the economy; dependency on customers’ acceptance of its products and services; consolidation within the gaming industry; litigation costs and outcomes; expansion within existing and into new markets; relationships with vendors and distributors; and natural events. Other applicable risks and uncertainties include, but are not limited to, those identified in The Stars Group’s 2017 AIF, including under the heading “Risk Factors and Uncertainties”, and in the 2017 Annual MD&A, including under the headings “Risk Factors and Uncertainties”, “Limitations of Key Metrics and Other Data” and “Key Metrics”, each available on SEDAR at www.sedar.com, EDGAR at www.sec.gov and The Stars Group’s website at www.starsgroup.com, and in other filings that The Stars Group has made and may make with applicable securities authorities in the future. Investors are cautioned not to put undue reliance on forward-looking statements or information. Any forward-looking statement or information speaks only as of the date hereof, and The Stars Group undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Non-IFRS and Non-U.S. GAAP Measures

This news release references non-IFRS and non-U.S. GAAP financial measures, including QNY, Adjusted EBITDA, Adjusted Cash Flow from Operations, Adjusted Net Earnings, Adjusted Net Earnings per Diluted Share, and the foreign exchange impact on revenues (i.e., constant currency). The Stars Group believes these non-IFRS and non-U.S. GAAP financial measures will provide investors with useful supplemental information about the financial performance of its business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating its business. Although management believes these financial measures are important in evaluating The Stars Group, they are not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with IFRS or U.S. GAAP. They are not recognized measures under IFRS or U.S. GAAP and do not have standardized meanings prescribed by IFRS or U.S. GAAP. These measures may be different from non-IFRS and non-U.S. GAAP financial measures used by other companies, limiting its usefulness for comparison purposes. Moreover, presentation of certain of these measures is provided for year-over-year comparison purposes, and investors should be cautioned that the effect of the adjustments thereto provided herein have an actual effect on The Stars Group’s operating results. In addition to QNY, which is defined below under “Key Metrics and Other Data”, The Stars Group uses the following non-IFRS and non-U.S. GAAP measures in this release:

Adjusted EBITDA means net earnings before financial expenses, income taxes expense (recovery), depreciation and amortization, stock-based compensation, restructuring and certain other items.

Adjusted Cash Flow from Operations means net cash inflows from operating activities after adding back customer deposit liability movements, and which The Stars Group first introduced for the quarter ended June 30, 2017.

Adjusted Net Earnings means net earnings before interest accretion, amortization of intangible assets resulting from purchase price allocation following acquisitions, deferred income taxes, stock-based compensation, restructuring, foreign exchange, and certain other items.

Adjusted Net Earnings per Diluted Share means Adjusted Net Earnings divided by Diluted Shares. Diluted Shares means the weighted average number of common shares on a fully diluted basis, including options, other equity-based awards, warrants and convertible preferred shares. The effects of anti-dilutive potential common shares are ignored in calculating Diluted Shares. See note 9 to the 2017 Annual Financial Statements. For the three months and year ended December 31, 2017, Diluted Shares equaled 206,807,485 and 203,707,589, respectively. For the purposes of the full year 2018 financial guidance provided in this release, Diluted Shares equals between 207,000,000 and 209,000,000 for the high and low ends of the Adjusted Net Earnings per Diluted Share range, respectively.

To calculate revenue on a constant currency basis, The Stars Group translated revenue for the three months and year ended December 31, 2017 using the prior year's monthly exchange rates for its local currencies other than the U.S. dollar, which The Stars Group believes is a useful metric that facilitates comparison to its historical performance.

For additional information on The Stars Group’s non-IFRS measures, see the 2017 Annual MD&A, including under the headings “Management’s Discussion and Analysis” and “Selected Financial Information—Other Financial Information”.

Key Metrics and Other Data

The Stars Group defines QAUs as active unique customers (online, mobile and desktop client) who (i) made a deposit or transferred funds into their real-money account with The Stars Group at any time, and (ii) generated real-money rake or placed a real-money bet or wager on or through one of its real-money online poker, casino or sportsbook offerings during the applicable quarterly period. The Stars Group defines unique as a customer who played at least once on one of its real-money offerings during the period, and excludes duplicate counting, even if that customer is active across multiple verticals (poker, casino and/or sportsbook). The definition of QAUs excludes customer activity from certain low-stakes, non-raked real-money poker games, but includes real-money activity by customers using funds (cash and cash equivalents) deposited by The Stars Group into such customers’ previously funded accounts as promotions to increase their lifetime value.

The Stars Group defines QNY as combined real-money online gaming and related revenue (excluding certain other revenues, such as revenues that are included in “other gaming” revenues) for its two business lines (i.e., real-money online poker and real-money online casino and sportsbook) as reported during the applicable quarterly period (or as adjusted to the extent any accounting reallocations are made in later periods) divided by the total QAUs during the same period. The Stars Group provides QNY on a U.S. dollar and constant currency basis. QNY is a non-IFRS measure.

The Stars Group defines Net Deposits as the aggregate of gross deposits or transfer of funds made by customers into their real-money online accounts less withdrawals or transfer of funds by such customers from such accounts, in each case during the applicable quarterly period. Gross deposits exclude (i) any deposits, transfers or other payments made by such customers into The Stars Group’s play-money and social gaming offerings, and (ii) any real-money funds (cash and cash equivalents) deposited by The Stars Group into such customers’ previously funded accounts as promotions to increase their lifetime value.

The Stars Group defines Customer Registrations as the cumulative number of online real-money and play-money customer registrations on The Stars Group’s brands.

For additional information on The Stars Group’s key metrics and other data, see the 2017 Annual MD&A, including under the headings “Limitations of Key Metrics and Other Data” and “Key Metrics”.

For investor relations, please contact:

Tim Foran

Tel: +1 437-371-5730

ir@starsgroup.com

For media inquiries, please contact:

Eric Hollreiser

Press@starsgroup.com

THE STARS GROUP INC. CONSOLIDATED STATEMENTS OF EARNINGS

Three Months Ended December 31, Year Ended December 31,
U.S. dollars 2017 2016 2017 2016
$000’s $000’s $000’s $000’s
(except per share amounts) (except per share amounts) ( except per share amounts) (except per share amounts)
Revenues 360,247 310,286 1,312,315 1,155,247
Expenses
Selling 67,251 45,505 192,709 162,785
General and administrative 162,856 151,552 571,258 585,123
Financial 39,713 36,565 163,039 138,299
Gaming duty 37,188 29,420 130,771 113,102
Acquisition-related costs — — — 199
Total expenses 307,008 263,042 1,057,777 999,508
Gain (loss) from investments 20,288 (4,728 ) 34,524