Amaya, the owner of the largest online poker operation in the world, has recently announced a decline in its revenues as part of its fourth-quarter earnings statement. According to the report, its real-money online poker revenues for Q4 were $217.2 million, a drop of 5.1% over the same period the previous year. Overall poker revenues for 2016 dropped 4.6% from 2015 to touch $846.1 million.
PokerStars has a lion’s share of the online poker market at 70%, but it does not have a substantial presence in the United States apart from New Jersey. In fact, the company has been putting in a lot of effort to launch its services in other states such as California but it hasn’t met with much success so far. At present, Amaya has signed up around 100 million online poker players but the numbers are set to increase.
Amaya Pointed Out…
The company pointed out that earnings from online poker dropped 1% for Q4 and remained flat for 2016 vis-à-vis 2015 if the change in foreign exchange rates were not taken into account. Furthermore, the company’s strategy of targeting recreational players and fine-tuning its loyalty programme has been very successful.
Professional poker players were used to edging out casual players but the company took steps to reverse this trend by reducing the benefits given to professional players in order to increase its customer base. The company has also made changes to its rate structure and overall poker ecosystem in order to continue building its business. It is clear that these measures to stop the decline in revenues have worked to a fair extent. Amaya has also put in place a number of measures to reduce costs.
Total Revenues of Amaya in 2015
Poker made up 82.7% of Amaya’s total revenues in 2015, but it came up to 73.2% in 2016. Overall sales in 2016 were $1.15 billion, a 7.8% hike over 2015’s sales figures of $1.07 billion. The company’s growth over 2015 has been driven by online casino games and not poker.
The impressive annual revenues for 2016 were not sufficient to help the profit reach its Q4 target of 56 cents per share. In fact, the company achieved only 53 cents profit per share during the last quarter.
Performance of Amaya in 2016
Amaya CEO Rafi Ashkenazi released a statement saying that 2016 was a very good year for the company. He emphasised that the company had put in place a number of initiatives. They would counteract negative trends and that these had managed to bring about organic growth. He also pointed out that the company’s online casino and sportsbook had managed to grow thanks to a cross-selling. There was a 35.8 hike in the share of online casino and sports book from the previous year’s 17.2%.
Expected Revenues of Amaya in 2017
Amaya’s poker business expects to have a setback in 2017. This is because of a new Australian law that bans online poker that will compel it to exit that market. In other negative news, former CEO and company founder David Baazov will be going on trial. This is because of insider trading allegations in connection with the company’s 2014 takeover of PokerStars.
Incidentally, Baazov recently unloaded around $100 million of his stock in Amaya. There was also a lot of speculation about a merger between Amaya and William Hill. But it ran into opposition from the latter company’s investor Parvus Asset Management.
Amaya currently has long-term debt amounting to $2.53 billion, with the founders of PokerStars yet to get payment. One of Ashkenazi’s biggest tasks will be to reduce the company’s debt burden. Even so, the company’s stock price saw a 3.2% spike to $21.09 since the adjusted earnings for the entire year would exceed expectations.