Amaya Announces Lab Approval for Slot Machines in New Jersey

1 May 2014

MONTREAL, May 2, 2014 – Amaya Gaming Group Inc. (“Amaya) (TSX: AYA), an entertainment solutions provider for the regulated gaming industry, announced today that its subsidiary Cadillac Jack has received approval from New Jersey’s Division of Gaming Enforcement (the “DGE”) to utilize its Genesis DV1 slot machine platform and associated hardware and software, including top performing game titles Fire Wolf, Siberian Siren, and Legend of White Buffalo, in the state. Cadillac Jack will now apply to the DGE for transactional waivers to begin supplying machines to Atlantic City casinos.

“This is an exciting step in our strategy to grow our footprint within the commercial and Class III gaming machine markets in the United States,” said David Baazov, CEO of Amaya. “New Jersey is the third largest commercial casino market in the nation, therefore this significantly expands our addressable market.”

Subject to receiving the transactional waivers, Cadillac Jack anticipates initial deployment of its gaming machines will begin immediately, with multiple Atlantic City casinos engaged to trial them.

“Our current Class III products have proven to be extremely competitive in all of our customer casinos across each jurisdiction in which we participate. We expect this success to carry into New Jersey, providing a strong return on investment to our partner casinos and added entertainment value to their patrons,” said Mauro Franic, COO of Cadillac Jack.

About Amaya
Amaya provides a full suite of gaming products and services including casino, poker, sportsbook, platform, lotteries and slot machines. Some of the world’s largest gaming operators and casinos are powered by Amaya’s online, mobile, and land-based products. Amaya is present in all major gaming markets in the world with offices in North America, Latin America and Europe. For more information please visit www.amayagaming.com.

For further information:

Tim Foran
Director, Investor Relations
ir@amayagaming.com

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“The second quarter was a transformative period for Amaya as we announced and completed well ahead of schedule our acquisition of PokerStars and Full Tilt Poker, which collectively hold a healthy majority of the market share in online poker,” said David Baazov, CEO of Amaya. “Led by its highly experienced management team, Rational Group provides Amaya with a strong platform for growth in revenues and profitability and will be significantly accretive to our earnings.

“The company has a loyal and recurring customer base which has been driven by its dedication to player protection and game integrity as well as innovative tournaments, game formats and software technology. We are strongly committed to Rational maintaining this focus in order for the game experience to remain as enjoyable and exciting as ever for online poker players,” Mr. Baazov added.

“The worldwide recognition of the PokerStars and Full Tilt brands, bolstered by being the largest producer of live poker tours and events across the globe and producer of televised and online poker programming, also provides Rational with an enormous opportunity to take advantage of adjacency opportunities in online casino and sportsbook, in jurisdictions where they can be offered -while growing in new geographies,” Mr. Baazov continued. “Amaya is committed to supporting these growth initiatives. However, with respect to the new verticals, we are determined that they not provide any disruption to the core poker offering and that the new vertical offerings are as robust and enjoyable as Rational’s online poker. After reviewing progress in its new initiatives following our acquisition on August 1, we expect growth in 2014 in these initiatives, notably in online casino, as the company continues to develop its technology platforms up to its high standards and works with various regulators to certify its solution. The company is continuing to see growth in its core poker business and the outlook for its entry into new verticals and geographies is strong. We look forward to updating this outlook in our third quarter financial results, the first quarter for which Rational will report under Amaya.

“Regarding Amaya’s B2B business, the company established and expanded upon a number of new relationships during the year to date,” Mr. Baazov concluded. “Cadillac Jack continues to execute on its expansion into Class III gaming in the United States and has developed a number of online facsimiles of its popular land-based game titles. Diamond Game is preparing for the third quarter launch of its instant ticket vending machines in veterans halls in Maryland. Within our B2B online gaming business, due to the development and launch of new proprietary and third-party games and the integration of our Casino Gaming System into new online casinos, we expect an increase in our online casino revenues in the back half of 2014.”

Revenue for the three month period ended June 30, 2014 was $42.45 million compared to $37.25 million for the three month period ended June 30, 2013, representing an increase of 14%. This was driven by an increase in gaming machines sold outright and consolidating revenue from Diamond Game Enterprises, which was acquired in February, 2014. Revenue for the six month period ended June 30, 2014 was $83.65 million compared to $75.31 million for the six month period ended June 30, 2013, representing an increase of 11%. This was driven by an increase in gaming machines sold outright and consolidating revenue from Diamond Game Enterprises (“Diamond Game”), which was acquired in February, 2014.

Total expenses, comprised of cost of goods sold, selling, general and administrative, and financial expenses as well as acquisition-related costs, were $61.59 million for the three month period ended June 30, 2014, compared to $45.16 million for the three month period ended June 30, 2013, an increase of 36%. The percentage increase was driven by non-recurring acquisition related costs related primarily to the acquisition of Rational Group; higher cost of products expense reflecting the increased sales of gaming machines in Q1 2014 vs Q1 2013; increased general and administrative expense driven by increased salaries and maintenance and repairs expenses due to the addition of Diamond Game, as well as higher depreciation and amortization expenses; and increased interest and bank charges. Total expenses were $111.18 million for the six month period ended June 30, 2014, compared to $89.90 million for the six month period ended June 30, 2013, an increase of 24%. The percentage increase was driven by non-recurring acquisition related costs related primarily to the acquisition of Rational Group, Diamond Game and the Corporation’s sale of WagerLogic in February, 2014; higher cost of products expense reflecting the increased sales of gaming machines in 2014 vs 2013; and increased general and administrative expense driven by increased salaries and maintenance and repairs expenses due to the addition of Diamond Game, as well as higher depreciation and amortization expenses; and increased interest and bank charges.

Net loss in the second quarter of 2014 was $2.89 million, or $0.03 per basic share and diluted share. Net loss in Q2 2013 was $11.44 million, or $0.13 per basic and diluted common share. The improvement was driven by increased revenues and a deferred income tax recovery. Net income in the first half of 2014 was $36.75 million, or $0.39 per basic and $0.37 per diluted share. Net loss in the first half of 2013 was $18.88 million, or$0.22 per basic and diluted common share. Net income in the first half of 2014 was driven by the sale of WagerLogic.

2014 FULL YEAR FINANCIAL GUIDANCE
Due to the Corporation’s acquisition of Rational Group, whose results will be consolidated under Amaya’s as of August 1, 2014, Amaya has updated its 2014 full year financial targets, originally identified May 15, 2014:

The financial statements, notes to financial statements and Management’s Discussion and Analysis for the three and six month periods ended June 30, 2014, will be available on the SEDAR website at www.sedar.com.

Amaya will host a conference call on Friday, August 15, 2014 at 9:00 a.m. ET to discuss its financial results for the second quarter ended June 30, 2014. David Baazov, CEO of Amaya, will chair the call. To participate in the call, please dial 647-427-7450 or 1-888-231-8191 ten minutes prior to the scheduled start of the call. A replay of the conference call will be available until August 22, 2014 by calling 1-416-849-0833 or 1-855-859-2056, reference number 87581837. The conference call will be webcast live atwww.newswire.ca/en/webcast/detail/1396646/1550214.

Amaya provides a full suite of gaming products and services including casino, poker, sportsbook, platform, lotteries and slot machines. Some of the world’s largest gaming operators and casinos are powered by Amaya’s online, mobile, and land-based products. Amaya is present in all major gaming markets in the world with offices in North America, Latin America and Europe. In August, 2014, Amaya completed the acquisition of the Rational Group, which owns and operates gaming and related businesses and brands including PokerStars, Full Tilt Poker, the European Poker Tour, PokerStars Caribbean Adventure, Latin American Poker Tour and the Asia Pacific Poker Tour. These brands collectively form the largest poker business in the world, comprising online poker games and tournaments, live poker competitions and poker programming created for television and online audiences. In addition to operating the two largest online poker sites, Rational Group is also the largest producer of live poker events around the world.

Certain statements included herein, including those that express management’s expectations or estimates of our future performance constitute “forward-looking statements” within the meaning of applicable securities laws. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management at this time, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Investors are cautioned not to put undue reliance on forward looking statements. Except as required by law, the Corporation does not intend, and undertakes no obligation, to update any forward-looking statements to reflect, in particular, new information or future events.

Adjusted EBITDA Reconciliation $	Q2 2014	Q2 2013	H1 2014	H1 2013
Net Income	(2,894,980)	(11,441,570)	36,748,631	(18,882,411)
Financial expenses	8,890,436	7,782,676	9,951,462	13,994,735
Current income taxes	2,834,130	3,032,259	6,937,732	3,722,173
Deferred income taxes	(13,596,178)	500,717	(15,775,285)	565,219
Depreciation of property and equipment	3,863,671	3,120,115	7,530,014	6,515,125
Amortization of deferred development costs	745,955	287,806	1,456,128	419,288
Amortization of intangible assets	5,623,439	4,317,904	11,026,157	8,443,155
Stock-based compensation	781,135	493,778	1,534,698	925,400
EBITDA	6,247,608	8,093,685	59,409,537	15,702,684
Termination of employment agreements	269,525	402,918	1,347,143	1,850,747
Termination of agency agreements	–	–	–	100,834
Loss (gain) on sale of investments	319,708	–	(49,053,516)	–
(Gain) on marketable securities	(5,800,078)	–	(6,385,156)	–
Office shut down costs	1,303,642	982,643	2,906,653	3,192,004
Acquisition-related costs	6,150,084	22,465	9,803,673	331,944
Net Adjusted EBITDA loss from assets & liabilities classified as held for sale	5,597,881	2,888,134	10,801,007	3,911,266
Other one-time costs	249,269	1,838,177	937,579	2,635,052
Adjusted EBITDA	14,337,641	14,228,019	29,766,921	27,724,528

Adjusted Net Income Reconciliation $	Q2 2014	Q2 2013	H1 2014	H1 2013
Net Income	(2,894,980)	(11,441,570)	36,748,631	(18,882,411)
Other one-time costs	249,269	1,838,177	937,579	2,635,052
Termination of employment agreements	269,525	402,918	1,347,143	1,850,747
Termination of agency agreements	–	–	–	100,834
(Gain) on marketable securities	(5,800,078)	–	(6,385,156)	–
Office shut down costs	1,303,642	982,643	2,906,653	3,192,004
Acquisition-related costs	6,150,084	22,465	9,803,673	331,944
Foreign exchange	536,991	3,281,517	(3,283,692)	3,764,908
Loss (gain) on sale of investments	319,708	–	(49,053,516)	–
Net adjusted loss of assets & liabilities classified as held for sale	6,500,793	3,857,792	12,502,234	6,006,139
Amortization of purchase price allocation Intangibles	4,057,154	3,500,840	7,858,935	6,939,151
Interest accretion	1,006,802	788,817	1,449,902	2,911,424
Stock-based compensation	781,135	493,778	1,534,698	925,400
Adjusted net income	12,480,045	3,727,377	16,367,084	9,775,192