Playtika Holding Corp. Price & Performance (PLTK)

We'll also post our prepared remarks immediately following the call. For a more complete discussion of the risks and uncertainties, please see our filings with the SEC. With that, I'll now turn the call over to Robert. Good morning and thank you everyone for joining our call today. As we reflect on 2024, I am pleased to share that we have made noteworthy progress in executing our return to growth strategy. And are moving in a positive direction for the company. We achieved significant milestones in 2024. We started the year by outlining our capital allocation framework for investors. We initiated our quarterly dividend authorized a buyback program and outlined our plan to restart our M and A engine which has been instrumental in generating growth and creating value for our shareholders in the past. One of the year highlights was completing the largest acquisition in our history by acquiring Superplay, one of the most attractive independent studios in the marketplace. And in the process adding two strong game franchise to our portfolio. This acquisition is a testament to our commitment to boosting our portfolio and driving future growth. As we look ahead to this year, we remain focused on execution.

Over the next twelve to eighteen months, we plan to bring to the market three new games, including Claire's Chronicles, and new slot themes games and Disney Solitaire scheduled for a global launch in Q2. Early metrics for Distant Solitaire have been very promising. And we are excited to bring this experience to all players very [indiscernible] explore M and A opportunities that support our goals. Meanwhile, we are also investing in our existing portfolio. With focus on titles that hold leadership positions and exhibit strong growth We are optimistic that this initiatives will help us generate consistent top line growth once again. Thank you for your continued support and confidence in Plaetica Playtika. Will hand over to Craig for more details review of our performance this past quarter. Thank you, Robert. And good morning, everyone. Last quarter, we began discussing our portfolio management approach focusing on making targeted investments based on the scale, leadership position growth potential of our games. This strategy is part of a broader framework where we allocate resources to maximize returns and drive growth. For games with both scale and growth potential, we invest significantly to drive further expansion. For those with scale but limited growth potential, we focus on defending market share through targeted spending.

Conversely, games that lack scale but show promising growth potential receive outsized investments including our recently acquired studios Historically, our growth strategy was based on acquiring and growing new studios. In this next phase, we are acquiring new studios and developing a pipeline of games. The objective is to revitalize our portfolio rather than focusing on individual game performance, By adding more games to our portfolio, we'll become less dependent on any single game making the portfolio approach more important and relevant While we continue to highlight the we will also provide regular updates on our acquired titles to highlight their progress. These titles include Animals and Coins, Governor of Poker three, Dice Dreams and Domino Dreams. Finally, we are changing how we present our EBITDA metrics. With the conclusion of the 2021 to 2024 retention plan, we no longer need to distinguish between retention plan adjusted EBITDA and credit adjusted EBITDA. Starting in Q1 twenty twenty five, we will refer to credit adjusted EBITDA as simply adjusted EBITDA. This change simplifies our reporting without altering the definition of In line with this transition, we are adopting a more market based executive compensation structure. This shift moves away from cash centric plans emphasizing compensation that is tied not only to our business results, but also our stock price performance and total shareholder returns.

By further aligning Executive Rewards with the company's business results, and adding stock market success as a driver, we aim to foster a culture of even greater ownership and accountability ensuring that our leadership's interest are fully aligned with those of our shareholders. Turning now to our financial results for the year.

We generated $2,549,000,000 of revenue down 0.7% year over year $162,200,000 of GAAP net income compared to $235,000,000 of GAAP net income 2023. And $757,700,000 in credit adjusted EBITDA a 9% decline year over year. Our net income margin was 6.4% compared to 9.2% in '20 Our credit adjusted EBITDA margin was 29.7% compared to 32.4% in 2023. We generated $396,800,000 of free cash flow, a 9.1% decline year over year. We define free cash flow as cash flow from operating activities minus capital expenditures. For the quarter, we generated $650,300,000.0 of revenue up 4.8% sequentially and up 1.9% year over year.

GAAP net income was negative $16,700,000 compared to GAAP net income of $39,300,000 in Q3 and $37,300,000 in Q4 of twenty twenty. Credit adjusted EBITDA was $183,900,000 down 6.7% sequentially and down 2.6% year over year. Our net income margin was negative 2.6% compared to 6.3% in Q3 and five point eight percent in Q4 last year. Our credit adjusted EBITDA margin was 28.3% compared to 31.8% in Q3 and 29.6% in Q4 of last year. We generated $174,600,000 in revenue from our direct to consumer platforms, up 0.1% sequentially and 8% year over year. Turning now to our business results for the quarter.

Bingo Blitz's revenue for the quarter was $159,100,000 down 0.5% sequentially and up 5.8% year over year. It was another record quarter for Bingo's D2C business and we are pleased to see the underlying growth in year over year average daily paying users for the largest game in our portfolio. Slotamania revenue for the quarter was $118,400,000 down 7.9% sequentially and 13.5% year over year. It was a disappointing quarter for the Slotamania team as game economy issues negatively affected performance for much of the quarter. Although these challenges were addressed in January, contributed to significant underperformance in Q4. On a positive note, the studio's launch of Cleopatra two successfully reengaged dormant players leading to increased activity. We recognize the importance to maintain our leadership in the slots category. By delivering innovative content that reactivates our extensive base of inactive players.

To this end, we are developing a new slot game to help regain market share in the category with further details to be announced in the future.

Solitaire Grand Harvest revenue for the quarter was $72,500,000 and down 4.3% year over year. Overall, Solitaire underperformed our expectations this past quarter. But we're encouraged to see the positive ramp in D2C revenues coming from the studio. This success underscores the effectiveness of our D2C platforms in deepening engagement with our most loyal players across different genres. In the fourth quarter, our acquired titles continue to demonstrate Animals and Coins achieved another record quarter showing strong sequential growth and delivering its best ever results during the Black Friday period. Governor of Poker three maintained its robust momentum [indiscernible] with notable contributions from its DTC revenues. Finally, Super Playtika contributed alongside minus $10,000,000 in adjusted EBITDA losses.

The Superplay acquisition closed mid quarter so these results reflect only a partial period contribution. These outcomes underscore the value of our acquisitions and their role and an enhancing our portfolio's performance.

Turning now to specific line items in the P and L for the fourth quarter.

Cost of revenue decreased 1% year over year and operating expenses increased by 13.7% year over year. The increase in operating expenses were primarily driven by our acquisition of Superplay. R and D costs decreased 5.1% year over year The decline in R and D was largely due to savings and labor costs. Our ongoing efforts to optimize operational efficiency while sustaining our R and D capabilities reflected in our results this quarter. Sales and marketing increased 23.6% year over year. The increase was primarily due to higher media buy expenditure coming from the acquisition of Superplay and the investments behind Dice Dreams, Domino Dreams G and A expenses increased 18.3% year over year, primarily due to deal related costs associated with our Superplay acquisition. Expenses include transaction fees and other one time costs related to the completion of the deal. As of December 31, had approximately $565,800,000 in cash and cash equivalents. Looking at our operational metrics, average DPU increased 12.6% sequentially and 10.8% year over year. Average DAU increased 5.3% sequentially and decreased 7% year over year. ARPDAU was $0.89 in the quarter, flat sequentially and an increase of 11.3% year over year. Turning now to our guidance and financial outlook for 2025.

We expect to deliver full year revenue between $2,800,000,000 and $2,850,000,000 we expect adjusted EBITDA between $715,000,000 and $740,000,000 We expect to deploy $95,000,000 in capital expenditures. We estimate that our effective tax rate for the current fiscal year to be '35 This projection is based on current tax laws and our expected income distribution across various jurisdictions. We are focused on building long term sustainable revenue growth by transitioning our portfolio away from some of our declining legacy titles and expanding through recently acquired studios. While the end of the cash retention program yields cost savings, we are reinvesting a portion of these savings to support the development of our growth titles. The resulting near term pressure on EBITDA reflects both the cost scaling our growth titles which often face early stage losses, but are expected to become strong EBITDA contributors as they scale. And the ongoing decline in our swap portfolio. At the same time, we are taking deliberate steps to stabilize our We are launching a new slots game to help mitigate declines in our slot portfolio while continuing to bolster our higher margin D2C channels. Looking ahead, 2025 will be a transitional year as these investments and portfolio shifts unfold.

Despite the EBITDA pressure this year, our strategy will position the business for renewed momentum as new titles scale and our slot games stabilize Beginning in 2026, we expect our In Playtika Super Play studios to become positive EBITDA contributors further enhancing our long term financial profile. We remain confident that our return to growth strategy will yield meaningful financial results supported by sustainable cash flow and stronger revenue mix. As we previously mentioned, we are updating our capital allocation framework to reflect our ongoing commitment disciplined fiscal management, The overall premise remains unchanged. We intend to use the free cash flow that we generate to execute our capital allocation framework.

We are proud of our attractive free cash flow profile which demonstrates our ability to execute the business with a focus on maximizing free cash flow. This is a competitive advantage providing financial flexibility to invest in growth opportunities and return capital to shareholders. It is a key tool we leverage to generate shareholder returns. We currently offer an attractive dividend yield and initiated share repurchase The objective of our buyback program is to provide another layer systematic capital return to investors specifically by offsetting dilution from vesting employee equity. Regarding M and A, as previously discussed, we expect our M and A activities to be bolt on in nature going forward. Over the next three years, we anticipate deploying hundred million dollars to $450,000,000 for M and A. This range does not include any potential future earnout obligations related to our past deals. Our approach to capital allocation is both disciplined and balanced. Focusing on returning capital to shareholders while investing in growth opportunities. By maintaining this approach, we aim to drive long term value creation for our investors. With that, we'd be happy to take your questions.

Our first question comes from Clark Lampkin with BTIG.

Thanks very much for taking the questions. Craig, first on the organic growth trajectory for 2025. I'm curious if you could help us understand sort of what's embedded guess organically for the existing portfolio and sort of recently acquired titles, if we were to put aside the three game launches that Robert mentioned, When we tried to strip out the Super Playtika impact casual, it seems like that segment was trending around flat. It also sounds like the economy issue that you faced for Slotomatica feels like it's maybe transient. So So if we were thinking high singles for the casino business and flattish for casual, are we [indiscernible] consistent with where you think you should be? And then you mentioned bolt on activity and sort of what you guys want to deploy over the next couple of years. I know it's a lot harder to sort of predict organic development, but curious if you have enough visibility around your development capacity or the pipe we should think about Playtika beyond twenty five being a company that's sort of organic a couple of new titles every year as well.

Sure. Thanks for the question, Clark. So, it was definitely a few themes embedded there. I'll start with with new games. Obviously, that is a bit of a shift from our previous approach with the acquisitions of Superplay bringing a pipeline with world class IP as well as a second title coming after that. We're pretty excited about coming to market there. Disney is now in for Q2. We also have Clare's Chronicles as well as a new slots game. So we have all the costs there embedded in our guidance from a top line perspective, I would say in '25 It's not material, but baked in. And as we look going forward, I think the Port in our new titles. And so I think as we see studios like Superplay and Inplay trend into '26 and go from negative EBITDA to positive EBITDA contributors we expect to kind of see that turnaround going into '26 and going forward. And as we acquire studios where they have new game development is part of their DNA. It will be part of our strategy that we execute on. So I definitely think we're all excited about having a whole another leg of growth to the company.

Thank you. Our next question comes from Arthur Chiu with Bank of America. Your line is open.

Hey, guys. It's Arthur on for Omar. Thanks for taking my question.

So there's been a lot of excitement recently around the potential to serve non gaming as particularly e commerce as in mobile games. I'm curious what your view is on that and if that opportunity could potentially change your view on eNAPP advertising as a monetization strategy which I know you guys have not particularly focused on? Thank you.

Thanks for the question. I think I'll cover the first part around in app advertising versus in app purchases. We've traditionally focused on in app purchases. We believe that our expertise in live operations allows us to have better monetization and better long term retention as a result of that focus. And while we do have some games that do have in app advertising, we don't see that as a driver for us. And in terms of the trending that's been happening around e commerce, I don't we're sort of fit to comment on that. [indiscernible] Thank you. Our next question comes from Eric Sheridan with Goldman Sachs. Your line is open.

Thanks so much for taking the question. Coming back to the DTC strategy, what could the key learnings as the DTC strategy has sort of scaled in 2024? And how do you think about the mix of games and or the pathway to the higher levels of mix you've talked about that will sort of Hi, thanks for the question. So as we put a target for D2C three years ago, we are on track on the target of the revenues. This year, last year actually, last quarter, we started [indiscernible] [indiscernible] Doing very well And in our [indiscernible] DTC is one of the most growth engine for EBITDA. This is how we're using it It's helping us to work much easier with the games. And we were one of the first companies that focus in this direction and our numbers are great. We grew 8% year over year.

Thank you. Our next question comes from Matt Koss with Morgan Stanley. Your line is open.

Great. Thanks for taking the question. I guess, just thinking about the new game pipeline, you have Disney Solitaire kind of in the late stages of testing. I guess how is that game trending in testing versus what you would like to see at this stage? And more broadly, how should we think about the potential contribution from a revenue perspective from these new games over the next twelve to eighteen months? And then I have one follow-up. Thank you. So to tell you the truth that we are so, so excited about launching this This game because this is actually a merge between our ability to acquire a company like Superplay that have the knowledge and the experience of launching new games improved themselves in the last two games that they launched in the last three years. So taking this advantage together with a brand like Disney and with our understanding in the solid category So altogether, this is going to be one of our growth engine in the coming two years. This is how we look at it It's going to be I think it's going to be our top three or four games in a year from now.

And we are very, very, very excited. This is a very big news for us. Very big news.

Got it.

Thank you. Our next question comes from Collin Sebastian with Baird. Your line is open.

All right. Thanks for the questions.

I guess first off in terms of what's embedded in the 2025 outlook from new games, Is it safe to say that that is somewhat immaterial for this year in terms of the guidance that it's organic in M and A or are you anticipating that they will contribute materially this year?

Thanks for the question, Collin.

So to be consistent with My answer before. From a cost perspective, we have all the development costs baked in. And from a revenue perspective, I would call it immaterial in terms of what's baked into the guidance.

Okay. And there's no other M and A embedded in the guidance at this point?

No, there's not.

Okay. And then just on In terms of the trends, I guess quarter to date, you mentioned some in improvements in thoughtamania here in January or through January. Is that something that you're seeing that's sustainable you think through the rest of Q1? And to what extent did you see an improvement? Sure.

So the area that we had called out specifically was making changes and adjustments as it relates to the game economy and see near term improvement. We are also continuing to add new content to improve performance there as well. And think furthermore strategically, we're investing in a new slot title as well, leveraging our know how and ten plus years experience in the space to really build a new application that takes our best in class know how on how to manage a slots game and bringing it something that's much more modern from a look and feel perspective. So really excited about that and more details to come. Okay. Thanks, Greg.

Thank you. Our next question comes from Eric Handler with ROTH Capital. Your line is open. [indiscernible] morning. Thanks for the question. Two questions actually. First, [indiscernible] question on DTC, I guess, Given how well you're doing there, what goes into bringing a game to the DTC platform? Because I guess when I think about it, it's like why don't you bring more of your games? To DTC, particularly the recently acquired games. So I'm just trying to get a sense of what needs to happen to bring a new game to the DDC platform?

So thanks for the question. Yes, this is the strategy in the end of the day that everyone will run on our DTC It's taking time. It's dependent the maturity of the game. It depends how the technology of the game being There is a lot of things that it's like it's a formula but definitely the new games that we acquired in the last year like animal and coins and [indiscernible] both of them already on the target to go. I don't know when, but this is one of the targets. And of course, the games of Superplay.

So I believe that in two years from now, we'll see most of our games, if not everyone, running on our platform.

That's very helpful, Robert. Thank you. And then guess from big picture perspective for the social casino genre, how do you see that genre over the next couple of years? Is it Can it grow broadly speaking, not your game, just the genre in general. And how competitive is it still at this point?

Listen, it's a very good question. It's a very good question because when we look at the history of this channel, this channel was actually the genre that started with the mobile increasing revenues in 2010 and was leading the categories of the mobile. In the last few years, we see more stability and big players are dominating this area. And I think I don't see a huge growth coming in this area, but I still see a place even for Platica to take much This is what we're doing. This is why we're launching a new title because we know what we know about this category with the experience, we have the users, the players, So I believe for the company himself, this is a huge opportunity. For the industry, [indiscernible] Okay. Thank you.

Thank you.

Our next question comes from Chris Scholl with UBS. Your line is open. Hey, thanks for taking the question. This is Albert on the line for Chris. So I know the company's experience with operating multiple apps of a similar archetype and Texas Holdem and Slots and etcetera. But how are you approaching the launch of these additional solitaire games? How do you see them targeting different audiences? And know it might still be a bit early, but do you see any potential competitive pressure with Candy Crush Ulta launching just given that they have such a huge franchise recognition? [indiscernible] So thank you for the question. So Playtika our biggest advantage is the huge portfolio. And now when we're looking at the new launch of Disney Solitaire, it's coming from our last acquisition, Superplay. And this is sitting on the roadmap And they have their own activities to launch it. And they're doing this the same way they launch the other two games in the last few years. So on our side, is the advantage of Playtech Playtika. We have many studios we have many many games huge portfolio and each of them is working independently. So I don't see any issue in this case.

On the other case of Candy Crush, I think it's a very good opportunity to the industry. Because [indiscernible] I will look a little bit about the history of games. We launched our social casino games Lotomania many years ago. And a few years after two big or even three big competitors came to the industry with the amazing content and everything. And what happened, the category grew dramatically. The category become one of the biggest category. So when I look at the solitaire today, coming to this category and of course we're coming with the Disney and we have Grand Harvest that doing amazing and still leading the category. So I'm very optimistic about the future here.

Thank you. Our next question comes from Aaron Lee with Macquarie. Your line is open. [indiscernible] good morning. Thanks for taking my question. Now that you're live with IGT content, is there anything more you can share just in terms of what you're seeing terms of performance and engagement from your users and also what the roadmap looks like for introducing more IGT content Thank you. Sure. So thanks for the question, Aaron.

So the IGG content for us has been limited in what's rolled out. We rolled out Cleopatra two. In the prepared remarks, we referenced how well it has performed in terms of reengagement and execution. I think we're excited about the rest of the content that we have coming out not only in Slotamania, but in Caesars and House of Fun as we roll those out through the rest of the year as well. So there's definitely been excitement that's built as a result of the success thus far with with Cleopatra two.

Sounds good. Thank you.

Showing no further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect. [indiscernible]