Playtika Holding Corp. (PLTK) Q3 2022 Earnings Call Transcript

Playtika Holding Corp. (PLTK)

Q3 2022 Earnings Conference Call

November 08, 2022 08:30 AM ET

Company Participants

David Niederman - Vice President of Investor Relations

Robert Antokol - Co-Founder, Chairman and Chief Executive Officer

Craig Abrahams - President and Chief Financial Officer

Eric Rapps - Chief Strategy Officer

Conference Call Participants

Matthew Cost - Morgan Stanley

Eric Handler - MKM Partners LLC

Colin Sebastian - Robert W. Baird & Co.

Stephen Ju - Credit Suisse AG

Clark Lampen - BTIG, LLC

Eric Sheridan - Goldman Sachs

Douglas Creutz - Cowen and Company, LLC

Jason Bazinet - Citigroup, Inc.

Omar Dessouky - Bank of America Merrill Lynch

Franco Granda - D.A. Davidson & Co.

Aaron Lee - Macquarie

Presentation

Operator

Thank you for standing by, and welcome to the Playtika Holding's Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded.

And now I would like to introduce your host for today's program, Mr. David Niederman, Vice President of Investor Relations. Please go ahead, sir.

David Niederman

Welcome, everyone, and thank you for joining us today for the third quarter 2022 earnings call for Playtika Holding Corp. Joining me on the call today are Robert Antokol, Co-Founder and CEO of Playtika and Craig Abrahams, Playtika's President and Chief Financial Officer.

I'd like to remind you that today's discussion may contain forward-looking statements including, but not limited to, the Company's anticipated future revenue and operating performance. These statements and other comments are not a guarantee of future performance, but rather are subject to risks and uncertainties, some of which are beyond our control. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. For a more complete discussion of the risks and uncertainties, please see our filings with the SEC.

We have posted an accompanying slide deck to our Investor Relations website and will also post our prepared remarks immediately following the call.

With that, I will now turn the call over to Robert.

Robert Antokol

Thank you, everyone for joining our call today. In the third quarter our casual games growth strategy continued to succeed. We saw excellent results from our casual games which grew 14% year-over-year. These results demonstrate Playtika's superior technology, live-ops and ability to optimize and grow revenue over the long-term. Bingo Blitz is driving these results using advanced live-ops and using new AI-based tools, which has the potential to create upside across our portfolio.

Thanks to our strong marketing capabilities, Bingo Blitz has also become a compelling mainstream franchise, leveraging celebrities and music stars with marketing partnerships, and is now the number one game in the Playtika portfolio by revenue. And it shows that we are creating amazing entertainment experiences that our players love.

I will now touch on our slot-themed games. The slot category is a mature, competitive market. Having said that, we are creating exciting roadmaps for 2023 that we expect to provide our players with unique innovative content.

Finally, I'd like to introduce a new initiative I am passionate about, Digital Studio. This will be a new way of managing game studios. It is a sophisticated AI and Machine Learning tool that enables studios to run more efficiently using automation. This is something we are testing with our legacy titles and will talk about more in the future.

In closing, I am excited and confident in our position and ability to win in this market. Playtika has a solid foundation in place for the long-term: A diversified portfolio of top-ranked games. Passionate, long-term players that are enjoying our games over many years. Our Direct-To-Consumer platform is at scale and a strong competitive advantage. Our data and technology-driven capabilities and approach to user acquisition allows us to be fast, efficient and optimize resources. And finally, we have a strong financial position, with a healthy balance sheet to pursue growth opportunities. I will sum up by saying that we are excited to continue building Playtika and enhancing its position as a leading mobile games company.

With that, I will now turn it over to Craig who will provide more detail on our financial results.

Craig Abrahams

Thank you, Robert. Revenue was $647.8 million, up 1.9% year-over-year. Regarding adjusted EBITDA, as our debt investors calculate a different EBITDA metric, going forward we will provide both credit adjusted and adjusted EBITDA. The difference between these two non-GAAP financial metrics is our management retention plan which expires at the end of 2024 and M&A-related retention payments. Adjusted EBITDA was $230.7 million in the quarter, down 6.9% year-over-year. Credit adjusted EBITDA was $203.5 million in the quarter, down 6.2% year-over-year.

Revenue across our Casual games grew 14.4% versus a year-ago. Junes Journey, from our Wooga studio, grew 32.5% versus last year, driven by strong conversion from The Vault feature in addition to new features implemented throughout the quarter. Solitaire Grand Harvest was up 14.3% versus a year-ago. Bingo Blitz grew 14.7% year-over-year driven by the Majestic Blitz promotion and very strong execution. This quarter, Bingo Blitz enjoyed amazing momentum and became the largest game in our portfolio from a revenue perspective.

Casino themed games revenue for the third quarter was down 10.2% versus a year-ago. This was driven primarily by results in Slotomania and House of Fun and offset by positive results in World Series of Poker.

Slotomania had a challenging quarter, down 12.7% year-over-year. This performance was driven in part by new features we introduced that did not resonate with our players. To address this, we plan to shift focus back to the core of the game including better slot-style content, optimizing the game economy, and overall being more responsive to player feedback. We have a compelling feature roadmap built for 2023 and are making Slotomania a strategic priority for the company.

House of Fun was down 21.2% year-over-year. As per our comments in Q2, we continued our strategy of cutting back on marketing and pursuing a more efficient studio model and ultimately aligning with the company's focus on overall adjusted EBITDA generation. As we evaluate the performance of this strategy, we have the potential to apply it to other mature titles as well. World Series of Poker performed well, growing 8.2% versus last year, driven partially by the World Series of Poker Main Event in July which helped build awareness for the game.

Looking at operational metrics, average daily payer conversion increased 60 basis points year-over-year to 3.4%, ARPDAU increased 16.4% year-over-year to $0.78 and average daily paying users increased 5.8% year-over-year to 310,000.

Turning to marketing. The digital user acquisition environment continues to evolve and costs per install have increased in the third quarter. As we look out to our plans for 2023, we will continue to increase marketing investment in our growth franchises while being disciplined and data-driven in how we allocate marketing capital.

Our offline marketing campaigns have been a great method to offset this changing user acquisition dynamic to drive user growth and also showcase the brands of our games. We continued to partner with celebrities in the third quarter including Drew Barrymore, Jane Seymour, Dr. Phil and Jay Leno, among others....

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