Playtika Holding Corp.

Good day and thank you for standing by. Welcome to the Platica Holding Corp Q4 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message, advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tay Lee, SVP, Corporate Finance and Investor Relations. Please go ahead.

Welcome everyone and thank you for joining us today

for the fourth quarter 2024 earnings call for Platica Holding Corp. Joining me on the call today are Robert Andecal, co-founder and CEO of Platica, and Craig Abrams, Platica's President and Chief Financial Officer. I'd like to remind you that today's discussion may contain four 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 four 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. We've posted an accompanying slide deck to our Investor Relations website, which contains information on four looking statements and non-GAAP measures. We'll also post and prepare 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&A engine, which has been instrumental in generating growth and creating value for our shareholders in the past. One of the year height lines 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 12 to 18 months, we plan to bring to the market three new games, including Claire's Chronicles and new slot teams games, and Disney Solitaire, scheduled for a global launch in Q2. Early metrics for Disney Solitaire have been very promising, and we are excited to bring this experience to all players very soon. Alongside this pipeline, we will continue to explore M&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 potential. We are optimistic that these initiatives will help us generate consistent top line growth once again. Thank you for your continued support and confidence in Platica. I 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, and 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 performance of our top three games in the quarter, we will also provide regular updates on our acquired titles to highlight their progress. These titles include Animals and Coins, Governor of Poker 3, 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 2025, we will refer to credit adjusted EBITDA as simply adjusted EBITDA. This change simplifies our reporting without altering the definition of adjusted EBITDA. 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 interests are fully aligned with those of our shareholders.

Turning

now to our financial results for the year. We generated $2.549 billion of revenue, down .7% year over year, $162.2 million of gap net income compared to $235 million of gap net income in 2023, and $757.7 million in credit-adjusted EBITDA, a 9% decline year over year. Our net income margin was .4% compared to .2% in 2023. Our credit-adjusted EBITDA margin was .7% compared to .4% in 2023. We generated $396.8 million of free cash flow, a .1% decline year over year. We define free cash flow as cash flow from operating activities minus capital expenditures. For the quarter, we generated $650.3 million of revenue, up .8% sequentially and up .9% year over year. Gap net income was negative $16.7 million compared to gap net income of $39.3 million in Q3 and $37.3 million in Q4 of 23. Credit-adjusted EBITDA was $183.9 million, down .7% sequentially and down .6% year over year. Our net income margin was negative .6% compared to .3% in Q3 and .8% in Q4 last year. Our credit-adjusted EBITDA margin was .3% compared to .8% in Q3 and .6% in Q4 of last year. We generated $174.6 million in revenue from our -to-consumer platforms, up .1% sequentially and 8% year over year. Turning now to our business results for the quarter. Bingo Blitz's revenue for the quarter was $159.1 million, down .5% sequentially and up .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 $118.4 million, down .9% sequentially and .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, they contributed to significant underperformance in Q4. On a positive note, the studio's launch of Cleopatra 2 successfully re-engaged 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 slots 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 $72.5 million, which was down .1% sequentially and down .3% year over year. Overall, Solitaire underperformed our expectations this past quarter, but we are 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 robust performance. Animals and Coins achieved another record quarter showing strong sequential growth in delivering its best ever results during the Black Friday period. Governor of Poker 3 maintained its robust momentum from Q3 into Q4 with notable contributions from its D2C revenues. Finally, Superplay contributed approximately $48 million in revenue for the quarter, alongside minus $10 million 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 in enhancing our portfolio's performance.

Turning

now to specific line items in the P&L for the fourth quarter. Cost of revenue decreased 1% year over year and operating expenses increased by .7% year over year. The increase in operating expenses were primarily driven by our acquisition of Superplay. R&D costs decreased .1% year over year. The decline in R&D was largely due to savings in labor costs. Our ongoing efforts to optimize operational efficiency while sustaining our R&D capabilities were reflected in our results this quarter. Sales and marketing increased .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 and Domino Dreams. G&A expenses increased .3% year over year, primarily due to deal-related costs associated with our Superplay acquisition. These expenses include transaction fees and other one-time costs related to the completion of the deal. As of December 31st, we had approximately $565.8 million in cash and cash equivalents. Looking at our operational metrics, average DPU increased .6% sequentially and .8% year over year. Average DAU increased .3% sequentially and decreased 7% year over year. ARPDOT was 89 cents in the quarter, flat sequentially, and an increase of .3% year over year. Turning now to our guidance and financial outlook for 2025. We expect to deliver full year revenue between 2.8 billion and $2.85 billion. We expect adjusted EBITDA between $715 million and $740 million. We expect to deploy $95 million 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 of 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 slot portfolio. At the same time, we are taking deliberate steps to stabilize our business. 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 InPlay and SuperPlay 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 to discipline 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 repurchases in Q4. The objective of our buyback program is to provide another layer of systematic capital return to investors, specifically by offsetting dilution from investing employee equity. Regarding M&A, as previously discussed, we expect our M&A activities to be bolt-on in nature going forward. Over the next three years, we anticipate deploying 300 million to $450 million for M&A. This range does not include any potential future earn-out 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 investors. With that, we'd be happy to take your questions.

As a reminder, to ask a question, please press star, one, one on your telephone and wait for your name to be announced. To withdraw your question, please press star, one, one again. Please stand by while we compile the Q&A roster. Our first question comes from Clark Lampen with BTIG. Your line is open.

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, I 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 play impact from 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 if we were thinking high singles for the casino business and flattish for casual, are we directionally consistent with where you think you should be? And then you mentioned bolt-on activity and sort of what you guys wanna 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 like visibility around your development capacity or the pipeline to say whether we should think about Platica beyond 20, or beyond 25 being a company that sort of organically develops, you know, a couple of new titles every year as well. Thank you.

Sure, thanks for the question, Clark. So there was definitely a few themes embedded there. I'll start with new games. Obviously that is a bit of a shift from our previous approach with the acquisitions of super play 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 Claire'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, you know, I think the portfolio is going through a bit of a transition as we invest in growth in our new titles. And so I think, you know, as we see studios like super play and in play trend into 26 and go from, you know, 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 as 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 nother leg of growth added to the

company.

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

Hey guys, it's Arthur on the phone. Thanks for taking the question. So there's been a lot of excitement recently, you know, 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, you know, if that opportunity could potentially change your view on E-NAV 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 E-NAV advertising versus E-NAV purchases. You know, we've traditionally focused on E-NAV 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 E-NAV 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 think we're sort of fit to comment on that.

Okay, I understand.

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 are 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 transition DTC as we move through 2025, just to understand how that channel evolves? Thank you.

Hi, thanks for the question. So as we put it out there for DTC three years ago, we are on track on the target of the revenues. This year, last year actually, last quarter, we started with the strategy with two games, June Journey and Solitaire, doing very well. And in our vision, DTC is one of the most growth engines 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 they focus in this direction and our numbers are great. We grew 8% year over year.

Thank you. Our next question comes from Matt Cost 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 12 to 18 months? And then I have one follow up, thank you.

So to tell you the truth, we are so, so excited about launching 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 and prove 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 of the Solitaire category, so altogether, this is going to be one of our growth engines 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 again, very excited, this is a very big news for us, very big news.

Got it. Thank you. Our next question comes from Colin Sebastian

with Bayard, your line is open.

All right, thanks for the questions. I guess first off in terms of what's embedded in a 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&A or are you anticipating that they will contribute materially this year?

Thanks for the question, Colin. 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 in to the guidance.

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

I know there's not.

Okay, and then just on, in terms of the trends, I guess quarter to day, you mentioned some improvements in thought of mania 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 I think the area that we had called out specifically was making changes and adjustments as it relates to the game economy and seeing a near term improvement. We are also continuing to add new content to improve performance there as well. And I think furthermore strategically, we're investing in a new slots title as well, leveraging our know-how and 10 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 to 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.

Good morning, thanks for the question. Two questions actually. First, another question on DTC I guess. Given how well you're doing there, what goes into bringing a game to the DTC platform? I guess, when I think about it, 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 DTC platform.

So thanks for the question. Yes, this is the strategy at 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's depend how the technology of the game built. There is a lot of things that, it's like a formula, but definitely the new games that we acquired in the last year, like Animal and Coins and the Governor of Poker, 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 will see most of our games, if not everyone running on our platform.

That's very helpful,

Robert, thank

you. And then I guess from a 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, just broadly speaking, not your game, just the genre in general, and how competitive is it still at this point?

It's a very good question, it's a very good question, because when we look at the history of the genre, this genre 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 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 market share from their competitors. This is what we're doing, this is why we're launching a new title, because we know what we know about this category, we have the experience, we have the users, the players, so I believe for the company itself, this is a huge opportunity, and for the industry, time will tell.

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 Kim on the line for Chris. So I know the company's experienced with operating multiple apps of a similar archetype, and Texas hold them in slots, and et cetera, but how are you approaching the launch of these additional Solitaire games? How do you see them targeting different audiences, and I know it might still be a bit early, but do you see any potential competitive pressure with Candy Crush, Delta, or Lanching, just given that they have such a huge franchise recognition?

Thanks. So thank you for the question. So Platica, 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, Super Play, and this is sitting on their roadmap, and they have their own activities to launch it, and they're doing this the same way they launched the other two games in the last few years. So on our side, this is the advantage of Platica. We have many studios, we have 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 I will look a little bit about the history of games. We launched our social casino games for Tomania many years ago, and a few years after, two big, or even three big competitors came to the industry with amazing content and everything, and what happened, the category grew dramatically. The category became one of the biggest categories. So when I look at the Solitaire today, it's amazing for us that we have Candy Crush coming to this category, and of course, we're coming with the Disney, and we have Grand Harvards that are 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.

Hey, 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, in 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 IGT content for us has been limited in what's rolled out. We rolled out Cleopatra 2, and the prepared remarks, we referenced how well it has performed in terms of re-engagement and execution. I think we're excited about the rest of the content that we have coming out, not only in -O-Mania, but in Caesar's 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 Cleopatra 2.

That was good, thank you.

Thank you. I'm showing no further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.