Playtika Holding Corp.

Good day, and thank you for standing by. Welcome to the Playteca Q1 2025 earnings call. At this time, all participants are in 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 your conference over to your first speaker today, Tay Lee, SVP, Corporate Finance and Investor Relations.

Please go ahead.

Welcome, everyone, and thank you for joining us today for the first quarter 2025 earnings call for Pletika Holding Corp. Joining me on the call today are Robert Anticall, co-founder and CEO of Pletika, and Craig Abrams, Pletika's President and Chief Financial Officer. I would 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, and more specifically, the future performance of our individual title to Sodomania or our recently launched Disney Solitaire. 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. We have posted an accompanying slide deck to our investor relations website, which contains information on forward-linking statements and non-GAAP measures, and we will also post our preferred 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 will now turn the call over to Robert.

Good morning, and thank you, everyone, for joining our call today. I'm pleased to report that Playtika achieved a historic milestone in the first quarter, generating over $700 million in revenue, the highest quarterly revenue in our company's history. This performance reflects the strength of our industry-leading portfolio of mobile games and our ability to acquire industry-leading franchises and help support each acquired studio's growth objectives. Recently, we celebrate our 15th anniversary, proof of our lasting business model and industry leadership. Over the years, Playtika has consistently demonstrated resilience and innovation, solidifying our position as a leader in mobile gaming. I'm also excited to share that Disney Solitaire had its global launch on April 17. While it's early, The new title is showing very promising signs with some of the best launch KPIs I have seen in years. Our SuperPlay Studio has a remarkable track record, having successfully launched and scaled two previous games, and Disney Solitaire is poised to be its third hit game. Based on the game's impressive start, I am confident that it will be a shift the $100 million run rate revenues mark faster than Dice Dreams and Domino Dreams. I look forward to sharing more updates on this exciting new franchise in the future. I'm incredibly proud of our Superplay Studio for the outstanding work in bringing Disney Solitaire to market in collaboration with Disney. Bingo Blitz has another record-breaking quarter, achieving all-time high in total revenues and revenues from our direct-to-consumer platforms. As the largest mobile bingo game and one of the largest casual games in the industry, Bingo Blitz continues to grow the category, attract new audiences, and benefit from the winner-takes-most dynamics of the genre. Its enduring performance More than a decade after the acquisition, it's clear testament to the strength of our live operation and ongoing content innovation. Turning to Slotomania. Slotomania's results in the first quarter were disappointing, and outside decline in year-over-year performance is a result of several quarters of sequential decline. While we believed we had addressed the game economy issues in January, we have seen the issues resurface leading to weakness in the game starting at the end of March. So tomorrow's revenue will continue to decline in the coming quarter before we start to see improvement. Looking ahead, we are planning to launch our new slot game in the back half of the year. In addition, we are integrating Renaud IGT slot titles into our platform, enriching our game offering with high-quality real-world content. Following the successful launch of Cleopatra 2 last December, we introduced Regal Riches this past quarter. With several more launches planned for the rest of the year, Stabilizing slotomania and launching new slot games remain the top strategic priorities at Playtica. In closing, I want to thank our team for the hard work. Your efforts have been vital in building our industry-leading portfolio of games, which has helped us achieve this milestone of record revenue in the quarter. I look forward to providing updates to our 2025 new game launches. I will now turn it over to Craig for a deep dive into our quarterly results.

Thank you, Robert. Before diving into the financials, I want to update where we are on our growth drivers. We're investing behind our recently acquired titles as well as our leading casual games. Our D2C efforts are showing strong results, and we are excited about introducing new mobile game franchises to the market. As Robert mentioned, Disney Solitaire is off to a very strong start in April and very encouraging as we look at our future pipeline. Within our core portfolio, we've experienced revenue declines in our slot titles and our smaller casual games without leadership positions in their respective genres. We are focused on product investments and operating improvements to stabilize slot-o-mania in our other slot titles, but this will take time. In addition, our leading casual game franchises, such as Bingo Blitz, Solitaire Grand Harvest and June's Journey continue to be franchises we believe we can grow over time. They reflect the kind of category leading evergreen franchises that define long-term winners in mobile gaming today. The mobile gaming landscape is evolving with player engagement and revenue increasingly concentrated around established and high performing titles. Players are dedicating more time to games that have stood the test of time drawn by ongoing updates, community engagement, and proven entertainment value. This favors companies like Platica, operators with a leading diversified portfolio, industry-leading games, best-in-class live ops capabilities, and a proven ability to generate free cash flow at scale. As we navigate this transition, we are making strategic capital allocation decisions aimed at enhancing our financial profile and positioning the company to capitalize on these dynamics. We take pride in our track record of being disciplined operators, consistently making thoughtful investment decisions to optimize our resources and drive revenue growth. We remain committed to identifying opportunities to enhance efficiency and deliver sustainable savings to support our long-term success. With that, let us get into the details of the quarter. We generated $706 million of revenue in the first quarter, an 8.6% sequential increase, and an 8.4% year-over-year increase. The increased overall investment in performance marketing had an impact on our credit adjusted EBITDA margins as we generated credit adjusted EBITDA of $167.3 million, down 9% sequentially, and down 9.9% year-over-year. GAAP net income was $30.6 million, down 42.3% year-over-year. Our direct-to-consumer business achieved record revenues once again, as we generated $179.2 million, up 2.6% sequentially, and 4.5% year-over-year. The growth in our D2C business was driven by Bingo Blitz, June's Journey, and Salt Lake Grand Harvest, all set by declines from the slot titles. We believe that our D2C business has meaningful growth potential over the next 12 months, Historically, we have targeted 30% of our revenue to come from D2C. It is important to note that many of our games are performing above this mark, and that 30% represented an average. This demonstrates our ability to further grow our D2C business, which we intend to prioritize in the coming quarters. This focus will help partially offset some of the margin pressure as we invest in recently acquired higher growth titles. We are confident these efforts, will contribute to our margins. To further elaborate on our performance, I want to provide some context around our Q1 results and our outlook for the remainder of the year. In Q1, as is our typical seasonal trend, we experienced higher marketing spend, which along with the losses from the Super Play acquisition, contributed to the decline in adjusted EBITDA year over year. We expect marketing expenses to decline sequentially in the coming quarters. As we evaluate our revenue forecast, we are reaffirming our guidance for the year as the declining trends in our slot games will be offset by growth of casual titles in the portfolio. Turning now to our business results from the quarter. The sequential growth in the quarter was driven by the full quarter contribution from Dice Dreams and Domino Dreams and the continued impressive performance from our largest game, Bingo Blitz. Dice Dreams was among our top three games by revenue this past quarter. Bingo Blitz revenue was $162.4 million, up 2.1% sequentially and up 3.1% year-over-year. In Q1, Bingo Blitz's performance was driven by several key initiatives. The American Idol campaign, which features an exclusive in-game collaboration with Lionel Richie, brought significant engagement and excitement to the game. Players enjoyed a unique American Idol experience competing in bingo challenges and having the chance to win VIP tickets to the American Idol finale. The introduction of a new bingo room featuring a social player versus player experience inspired by American Idol was received positively by our community. This campaign not only boosted player engagement, but also enhanced the game's visibility and appeal, driving a strong marketing effort that successfully attracted new players to the game. More recently, we launched our Bingo Blitz branded game show on the Game Show Network. This new series, hosted by Valerie Bertinelli, combines bingo play with trivia challenges. The game show has been well received, bringing the dynamic and social gaming experience of Bingo Blitz to television screens. We anticipate this initiative will help strengthen the Bingo Blitz brand by reaching a broader audience. Flotamania revenue was $111.8 million, down 5.5% sequentially and 17.4% year over year. Despite these challenges, our D2C business remains a cornerstone of our success. Slotomania's D2C business demonstrated stable performance quarter over quarter. Our strong connection with our most loyal players has been instrumental in extending the life cycle of our games far beyond industry standards. Dice Dreams revenue was $78.6 million up 124.5% sequentially compared to a partial quarter of revenue contribution from the Super Play acquisition. This impressive growth reflects the successful integration of Dice Dreams into our portfolio and the strong execution by our teams. In Q1, Dice Dreams benefited from several key initiatives that contributed to its robust performance. Our other acquired titles are performing in line with our expectations. We are especially pleased with the ramp up in revenue we have seen from Domino Dreams. The game is gaining traction, and we are optimistic about its roadmap as we invest in marketing and content updates to drive monetization. Turning now to specific line items in our P&L for the first quarter. Cost of revenue increased 11.5% year-over-year, driven by our revenue growth and increase in amortization expenses in our P&L, resulting from the acquisition of SuperPlay. Operating expenses increased 19.4%, driven primarily by increased performance marketing spending also driven by our acquisition of SuperPlay. R&D decreased by 2.9% year-over-year. The savings from the expiration of our long-term cash compensation program offset increases in hosting expenses and costs associated with outsourced services. Sales and marketing increased 42.8% year-over-year. The increase in sales and marketing was primarily driven by the incremental performance marketing spend from our acquisition of SuperPlay. We anticipate sequential declines in marketing spend for the remainder of the year. G&A expenses declined 9.2% year-over-year. The decline was primarily due to the expiration of our long-term cash compensation program, which resulted in lower accrued expenses offset by an increase in contingent considerations. As of March 31st, we had approximately $514.3 million in cash, cash equivalents, and short-term investments. We entered into an agreement to extend the maturity of the revolving credit facility from March 2026 to September 2027, subject to the satisfaction of certain conditions, and decreased the aggregate principal amount of the revolving credit facility from $600 million to $550 million. Looking at our operating metrics, average DPU increased 15% sequentially and increased 26.2% year-over-year to 390,000. Average DAU increased 12.5% sequentially and increased 2.3% year over year to $9 million. ARPDAU decreased 2.2% sequentially and increased 7.4% year over year to $0.87. Finally, we are reaffirming our guidance for the year. We'd be happy to take your questions.

Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to 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 Doug Krutz of TD Cowan.

The floor is yours.

Hey, thanks. I wondered if you could talk a little bit more about sort of dizzy solitaire and how that fits into your marketing plans for the year. Obviously, it's great that it's off to a good start. Typically, when you have a new launch, if the KPIs are good, you're willing to pour more marketing revenue into the game to increase the long-term value of the game. So how are you sort of balancing that off against your commentary that marketing expenses will be declining sequentially through the year? Thanks.

Hey, Doug. Thank you for the question. Obviously excited about the new franchise and the strong start to the launch. As we look at marketing expenses overall, the first quarter tends to be the largest quarter in terms of marketing spend, and it typically goes down sequentially from there. I think as we look at the launch and we weigh it, we obviously have a large portfolio of games, and so we're mindful kind of allocating capital towards those games with the best ROI.

Okay, thanks. Thank you for your question. One moment, please. Our next question comes from Matt Cost of Morgan Stanley. The line is yours.

Great. Good morning. Thanks for taking the questions. I guess on Slotomania, it seems like you're expecting continued declines for that game. How should we think about the path forward to that franchise? Is the new slots game in the pipeline kind of an attempt to fill the gap from Slotomania or maybe serve as like a sequel or replacement for it? Or is there a plan in place to sort of stabilize Slotomania and throw a lot of investment at some point in the future into that title?

Thanks for the question. We see issues around Slotomania in the last year and we said to the market and we were sure that last quarter we find a way to stabilize the game. I think at the end of the day the game is suffering for being such a long time in the market without a big change. So now we decide to focus and to change a lot of things in the game to stabilize the game, we changed the management of the studio, and for us it's top priority to stabilize and to grow the game. On the other hand, our last launch of a slot game was 10 years ago, and in the last 10 years we found ourselves with a lot of content, a lot of interesting content, with a lot of experience, with a lot of knowledge, and we decided to take everything and to bring back the market share that we lost in the last few quarters. This is our mission. For us, being in the market with a new app in this category, it's a win-win situation. So I think to stabilize the game, to fix the issues that we have, to launch a new, fresh app in this market, I think this is the right step to come back and to grow again in this category.

Thank you. Great, thanks. And then Craig, you talked about marketing stepping down sequentially in the coming quarters. I guess, are there any other puts and takes that we should think about in the phasing of costs through the rest of the year as you integrate Super Play?

Nothing as it relates to Super Play, but I think as we look at the year, obviously there's opportunities to continue to progress on direct-to-consumer. I think there's margin potential there and we're consistently looking at opportunities to further manage expenses so i think that's the puts and takes between the the growth and the casual part of the business as well as managing the declines we've seen in the slot portfolio okay thank you thank you for your question again as a reminder to ask a question please press star one one on your telephone one moment one moment please

Our next question comes from Albert Kim from UBS.

The floor is yours.

Hi, thanks for taking the question. Just on the D2C front, last quarter, I believe you talked about animals and coins and governors and pokers eventually making their way into the D2C channels. Any update on timing? How should we think about the overall D2C mix going from here? And just to the extent that there are any apps or changes allowing kind of the direct link and the inclusion of third-party apps, do you see any changes to D2C adoption rate expectations? Thank you.

So thanks for the question. DTC for Playtech was always a big advantage. We believed in this a few years ago and we built slowly, slowly our infrastructures and being ready for the situation that today Everyone is speaking about the DTC. We see the changes in the market. We're still learning the changes. We're still trying to understand how to react. But one thing I can say, we are all in. We understand. We are ready. We are going. For us, it's one of the most biggest potential for more profit to the company, more EBITDA to the company. And again, you know, for everyone, everyone speaking about the DTC, for us, it's all news. we are starting in a different place than everyone else and I think again for Platica this is a huge opportunity and actually it's really hard to say opportunity because it's already here. Thank you.

Thank you for your question.

At this time I'm showing no other questions. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.