SciPlay Corporation

perspective as we embark on the next phase of our growth. Last but not least, our board has authorized the $60 million two-year share repurchase program. We are in strong position to invest in growth as well as return capital to our shareholders. This demonstrates our commitment to driving shareholder value and generating the highest return for our investors by deploying capital wherever we see the best opportunity. whether that's investing in our growth initiatives, executing on disciplined acquisition, or returning capital to our shareholders via share buyback. So to take a step back, we outpaced the social casino market in the first quarter in line with our expectations. But for us, the top line coming out of this quarter isn't just growth, it's momentum. The momentum we continue to generate quarter over quarter as we execute on our suite of strategies to expand our market share. And that's what makes us so excited, not just about the results we saw in the first quarter, but also the results we anticipate going forward. Indeed, our success reflects the successful execution of the plan that has been in place for some time. I mentioned, for example, our success of our increased investment in marketing which was made possible by our record LTVs we began to see. And we are just getting started. We are continuing to invest in our SidePlay engine with the goal of continuing to increase reach, improve retention, provide enhanced value to the players, and ultimately deepen our player engagement and monetization. And we saw great results this quarter. Monthly paying users and monthly active users improved sequentially, while our payer conversion rate remained at record levels. Also, ARPDAL was strong at $0.74, up from $0.67 in the first quarter of 2021. As we continue to product size our core capabilities, centralizing Project All-Star to benefit across all portfolio again We're creating the next catalyst to enable to accelerate revenue growth and drive sustainable profitability. Concurrently, we continue to invest in our direct-to-player platform, which will further enhance revenue growth, customer LTV, and margins. All of the investments are already beginning to deliver returns, and we couldn't be happier about what all of these initial returns look like. That's why we are confident in achieving our 2022 revenue growth target of 10% we provided last quarter. And we'll remain on pace to achieve 29% full year 2022 AEBITDA margin. Before I turn it over to Daniel for more detail on our financial performance, let me just briefly speak to the early success of the ELICTUS acquisition. Integration is proceeding extremely well. and both teams are delivering solid results. We are on target and have great news to share. Ellictus executed successfully on the product roadmap in the first quarter, releasing two new games, one of which achieved number one free games on the US Google Play and number five free games on the iOS US App Store. In acquiring the company, we added 28 million monthly active users. More importantly, we added the opportunity to achieve increased synergies. I'll give you one example. Ellictus' in-app advertising technology allows us to diversify our revenue by giving us flexibility to design games that get both monetized through in-app advertising, in-app purchasing, or a hybrid revenue model. And we are already seeing a perfect opportunity to take advantage of this new capability with Solitaire Pet Adventure. On top of that, we're going to be able to cross-sell between social casino and casual, helping us maximize the LTV across the entire portfolio. I had a chance to visit with the whole Ellictus team in Turkey, and I came back even more excited about the acquisition. We have a lot to look forward to as we scale this high-growth, profitable business even further. You'll hear more about the strategy and business next Tuesday, May 17, at our Investor Day, including a sneak preview of Project X, which is on track for launch in the second half of 2022. Trust me, you won't want to miss that. And now, let me turn it over to Daniel.

Thanks, Josh. I, too, will try to keep things short. I will just run through some financial highlights quickly, and then we'll open up the call to take your questions. Let me start by reiterating what Josh said. This was an extremely strong quarter, building off the strong momentum from fourth quarter to achieve our second-highest revenues ever. Total revenues increased 5% year-over-year to $158 million, and excluding electives, revenue growth was about 3% year-over-year. Coming off those excellent results, we're on target to achieve our target of 10% full-year revenue growth and 29% full-year 2022 EBITDA margin. And I'll note again, this outlook reflects our expectations that margins will scale over the course of the year and next year as the investments Josh talked about drive revenues. Net income for the quarter was $32 million, and our net income margin was 20%. Both were impacted by our investments and growth initiatives. You can see the scale of those investments in the numbers, but also the initial impact of their returns. We generated a EBITDA of $44 million, including investments we made during the quarter. Our first quarter EBITDA margin of 28% is consistent with our expectations and we continue to expect margins will scale in the second half of the year. However, as we've said today, the initial returns on those investments are reason for excitement. As Josh mentioned, our engagement and monetization metrics are very strong. Players are spending more time and money in our games, and we achieved record revenues for Goldfish and Quick Hit. Player LTV and retention is at an all-time high we're already generating attractive returns on our ad spin as we increase the funnel of new players and continue to grow our business and even as we grew our user base payer conversion matched our record results from the fourth quarter 2021 standing at 8.9 percent this is 80 basis points above our conversion rate of 8.1 percent in the first quarter of 2021 As we look forward, we expect to benefit from the investments in our growth initiatives in the second half of 2022. And the impact of the top and bottom line will accelerate into 2023 and beyond. You can see why we're excited about our future. Now turning to cash flow. We generated $37 million in operating cash flows in the first quarter, resulting in strong conversion rates. And even after paying $106 million for the Olictus acquisition, cash on our balance sheet only declined $72 million sequentially and stands at $292 million. The strength of our balance sheet and our highly cash-generative business provides us with financial flexibility to execute on our vision while returning capital to our investors. To that end, we are pleased to launch our first share repurchase program. reflecting the capacity to execute on our growth strategy while concurrently returning excess capital to shareholders through stock repurchases. And given our current valuation, we believe this is an opportune time to buy back our shares. So to sum it up, we're thrilled about where we are and where we're going. First quarter 2022 saw us reach our second highest quarterly revenue ever, and we generated $37 million in operating cash flows. As we continue to invest, we are creating the foundation for sustainable top-line growth and profitability. We have a lot of exciting initiatives and look forward to continue to generate shareholder value as we execute on our plan. With that, I will open it up for questions. Operator?

Thank you. Ladies and gentlemen, as a reminder to ask the question, you will need to press star then 1 on your telephone. To withdraw your question, press the pound key. Again, that's star 1 to ask the question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ryan Sigdahl with Craig Hallam. The line is open.