Q1 2021 Playtika Holding Corp Earnings Call
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Good day and thank you for standing by welcome to the play Chico's first quarter 2021 earnings 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.
That's a question during this session you will need to press star one of your telephone please.
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Any further assistance. Please press star Zero I would now like to hand, the conference over to your Speaker today, David Neeleman, Vice President of Investor Relations. Please go ahead.
Welcome to everyone and thank you for joining us today for the first quarter 2021 earnings call for <unk> holding Corp.
Joining me on the call today are Robert call co founder and CEO of <unk>, Greg Abrams, <unk>, President and Chief Financial Officer, Eric <unk>.
Our corporate development and drawing Mackey, Chief Accounting officer, I'd like to remind you that today's discussion may contain forward looking statements, including but not limited to the companys future 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.
Undertakes 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 with that I'll now turn the call over to Robert.
Thank you David and thank you everyone joining us today.
We had an excellent first quarter, we're very proud of our strong performance across the board if we start the 2021.
Let me provide some quick financial highlights for the quarter.
Revenues of $639 million grew almost 20 prostatic you Obi you driven completely by organic growth at Justice EBITDA of $258 million grew nearly 39% you Oberly U D.
D C. Breasted results were driven by our best in Class League operation, which is run on novel boost technology platform.
This technology allowed us to keep drawing gobbled games despite their age.
We believe we're the best at operating games for the long run.
Proves our results and here are a few examples.
Dingell Beach, which is 10 years old game and that was second largest game by revenue grew revenue over faulty profane year over to you.
We also boosted Roes for our bulking game, which grew revenue nearly 57% year over year Q1.
So all it does bring hardwoods has an excellent 60% revenue growth year over year in Q1 household finally, enjoying strong roadmap, which helped drive nearly 23%.
Revenues in Q1.
These results show, how our company and model out different we can take franchise that had been in the market for several years and continue to drive growth with proven roadmap and space that we control.
Now, let's look at some specific example, boost capabilities that we leverage in Q1.
We have a powerful player journey.
We used to drive improvement in both household fun and selected run Hollywood with excellent results.
Hello, Germany allowed us to provide complex promotion Gallo two hour playoff game behavioral.
Looking forward, we have strong roadmap of additional capabilities enabled by blow journey, which we plan to implement this year.
While cloud journey is one capability boost platform the platform itself enable us to quickly deploy successful features from one game to add those for example in Q1 Bingo Blitz lunch Clinton, which origin tables and slots, Romania tournament, which originally saw it though will love.
In midstream.
Another key area, we are walking on AI.
We have almost 60 people in our AI team across Europe and Israel.
The reason one example from slow to ammonia, we have seen great results by enabling AI powered content recommendation.
With over 200 deepened machines to play deciding which one to choose can be confusing well using a iron commended the ones best suit to the strategic plan.
For 2021 we'll remain focused leveraging our strength in technology data and analyst to continue to drive growth and you know baked in to our mobile game portfolio. Finally, I would like to provide a quick update regarding COVID-19.
You may have read recently in Israel, Haplology reopened and it has been great for people, who have the ability to walk to collaborate in person.
To say, we're following local guidelines he never countries to ensure we protect our global work force.
First of all employees is our top priority and we will continue to do what is necessary to ensure that our people remain healthy happy and protected now I'll turn the call over to Craig to discuss operation and financial results.
Thank you Robert and I like to thank everyone for joining us on our call today.
I'll review, some financial and operational highlights and then discuss our improved 2021 financial outlook following that we will take questions.
<unk> got an excellent first quarter positioning the company for continued success through 2020 one.
As Robert mentioned the company is executing strongly across the board from game feature development to boost to marketing and technology, having a great quarter. Like this serves as an additional motivation and a proof point that we can exceed ambitious targets and set a new standard of leadership within the mobile games industry.
Do you get benefits from a platform that is a combination of technology experienced employees and owned IP that we believe give our company a competitive advantage with this experience and the boost platform comes the ability to know what features will work within a game and more importantly, how and when to deploy those features. Additionally, when one game.
Implement successful content, we can often take that concept to our other games and leverage that success across our portfolio.
While we're focused on creating great game content for our customers I believe we have a nuanced perspective of how games work that enables a more detailed level of analysis, which ultimately drives monetization.
Constant testing and measurement play a big part.
Robert spent some time discussing our player journey and artificial intelligence capabilities that are a part of our boost platform.
The broad set of technologies within boost enable us to drive continued growth even across our most mature franchises by increasing the level of complexity and sophistication of our games features their configurations and their deployment being able to organically grow titles that have been in the market for approximately eight to 10 years is a testament to what makes quite special.
Separates us from our competition.
Turning to the performance of our game portfolios are casual portfolio had a tremendous quarter with first quarter revenue growth of 30% year over year, our casino themed portfolio continue to exhibit strong growth, increasing Q1 revenue 12% year over year.
Of our top nine games grew revenue over 20% year over year in the first quarter.
They are not casino. These games World series of Poker grew revenue nearly 23%.
This performance is another example that underscores our ability to build and sustain long lasting franchises powered by our relentless focus around live ops and constantly deploying new content.
We saw notable growth in several games in our casual portfolio solitary grant harvest and board games led the way with 60% and 56, 6% year over year revenue growth respectively. We're incredibly pleased with this performance. We had several examples of innovation and success in our casualty portfolio in the first quarter and soldier Grant harvest, we launched the my farm.
A feature in which players grow farms will also playing solitaire player response to this feature was also very positive. Additionally for our <unk> franchise. We are the fourth birthday celebration with a week long campaign, featuring several promotions that drove a peak and engagement. We also launched a new emissions feature with exciting new content for our players.
This is just a selection of highlights and many of the new features and content that was added to our games. Our teams have extensive roadmaps for future content releases throughout 2021 and beyond.
I also want to highlight our marketing efforts, which are driving positive results. You may have seen our solitaire grant harvest in spot ammonia featured on the Doctor Phil show or heard the Bingo Blitz song performed by Luis Fonzie, where the chart topping hits does placido, along with Nicole Scherzinger in front of US. He got dolls, both campaigns have been very successful in driving awareness and game instead.
<unk>.
We also created a very fun commercial of our Solitaire Grant harvest feature in Verona proof of well known entertainer in Germany. This is helping us expand our user base in Germany and is a great example of improving our localization and non U S markets. We plan to sustain this momentum with several new exciting marketing strategies, we have planned for 2021.
Now I'll review, our financial performance revenues for the first quarter of 2021 increased by 19, 6% to $638 $9 million from $534 $2 million in the same period last year.
On a geographic basis, the U S contributed 71% of revenues with Europe, and APAC, contributing 14% and 8% respectively.
As previously announced we refinanced our debt in early March and further enhanced our capital structure through interest rate swap agreements in late March these transactions allowed us to fix our interest expense over the next five years on over 40% of our outstanding debt and to secure approximately $80 million and cash interest expense save.
Things on an annualized basis.
In Q1, we reported GAAP net income of $35 $7 million versus net income of $35 $8 million last year.
First quarter adjusted EBITDA was strong at $258 million, representing a 38, 6% increase over Q1 2020, our Q1 adjusted EBITDA margins were 44%, which compares to 34, 8% in the same period last year. This margin expansion was driven by the increase in revenue year over year.
And also the continued strong performance of our proprietary platforms.
As of March 31, we had over $1 billion in cash and investments and we now have around $1 $5 billion in available liquidity to support potential future M&A, which includes $600 million of Undrawn revolver.
Finally, I'd like to update our financial guidance for the full year 2021, with our excellent first quarter results and encouraging momentum in our business. We are pleased to raise our guidance today.
We now anticipate revenue of $2 $6 billion up $160 million from our prior guidance of $2 four $4 billion, our new adjusted EBITDA guidance is $1 billion up $80 million from our prior guidance of $920 million.
In closing our Q1 performance represents a great start to the year and we're optimistic that our continued investments in content people and technology will set the stage for ongoing success for the rest of 2021 and beyond.
With that we'd be happy to take your questions.
Thank you as a reminder to ask a question you will need to press star one ear telephone to Australia question press the pound key please Stefan will compile the Q&A roster.
Our first question comes from Brian <unk> with Morgan Stanley. Your line is open.
Hi, guys, it's Matt on for Brian. Thanks for taking the question I guess just to start you know you you raised the full year.
Full year guidance for top line well in excess of how much <unk> came in ahead of consensus. So obviously that kind of speaks to the momentum you guys, having have been going to the rest of the year. What gives you confidence that you know you'll be able to hold onto those users continue driving conversion and sort of you know keep growing through the back half.
Even as we hit the hardest comps thanks.
Hey, Thank you for the question. So yes, we rule the guidelines in the when we are looking at that will Roadmaps with 11 games nano BMO. The adult pay 100 grossing in the U S and we see the roadmap and we'll see how we started the game and so we are really confident about growing it.
This year dramatically that we said.
For political when you look in the last <unk> for me always the first quarter is the most important quarter starting strong.
It gets into all of the numbers, if we have a strong roadmap. So I'm feeling really confident about the rest of the U and this is exactly why we raised our guidance.
Great. Thank you.
Thank you. Our next question comes from Stephen Ju with Credit Suisse. Your line is open.
Okay. Thank you so it's a recollection, but you guys had about eight games brewing in the pipeline.
Any updates you may be thinking about to that number or a potential soft launcher is a release dates or should we continue to assume that these are not part of your near term plans as well as your fiscal year guidance and secondarily. It looks like your monthly active user declines coming off the spike last year.
Has turned the corner.
Has have the daily play up paying user so does the guidance parameters baked in.
Ongoing sequential growth from here. Thanks.
Sure, So hey, Stephen Great Ted.
We hear from you. So in terms of our our guidance that is our organic business plan. It doesn't include any new game launches for the year. It doesn't include any potential M&A. So as you think about games, we guided as part of the road show that we'll have one new game in 2022 with a global launch.
No.
Guidance doesn't suggest anything in in 'twenty, one in terms of the Kpis you're right. We saw some great sequential growth in Gpus and engagement and I think as we're coming out of.
Stay at home, we're continuing to see our mobile game.
Game users engaged in and feel very excited by the Kpis that we're seeing and we expect to continue to see that engagement throughout the year as.
As we as we continue to execute on our roadmap.
Okay. Thank you.
Thank you. Our next question comes from Colin Sebastian with Baird. Your line is open.
Great. Thanks, everyone. Good morning, and good afternoon.
Nice quarter once again first off maybe just a follow up to the second question from Steven.
Just on the social casino side or maybe slot ammonia specifically just curious how the game performed in Q1, and if youre seeing any impact on usage or engagement with the Lockdowns and then secondly in the press release, you talked about an impactful marketing campaign, helping to drive growth. If you could talk about those.
<unk> as it relates to UA more broadly from Facebook and other platforms, if youre seeing any impact on app downloads or re targeting from from apples privacy enforcement. Thank you.
Hey, Thank you for the question so regarding scope, Romania, with a very strong quarter.
It is everybody else because there, but the demand is 11 years old game.
Good this quarter, 8%. So it's a it's a logical again, that's running more than 10 years, we have a strong roadmap as I said before the first question, we haven't really sort of roadmap.
And especially in slot domain new features we add so dominant to the boost platform. So we're getting more feature pull other than just little money I'm feeling really confident about it.
Regarding the UA, we don't see any changes.
The last few weeks few months everything looks the same.
We're doing very well with very good returns and 10 now we don't see anything that can impact that business. So anything that's really changing.
Alright, Thanks Robert.
Thank you. Our next question comes from drew Crum with Stifel. Your line is open.
Hi, This is David on for drew.
You guys had really strong gross margins for the first quarter, what drove the improvement in <unk> and is this level sustainable.
Sure.
Thanks for the question. So in terms of gross margin, we had some improvements in terms of percentage of revenue from our own proprietary platforms as you'll see in our 10-Q that was just filed.
That is up to 18% of our gross revenues up from 15, 5%.
I think with that you'll see the improvements in gross margin.
And I think as we go throughout the year.
Intend to sort of see similar.
A percentage of revenues from those platforms as well so I expect that to continue I think on an overall margin perspective, you will see in our guidance, we guided to 38, 5% adjusted EBITDA margins and that's up from our prior guidance with 37, 7% EBITDA margins and so I think while we while we had over 40% margins in the quarter, we expect some <unk>.
<unk> costs throughout the year and get to a blend of 38 and a half by year end.
Thank you our next question Hudson Balco.
Alan Your line is open.
Hi, Thank you.
It seems that Q1 digital advertising was very strong across the industry and I'm just wondering what kind of trends you saw in terms of customer acquisition cost.
Keep your eyes are going up or if they remain pretty stable. Thank you.
Okay.
Yeah. So in terms of overall marketing costs for US I think everything was pretty consistent we didn't see any trends worth noting.
Nothing stood out from that perspective.
Okay. Thank you.
Thank you. Our next question comes from Eric Handler with <unk> Partners. Your line is open.
Good morning, and thank you for the question.
Wondering if you just give some thoughts what you're seeing right now in the M&A landscape. How is there a lot of activity going on and.
What's the.
How are you thinking about things these days.
Sure No. We're excited about the M&A opportunities in front of us.
Really good about the pipeline and where we sit today.
Obviously, I bet, we fixed our balance sheet as well over the quarter, we now have $1 billion of liquidity to <unk>.
Support M&A and that includes a $600 million undrawn revolver.
About $1 billion and our balance sheet. So we.
We feel very encouraged I think theres nothing to update specifically on today, but we'll update when there is something to report on but I think there's you know there's a lot of activity in the market and we feel good about the pipeline.
Thank you.
Yeah.
Thank you. Our final question comes from Jason Bazinet with Citi. Your line is open.
Good morning, I was just wondering if you could share your perspective on some of the shifts that seem to be coming on in the broader landscape, meaning some of the traditional I'll call them platform companies that did ran at an AD network should it have mediation or attribution or sort of moving into the.
The gaming business itself.
I just wonder what do you think is driving that and what what implications are there if any for your business. Thanks.
Sure. Thanks, Eric So we won't speak to competitor strategies and why they may be entering the game space.
Have a great business model, we've been executing on it for the last 10 years, we feel really good about our plans for the next 10 years and you know well.
<unk> execute on our strategy.
Do you just qualitatively do you feel like you guys are sort of ahead in that you own the IP and the actual games like that's the harder part of the business.
I think we've talked about this on the road show we have some structural advantages we own our own intellectual property we have a.
Distinct advantage in Israel, we have a go.
Strong R&D workforce throughout eastern Europe.
Nine leading franchises in the top 100, and able to cross pollinate learnings from one title to the next.
Leverage our plate Jacob boost platform, so I think our investments in technology and boost.
And the fact that we have such a well diversified portfolio definitely gives us an advantage in the marketplace.
Thank you.
Thank you I would now like to turn the call back over to Robert <unk> for closing remarks.
So thank you so much everyone for the call.
To summarize everything.
And it really is.
I am very excited about this quarter about this year about the roadmap about the guidelines.
Both our organic growth of 20%.
It's only shows a strong display ticker and the political can go into a magic the I'm not talking to you. After a year like we did in the last 11 years.
So thank you so much again for joining us in the ceiling the next call.
You guys.
This concludes today's conference call. Thank you for participating you may now disconnect.
Thank you.
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Okay.
Yes.
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