Q4 2021 Playtika Holding Corp Earnings Call
Ladies and gentlemen, thank you for standing by and walk through the <unk> Q4, 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the presentation. Please press Star then one on your telephone keypad. If you wish to draw. Your question. Please press the pound key.
If you require any further assistance. Please press star Zero I would now like turn the call over to David <unk>, Vice President of Investor Relations you may begin.
Welcome to everyone and thank you for joining us today for the fourth quarter of 2021 earnings call for <unk> holding Corp.
I'd like to remind you that today's discussion may contain forward looking statements.
Such statements are not a guarantee of future performance, but rather are subject to risks and uncertainties some of which are beyond our control.
Any such 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 any forward looking statements. After this call.
For a more complete discussion of the risks and uncertainties. Please see our filings with the SEC.
We previously posted an accompanying slide deck to our Investor Relations website on February 24th and we'll also post our prepared remarks immediately following the call.
Finally, we would like to remind investors that we will not be providing any financial guidance on this call nor will we will be addressing the press release published February 24, announcing that <unk> board of directors approved evaluating strategic alternatives for the company.
We ask that participants on this call. Please restrict your questions to topics regarding our fourth quarter and 2021 results.
With that I will now turn the call over to Craig.
<unk>, President and Chief Financial Officer.
Thank you to everyone joining our call today.
We closed out 2021 with strong momentum across the company.
In the fourth quarter, we grew revenue 13, 2% year over year. This resulted in full year revenue up eight 9% to $2 five 8 billion in.
And adjusted EBITDA of $982 7 million exceeding our prior guidance of $2 $5 7 billion and $980 million respectively.
We achieved these results by steadily executing our growth strategy and leveraging our industry, leading live ops capabilities to grow our core game portfolio our.
Our CAGR portfolio grew 22% with sulzer grain harvest and bingo Blitz, leading the way with 56% and 22, 4% growth respectively, demonstrating the power of our boost technology and live ops platform to drive exceptional performance in our established games.
While the casino portfolio was down one 8% year over year. This decline came on the back of a very strong COVID-19 driven 12, 2% increase in 2020 across the two year period Casino games grew over 5% compounded annual growth rate.
We ramped our expansion in new categories. During 2021 with the acquisition of 80% of the equity of Reworks in August and the launch of Lucas New game switch grafts in October as well as ongoing development work on two additional new game launches.
The first full quarter of revenue from rework suite of core design Entertainment application helps our casino portfolio generate more than 50% of our total revenue in the fourth quarter, a milestone that demonstrates our ability to deploy our boost technology and live ops approach across all gaming entertainment genres.
Turning to the fourth quarter, our revenue growth of 13, 2% year over year was also a two 1% sequential increase the.
The casualty portfolio led the way with year over year growth accelerating to nearly 31, 5% our casual games comprised 51, 8% of revenue in the quarter.
Salter Grant harvest remained our fastest growing game was 61% growth as both <unk> and <unk> continue to rise the game's migration of unity is tracking ahead of schedule with this rollout slated to begin later this month.
June's journey grew 36% year over year through the boost platform, we launched multiple collectible album promotions, which resulted in june's journeys strong performance and record increase in daily payer conversion.
And the casino portfolio revenue was down two 4% year over year with growth in casino and World series of poker offset by declines in slot ammonia in house upon.
We were encouraged by the response, we started do events and products in the World series of poker obligation, which drove monetization and together with enhanced user experience led to a steady increase in <unk> in the quarter and seven 3% revenue growth on a sequential basis.
Caesars Casino also realized increases in conversion are down as we launched new and improved events, helping the game grew seven 1% year over year, which is a strong milestone in a game that recently celebrated its 10th birthday.
Now turning to our P&L cost of goods as a percentage of revenue declined year over year from 33% to 28, 2%.
This shift was primarily driven by the percentage of revenue flowing through our proprietary direct to consumer platforms to 21, 7% of revenue up from 15, 5% in the fourth quarter of 2020.
Our direct to consumer platforms continue to be a competitive advantage and strong source of margin for <unk>.
I'd like to add a quick comment highlighting that we are now referring to our proprietary platforms as our direct to consumer platforms.
While it is just the change in name we felt it important and appropriate as it better describes what we've achieved and more importantly points the future potential of this piece of the business.
Regarding operating expenses, our R&D sales and marketing and G&A were all essentially in line with our expectations as we continue to add team members to support our future growth plans and invested in new user acquisition and marketing campaigns.
GAAP net income was $102 3 million compared to $76 million in the prior year quarter.
With the successful refinancing our debt in March of 'twenty, one, we significantly lowered our future cash interest costs.
As such we reduced the associated need to repatriate cash from our foreign subsidiaries. So we're able to reverse approximately $46 million in tax reserves to pay withholding taxes on future repatriated cash adjust.
Adjusted EBITDA was $212 $5 million, representing a margin of 32, 7%. This compares to $210 4 million and 36, 7% in the fourth quarter of 2020.
As of December 31, we had approximately $1 1 billion in cash and cash equivalents and $1 7 billion in available liquidity to fund growth opportunities.
With that we'd be happy to take your questions.
We ask that you limit your questions to the fourth quarter and full year 2021.
Thank you.
Ladies and gentlemen, if you have a question or comment at this time. Please press. The Star then the one key on your Touchtone telephone. If your question has been answered or you wish to put yourself from the queue Kate to parts of the pound key.
Our first question comes from Matthew Cross with Morgan Stanley .
Hi, Thanks for taking the questions guys How're you doing I appreciate you taking the question.
So I guess for margins in <unk>. So.
It's in line certainly with the guidance that you gave at <unk>, but definitely down year on year down sequentially.
Understanding you're not providing guidance for 2022.
What were the drivers of kind of like the margins in <unk> and should we expect as you mix more towards casual that margins will be more in kind of like the low 30% rather than the high <unk> range going forward and then I have a follow up.
Thanks for the question, Matt as you mentioned this was something that we had planned for in the fourth quarter, obviously with the execution in the fourth quarter, we exceeded our adjusted EBITDA guidance for.
For the year.
It was an investment quarter and growth.
Both in our in our people as well as in marketing and media expenses.
There were several offline campaigns.
Several more than a typical quarter in the fourth quarter, which drove additional media.
This is both on production and media so.
Listen and investing in our people definitely is a differentiator for us in R&D.
Our technology and so a lot of that showed up in the fourth quarter as we had planned.
A lot of that media was especially in the fourth quarter and I'm not sure that that.
As I said I think we're going forward, but we're not not making comments on forward guidance.
Got it that's helpful. And then just following up kind of along those lines. So there was a comment in the press release about year over year CPI growth being up around 6%.
<unk> and I think your commentary on the prior two calls has been that it was it was stable I guess I wanted to wanted to get a sense is it is that an acceleration in <unk> growth and sort of what are you seeing in terms of the effectiveness of your advertising.
As we kind of stabilize a little bit post the FAA.
Sure. So in the past, we've given commentary sequentially right because people were focused on given IV FAA, what was happening from a quarter to quarter basis, obviously with the holidays in the fourth quarter sequential wasn't the right comparable so we wanted to show year over year.
We chose five 8%, which we feel demonstrates our capabilities and everything that we've talked about in the past around our AD tech are our strategies around diversification of sources leveraging offline campaigns.
But I think as we really look at this new environment post <unk> it really highlights.
Our capabilities. The fact that we are the best at live operations.
That we're able to have higher ltvs than anyone else within our genres.
That gives us a competitive advantage in marketing regardless of the landscape and this is in many ways level the playing field.
Given us an advantage around live ops.
So.
I think thats really why we gave that guidance and obviously, we will continue to execute quarter to quarter and as you can see by the results in the fourth quarter.
Clearly validates our strategy.
Great. Thank you.
Our next question comes from Eric Handler with <unk> partners.
Good morning, and thanks for the question.
If you could talk a little bit.
The ramp of switch craft and how thats doing relative to your expectations.
Sure. Thanks for the question I think I think it's still too early to tell.
Obviously, it's a unique offering one the Google pick up and play award.
There is definitely opportunity for us to further optimize it before we put meaningful marketing dollars behind it.
And so it's part of a larger strategy with a slate of titles that we plan to bring to the marketplace and so I think I think we'll obviously update when there is a material update but as of now continue to optimize.
Okay, and then as a follow up last quarter on last quarter's call you talked about infrastructure investments that were being made.
Slaughter Mania, and bingo Blitz single, but didnt seem to have any negative impact from these investments wondering if you could talk about where you are with.
With these games in terms of how much longer.
Investment process will continue.
Sure. So I think the highlight around infrastructure investments was pretty unique to the third quarter.
Titled like salts or grant harvest, we've made commentary that thats still undergoing.
A transition of the at the end of March but with that.
We flash January numbers to really highlight the strength of the portfolio and execution.
And we're really past that situation, we have which is pretty unique in the third quarter, where we had a lot of infrastructure overlapping at the same time.
Great. Thank you.
Our next question comes from Colin Sebastian with Baird.
Thanks, Good morning, Craig a.
Couple of questions from me I guess first off a little more detail maybe on what's driving the increase in payer conversion in <unk> I know.
Denominator.
On the numerator or maybe moving in different directions there.
And then also just the eastern European Studios, I think Ukraine, and Belarus, any disruptions expected from those operations.
To know thank you.
Sure So let's start with Ukraine, given just the imported there in terms of what's happening in our Hearts go out to the to the people of Ukraine.
Obviously, the dynamic situation that we monitor in real time.
The most important thing to us is the safety and wellbeing of our employees.
Thoughts and prayers are obviously with them.
We continue to work on being in touch and ensuring their wellbeing, we've taken steps over the last few quarters to really geographically diversify ourselves across eastern Europe .
Implemented business continuity plans.
In the immediate term there has been no material disruption to our operations.
And obviously, it's a dynamic situation but.
Has it has not affected business ops at this point.
In terms of your question on conversion to head back. Obviously January was also continued execution up to 330000 daily paying users.
And.
In light of a DAU being pretty consistent conversion continues to get driven higher.
It's really a testament to the technology of the boost platform and how the teams across the various studios across the company are leveraging boost.
To really drive monetization conversion features to really deeply engage our players on a personalized basis.
Yes.
And I think that kind of growth and really highlights the differentiator between us and other competitors in the marketplace.
Thanks, Greg.
Thanks, Tom Our next our next question comes from Stephen Ju with Credit Suisse.
Okay. Thank you so it might be a bit early but now that <unk> is part of the portfolio is there anything you've learned from operating an app that sitting slightly outside of what you have been doing historically.
At the time of the acquisition is also sounded like Theres, probably a greater opportunity to generate AD revenue there.
Given the exposure to the home decor category. So overall how is operating this asset.
The same in how is it different versus what you historically have been doing thanks.
Hi, Steven Thanks for the question, obviously, we're still big believers in the gamification of entertainment applications beyond traditional games.
<unk> came in at $32 $4 million in the quarter ahead of our public guidance of $30 million.
So it really demonstrates our ability to execute and gives us confidence.
Towards being able to execute around game of buying applications.
Integration is ongoing and underway and.
Everything is on track in terms of.
Our thesis around entering this category.
Thank you.
Yeah.
Our next question comes from drew Crum with Stifel.
Okay. Thanks, Hey, guys good morning.
Last quarter, guys, you talked about board Kings and some changes that were being made with the management team. There any updates you can provide in terms of what you saw in <unk>.
I know youre not commenting on 'twenty, two but historically.
January performed relative to December the metrics that you provided in the press release suggested.
<unk> will uptick a month to month is that in line with or typically what you see historically months to months. Thanks.
Sure Andrew Thanks for the question.
Last quarter, we highlighted two games that.
Had either delays or management changes World series of Poker was first obviously that game clearly had a great quarter and executed up over 7% sequentially.
And things are strong there.
January was the best month.
What series of Poker history.
Clear clear execution as well trending into into 'twenty to <unk>.
<unk> has also stabilized revenue for the year was up 13%.
We're excited for what that team can do and so yes, I think that in terms of that.
Strong execution by the teams as we look at January I look at just last year first year public company.
Q1 was also pretty strong as we had.
I had a strong roadmap in that quarter and I think we previewed.
Last quarter as we talked about a strong roadmap in Q1, and so January obviously demonstrates that.
Okay.
Sure.
Sure.
Thank you. Our next question comes from Brett Levy with UBS.
Great. Thank you.
Can you just provide Dave maybe margins could you envision of reworks in the quarter.
Last time you.
You spoke you had mentioned that marketing expense will ramp.
So are we seeing that to the first quarter or is there little bit of a slowdown now and maybe a final question on any.
Any change in incentive compensation plans towards the end of the year.
Sure. Thank you for the question. So in terms of reworks, we don't break out margin contribution.
We're not giving guidance on that on a go forward basis.
And we're not commenting on on 'twenty, one guidance in terms of.
Incentive plans.
Theres nothing Thats changed.
And in 'twenty one versus.
Then what's happening here in 'twenty two.
Okay. Thank you.
Our next question comes from Michael <unk> with Goldman Sachs.
Hey, good morning, Thank you very much for the question.
I was just wondering if I could follow up on the question on payer conversion, where there any particular games that did particularly well in terms of increasing payer conversion, obviously really strong numbers in the fourth quarter ended in January .
Any elements of the boost platform that you would call out that that really help with that payer number. Thank you.
Sure. So I think one of our core theses around initially I drink casual games is the ability to take our knowhow to other new genres.
And it's clear you see by the growth across the casual portfolio that we're firing on all cylinders in terms of how we're executing.
That's driving.
Continued payer growth.
Monetization increases, which is driving that top line number.
And then saw that continue into January as well at the start of the year. So.
I think theres no specific game callouts I would say other than.
Casual performance is really driving.
Those metrics.
Great that's helpful. Thanks, Craig.
Our next question comes from Eric <unk> with Macquarie.
Hi, good morning, Thanks for taking my question.
On marketing because that can take one of your strength historically has been the variety of need verses you buy from as well as the offline campaigns that you guys do.
That's called out in the quarter and I think you had the Billboard in times Square recently.
Have you noticed the cost of this offline campaign, increasing perhaps as other companies look for ways to get around <unk>.
Have those remained pretty stable as well.
Sure So for US I think it's a media mix.
That shifting in terms of how we diversify our sources obviously in the fourth quarter. We had some of the larger campaigns, we had John Goodman with spot ammonia Ty Pennington with Caesars casino.
Taylor with house of fun.
Doing things on televisions World series of Poker, Dr. Phil with Bingo Blitz installs are going to harvest and so you saw a lot of offline campaigns in the quarter.
And a bit of a mix shift, but I think you will see the benefits from that on a go forward basis as those brands get built.
And you'll see those benefits over time versus performance marketing it's more.
Directly in the quarter, So I think.
Some of those benefits are a bit delayed from on the spend happens, but it's more of a mix shift rather than a broad increase.
Got it okay.
And just a follow up Gpus were up in the fourth quarter, which created an encouraging to see it taking another positive step in January .
In your prepared remarks, it seems like for a few trends, we're mainly on the casual side.
Was it the same story in the January numbers, you gave or was it wouldn't.
Wouldn't gains more broad based across your portfolio.
Sure. So I would say for January is pretty consistent with the execution, we had in the fourth quarter.
Okay perfect. Thank you.
Our next question comes from Clark <unk> with BTG.
Thanks, a lot good morning.
Two quick ones from me first with any of the fixed cost growth that we saw in the fourth quarter related to some of the initiatives that you guys had talked about with building out reworks in new categories like fashion, Toronto, and then <unk>.
On the marketing side that might be a little bit too micro but how important is you guys have been shifting budget makes around how important channel like tick tock become.
And if it is sort of rising as a percentage of the mix and what are you seeing there conversion wise. Thanks a lot.
Sure. Thanks for the question. So in terms of reworks, obviously, we're ramping up integration efforts and staffing up there really for execution around design entertainment as of now obviously, we have granted our visions for other genres going forward, but the focus right now is integration and growth of <unk>.
In terms of marketing channels, obviously, we're diversifying we're using a variety of influencers and other new channels as well but.
But we don't comment on specific performance for any given category, obviously, it's competitively sensitive.
Understood. Thanks.
And I'm not showing any further questions at this time I'd like to turn the call back to correct for any closing remarks.
Yeah.
Thank you everyone for listening in and.
We will talk soon thank you.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
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