Q2 2023 SciPlay Corporation Earnings Call
Hello, and welcome to the SIFI second quarter 2023 conference call. All participants are in listen only mode. Please note today's call is being recorded.
At this time I'd like to hand, the floor over to Rob Leaner Vice President of Investor Relations. Please go ahead.
Good morning, everyone. This is Robert Weiner speaking I am the Vice President Investor Relations precise, but before we begin our formal remarks. Please note that we will not be conducting a question and answer session due to light wonders pending proposal to acquire the company's outstanding shares, which it does not already own.
During today's call our team will discuss the 2023.
<unk> quarter financial results and operating performance with me today are Josh Wilson, CEO , Daniel Oh, Quinn interim CFO our call today will contain remarks include forward looking statements under the private Securities Litigation Reform Act of 1995.
Payments involves certain risks and uncertainties that could cause the actual results to differ materially from those discussed during the call.
For more information regarding these risks and uncertainties. Please refer to our earnings release issued earlier today and our filings with the SEC.
We will also discuss certain non-GAAP financial measures, including key performance indicators, which are based on in App purchases only a description of each non-GAAP measure.
Reconciliation of each non-GAAP measure to the most directly comparable GAAP measure can be found in our earnings release as well as in the investors section on our website.
As a reminder, this conference call is being recorded.
A replay of this webcast will be archived in the investors section of our website at Si play Dot com.
Now I am please turn the call over to Josh.
Good afternoon, and thank you for joining US today, we are excited to share the latest updates from Si play.
Let's dive right in.
For the sixth consecutive quarter five play has outperformed the entire social casino market.
Revenue grew $190 million up from $160 million eight Q2 last year.
This is a strong 19% year over year crop it demonstrates the resilience of our games and that consistent engagement of our player base.
We deliver great gaming and entertainment experiences to our customers thanks to our terrific side flaky.
Net income was $41 million, an increase of 28% compared to last year's second quarter.
EBITDA performance was exceptional.
We achieved 45% year over year aircrafts with party $59 million in EBITDA in Q2 up from $41 million compared to last year's second quarter.
Five players experiencing the success, because we deliver unrivaled lineup and have incredible disciplined marketing strategy.
Our teams continue to develop games that attract retain and grow the players and then convert them into pants.
In terms of marked out we achieved an impressive new record of 93 in Q2, representing 26% year over year. Accra. Additionally, our average monthly revenue per paying user rose, 12%, reaching a record of $102.04 compared to 91.
And 99% in.
In Q2 over the previous year Q2 proved to be strong partner by typical seasonal patterns.
During the warmer months players generally engage in few words like fashion.
Manage that seasonal trend, we remain vigilant and carefully analyze the data and the trends.
We plan accordingly.
That's using predictive analytics, we also implement traditional and half marketing strategies to ensure continued growth of our user base.
To maximize returns we made strategic adjustments in our marketing approach, we reduced our UA spend during the second quarter and reallocated into the second half of the year when returns are expected to be higher.
We have kept them in particular by on all Kpis.
Spike Q2, a slight decrease in user behavior. We maintained the reason about CPI levels and combined with the marketing spend pullback, we weren't able to surpass our profit margin expectations on a sequential basis, we anticipate a slight dip in Q3 profit. This is due to the.
Patient of marketing spend from the previous quarter.
We continue to make tremendous strides in converting our nearly 6 million monthly active.
Users into loyal paying customers.
This is a clear testament to our ability to seize the opportunities and capitalize on our basketball of active players. This is yet. Another example of how our dedication and expertise turn engagement into real life Sally.
It is also worth emphasizing that we hit our highest payer conversion rates today with an impressive 10, 5% in Q2.
Through dynamic targeting we are driving quality install retaining players with entertaining content and converting players with our highly engaging live ops side.
I play it has enormous runway for the future growth there continued conversion of our player base into paying customers.
Even with the seasonal fluctuations in the market place by place remain strong momentum without any signs of consumer slowdown.
Our leading game franchises jackpot party social casino.
Catch slot and golf fish casino continue to captivate, our players they pushed the boundaries and are setting new records. In fact, according to data AI Q2 report. These games are ranked in the top three fastest growing social casino games in the U S.
Yeah put party social casino had strong double digit growth year over year and its fourth consecutive quarterly revenue record.
A highly popular title dominated the chart once again being listed as data AI is number one social casino game in the U S for the third consecutive quarter.
As far posted its sixth consecutive quarterly revenue record celebrating two straight years of correct.
And its fourth consecutive quarter quick hit slots has secured the possession of the past.
Fastest growing games and social casino category According to data.
Goldfish Casino also had a record quarter in Q2 with double digit growth year over year. The game continues to gain momentum posting a high single digit increase in revenue quarter over quarter.
These three leading games continues to outpace the market exciting new features and engaging unparalleled live off of driving their success.
We are further advancing the balance of our portfolio by playing these valuable insights and learnings from our larger game franchises.
For example, we are also seeing solid year over year growth and momentum from 88 fortunes.
<unk> has a competitive lead in the industry as the result of bond articulates planning and highly disciplined guidance strategy.
Our player first focus drives everything we do.
The wide application of the <unk> engine across all of our games has made it possible to provide highly personalized player experiences.
Pay attention to every single player.
We continue to evolve our investments such as data analytics.
<unk> marketing innovation, DTC and new game every dollar we invest carefully analyzed to deliver the best impact to our shareholders.
So I play as it stands our AD monetization infrastructure to strengthen our position in the in App advertising market, what the integration of Electus completed.
Exceptional marketing a game teams are leveraging the enhanced resources to capture valuable first party data and further improve our player experiences. These developments are pivotal to our forward looking strategy and will contribute to our ongoing success, including the law.
Two new IAA gains later this year, we are actively laying the foundation for sustainable long term growth.
We remain fully committed to continuously and strategically investing throughout our organization.
We are constantly improving operations optimizing processes and staying ahead of the industry trends.
This allows us to deliver exceptional value to the shareholders.
Can you see I'm thrilled with our performance.
We are expanding our global communities through channel development, and new channels entries and with our collaboration with Leiden Wonder we are extending our reach and impact with cross market and cross marketing opportunities.
Our mutual R&D partnership serves as both a catalyst for new content development and also reliable testing and Jay for both companies.
The menu the backbone of our success is our exceptional team a group of visionary leaders and experts with various domains, including data development analytics engineering and marketing with their deep collective knowledge and skill set.
Tenuous to innovate create deliver and to cheat.
By players that dynamic company, performing exceptionally well investing in the future sustainable growth and increasing competitive advantages.
We are very disciplined company guided by our performance measurement and our Kpis.
We are stringent objectives around rois and built a proprietary capability.
Looking ahead, we are excited about <unk> prospects for the rest of the year.
Our strong execution.
<unk> outperformance of the social casino market and our unwavering passion to win will undoubtedly help us to achieve our goal.
I wanted to extend my pride and gratitude to the entire SIFI came.
From around the world for their commitment and exceptional contributions that set us apart.
Tell us toward continuing growth and success now a more detailed review of our financial numbers Daniel.
Thanks, Josh.
Good afternoon, everyone.
And thank you for joining our call today.
I played continued to perform at a high level in the second quarter of 2023.
Our performance further illustrates the quality of our earnings.
Cash flow stream.
And the sustainability of our growth.
We're delivering engaging experiences to our players.
Retaining them in our games and heightening, our payer base and their monetization.
So I played once again outperformed the social casino market for the sixth consecutive quarter.
Let me repeat.
We've been a top performer for the past six quarters in a row.
We're delivering this performance consistently.
We're driving it through our top game franchises.
We're not buying growth.
Not cutting cost or limiting our investments.
We're doing the right things operationally and strategically.
Today side plays the healthiest position in the company's history.
We have three game franchises achieving industry leading performance.
And all three have set new revenue records this quarter.
As we continue to lead we continue to invest in the Bubbling.
Current and new games.
New growth initiatives.
In proprietary technologies and systems to enable organizational scalability.
We're a player first focused and buy.
By executing on that mission, we're delivering wins for our customers and our shareholders.
Together, we're building a stronger business with better entertainment experiences and increasing shareholder value.
As Josh mentioned.
Our game franchises continue to win in the marketplace with players driving strong year over year revenue growth and Kpis.
Our largest three games all set new quarterly revenue records driving quality growth in revenue earnings and cash flow.
This is fueled by our games with the longest presence in the market.
Which underscores the stickiness of our content and the resilience of our payers.
Now I'll turn to the financial performance details.
Revenue was $190 million.
19% year over year.
This marks our fourth consecutive quarterly revenue record.
Net income for the same period was up 28% and <unk>.
Q2, reaching $41 million and translating into a 22% net income margin.
Diluted earnings per share attributable to Si play was 25 cents.
Representing a 9% growth year over year.
EBITDA grew 45% year over year to $59 million, achieving a margin of 31% in Q2.
As Josh mentioned earlier.
We adjusted our marketing spend to maximize returns.
We reduced UA spend in the second quarter and reallocated that budget to the back half of the year.
We anticipate higher returns.
As a result.
We expect decreased margins on a sequential basis.
We increase our marketing in Q3.
We sit in the U K P. Our records again this quarter for.
For the second time remember our average monthly revenue per paying users surpassed $100.
Reaching an impressive $102.04.
This marks the 13th consecutive quarter above $90.
We also set a record for opt out of 93.
An increase of 26% year over year.
And we grew our payers, 9% year over year to 609000.
So I placed financial foundation is strong.
Year to date operating cash flow of $102 million with $395 million in cash and total liquidity of $545 million.
We have considerable financial strength and flexibility.
This enables us to effectively deploy excess capital to drive increasing shareholder value.
We focus on organic growth drivers, including our games technology systems people and our global reach.
My focus is delivering our strategic objectives, which are designed to.
One spur profitable growth with discipline and based on returns.
True.
<unk> manage our resources as we reach for new opportunities.
And three invest wisely to continue driving our leading competitive position in the market.
Often we're asked the question.
How does <unk> play consistently perform at such a high level.
It boils down to investing in our people organic growth and technology to drive this board as a company.
Our three largest and best performing game franchises have been in the market for a long time.
And over the years, we've learned and adapted to an agile environment.
But at the core it's our daily focus on players and the games that we deliver to them.
The majority of our revenue and profit comes from organic growth of our game portfolio.
This is a key point.
Illustrating the quality and sustainability of our cash flow and earnings stream.
It is also an important distinction precisely.
As a prominent player in the mobile gaming industry.
Majority of our success stems from organic investments and internal resources.
This solid foundation sets us apart from others.
We've relied on our own capabilities to achieve our position in the market.
With such a strong groundwork in place, we can continue to invest and integrate innovative growth opportunities.
And further amplified our in house strengths.
Our investments made during 2022 in the current year had been designed to leverage our strong platform to further to our competitive lead.
Those investments fueled the creation and development of new and emerging opportunities for growth.
The payoff from these investments is evident in our operational and financial performance.
We also employ dynamic strategies that win in the marketplace.
As illustrated by our Q2 performance.
We invest wisely and with discipline to ensure we adhere to our ROI driven criteria.
Sure a few examples of our fiscal discipline and prudent decision making.
We reduced our UA spend in Q2.
Due to lower Rois visibility and returns.
We closed our Finland studio and its affiliated game.
We continued investment in the side play engine.
And finally.
We repurchased $60 million of <unk> shares since may of 2022.
Including repurchases of nearly $15 million or approximately 860000 shares during the second quarter.
And our Q1 call I outlined some factors that have influence on our operational and financial performance. This year.
To review.
So Jerry O'connell campaign in Q1 with such a success it will be running another round in Q3.
Well, it's incremental UA investment in the second half of the year.
With the integration of Electus completed.
We've incorporated its resources and capabilities across our platform.
We anticipate launching new in App advertising games by the end of this year.
We'll have an increase in marketing spend to test those games beginning in Q3.
Like many other companies, we're experiencing rising cost driven by growing concerns surrounding global privacy and data security.
As a result, we.
We will need to invest more than originally planned for this year.
This area is a paramount importance.
And it's constantly evolving in the industry.
As a consequence, our current year's investment will exceed.
Our initial projections and we're planning for an increase in 2024.
Finally, we discussed in our last call.
Approximately $5 $5 million impact, we anticipate for legal expenses.
Thin stayed allegations and legal matters.
We incurred about $1 million in Q2 with.
With about $2 million per quarter anticipated in each of the next two quarters.
In summary.
We remain focused on achieving three primary goals.
To outpace the growth in social casino market and take share.
To expand our margins prudently, but not at the expense of investing in future growth.
And to reliably generate strong and growing operating cash flows.
We are confident that our team's determination to succeed.
We will enable us to obtain these objectives.
And generate increasing shareholder value.
Through our sustain industry leading performance.
Our team's strong execution is expected to continue fueling outperformance in the social casino market.
Thank you for your time.
Thank you for joining us today, we shared some updates and achievements.
Our commitment to being the best remains unwavering and are rooted in the culture and the spirit of our amazing team we.
Look forward to continued growth delivering value to our shareholders and providing exceptional entertainment experiences. Thank you and have a great day.
The conference has now concluded. Thank you for your participation you may now disconnect your lines.