Q3 2023 Playtika Holding Corp Earnings Call

November 8, 2023

Good day, and thank you for standing by and welcome to the Q3 2023 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.

To ask a question during the session you will need to press star one on your telephone you will then hear an automated message advising your hand is raised.

To withdraw your question. Please press star one again.

Please be advised that today's conference is being recorded.

Now I'd like to hand, the conference over to your first speaker today totally SVP corporate finance and Investor Relations. Please go ahead.

Welcome everyone and thank you for joining us today for the third quarter of 2023 earnings call, replacing a holding corp.

Joining me on the call today are Robert ended the call co founder and CEO.

And Craig Abrahams, <unk>, President and Chief Financial Officer.

I'd 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.

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.

The 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 the call.

We have posted an accompanying slide deck to our Investor Relations website, which contains information on forward looking statements and non-GAAP measures.

We'll also post our prepared remarks immediately following the call for a more complete discussion of the risks and uncertainties. Please see our filings with SEC.

With that I will now turn the call over to Robert.

Good morning, and thank you everyone for joining our call today.

Before we speak about our business and financial results.

I would like to take a moment to address the current situation in Israel, which has affected us all.

As you all well.

As it relates to recently faces tragic Intensiveness Act of terrorism that has left our house.

Heavy with Greece.

Fortunately I can report that all play to get team members are currently accounted for and safe.

<unk> expansion, we do know that some of our colleagues are experiencing a greenfield heavily lost loved ones.

Our hearts go out to them and we offer our deepest condolences and support.

We are committed to ensuring the safety of our team the success of our businesses and our unwavering support for our community.

We conduct significant operation in Israel, and most of our senior management is based in our city office.

Most corporate function led from the U S.

We have approximately 1100 employees in Israel, which represent approximately 29% of our global workforce.

As from this week about 14% of our colleagues in Israel has been activated from the Israeli military sales.

As we continue to closely manage this situation we are beginning our business contingency planning and we will make necessary adjustment as situations progress.

Currently our team members in Israel are mostly working from home with support from our colleagues across the global offices of Politico.

We have moved a limited number of employees from Israel to Poland and Romania.

Provide redundancy in case of situating in Israel escalates.

Our technology infrastructure stands as a critical pillar supporting the performance of our games.

Ensuring uptime.

You may know for or against the opera ads on our private clouds, which are maintenance through two data centers in the U S and other data center in the EU, the quality and corporate infrastructure.

We wanted to emphasize that the company with a history of operating in the region facing geopolitical challenges. We believe we are well prepared to navigate the challenges with the war in Israel.

We remain committed to safeguarding our operation our employees.

Interest of our shareholders.

We have faced adversity before and we have always emerged.

Stronger and more United.

I will now turn it over to Craig to speak about the quarter.

Thank you Robert.

Before we dive into the business and financial results for the quarter.

I'd like to highlight our recent strategic acquisitions of in play Labs and unit games.

Our acquisition of N play offers an expansion into a new exciting luck battle genre with a growing player base.

In play is an Israeli based company known for the recently rebranded title animals and coins.

Animals and coins is an emerging title with high growth potential and.

And we structured the earn out to be reflective of our goal to fuel this growth profile.

This transaction is a testament that our footprint in mobile gaming hubs around the world continues to benefit us as we evaluate local M&A prospects.

Earlier in the quarter, we also announced a carve out acquisition of the unit games portfolio known for their largest franchise governor of poker.

We are encouraged by the fact that we not only acquired this portfolio at an attractive multiple but it is also EBITDA accretive on day one.

This transaction has an earn out structure in place to incentivize.

The team to maximize EBITDA contribution and focus on profitable growth.

This transaction also serves as a testament to our proficiency and executing complex acquisitions.

We successfully acquired an asset of another business in a region, where we lacked an existing footprint, while enhancing our portfolio with a proven franchise.

As we look to next year, we have a positive view of the M&A market conditions and remain committed to capitalizing unfavorable opportunities.

The robust free cash flow generation of our business model and large cash position enables us to self finance, our acquisitions, which is a competitive advantage in the current market environment.

Furthermore, I'm also excited to highlight our recent partnership with Netflix, where we launched our internally developed title goes detectives a hidden object game built by our <unk> studio.

This is a significant milestone that represents our ability to deliver best in class entertainment experiences to global audiences across many platforms.

Turning to our financial results our performance in the quarter was consistent with the seasonal headwinds we typically face in the third quarter and is in line with our expectation for the industry to be flat to slightly down this year.

For the quarter, we generated $631 million of revenue down, 2% sequentially and two 7% year over year.

Net income was $37 $9 million, including the impact of an impairment charge of $41 $6 million related to <unk>.

Compared to net income of $68 $2 million in Q3 of 2022.

Credit adjusted EBITDA was $205 6 million down four 4% sequentially and up 1% year over year.

Our credit adjusted EBITDA margin was 32, 6% in the quarter compared to 33, 4% in Q2 and 31, 4% in Q3 last year.

We generated $161 million in revenue from our direct to consumer platforms down two 6% sequentially and up six 8% year over year or.

Our direct to consumer business now makes up 25, 6% of our overall revenues down slightly from 25, 7% last quarter.

Turning now to our business results for the quarter revenue across our casual theme games declined two 1% sequentially and was flat year over year.

The double digit growth year over year in <unk> journey and solids are grant harvest was offset by declines in other titles, such as bingo Blitz, best beans and <unk>.

<unk> revenue was $149 7 million down four 3% sequentially and four 6% year over year.

While we saw slight declines in bingo topline performance, we are confident in the long term health and growth profile of this game.

As the largest game in our portfolio. It was partially negatively affected by some of the largest and fastest growing casual games in our industry, making substantial performance marketing investments.

<unk> remains the number one game in its category with a strong community of dedicated and loyal players.

Solgel Grant harvest revenue was $79 1 million down three 3% sequentially off a record Q2 and up 13, 7% year over year.

While we experienced some normalization quarter over quarter. The studio experience successful feature launches in September the main contributions being the release of team versus team and the release of pets.

Shifting to our social casino themed games, social casino themed game revenue declined one 7% sequentially and down six 6% year over year.

<unk> revenue was $141 9 million down one, 9% sequentially and down five 5% year over year.

Despite the seasonal headwinds in the third quarter, we are encouraged to see sequential stabilization and spot ammonia and whilst <unk> continues to decline year over year. We are encouraged to note. This pace of decline has moderated compared to prior quarters.

We have started to invest more in marketing of the studio alongside content packages released in the quarter.

Turning now to specific line items in our P&L for the second quarter.

Cost of revenue decreased four 3% year over year, primarily due to an increase in revenues flowing through our direct to consumer platforms.

Operating expenses declined 3% year over year.

R&D decreased by 11, 2% year over year.

The lower R&D expenses were driven by savings in labor costs from our reduction in force earlier, this year and savings from various discretionary operating expenses across the organization.

Sales and marketing decreased by one 8% year over year decline in sales and marketing expenses year over year was driven by reduced head count slightly offset by increased performance marketing and other marketing expenses as we look to be opportunistic in investing in our largest titles as we mentioned at the beginning of this year.

G&A expenses increased by seven 4% year over year.

Savings across certain discretionary G&A categories were offset by a reversal in contingent considerations that we booked in Q3 of fiscal year 2022 regarding M&A retention payments related to the earn out of our <unk> acquisition.

On an adjusted basis G&A declined by six 9% year over year.

As of September 30, we had approximately $878 $2 million in cash and cash equivalents.

Looking at our operational metrics average GPU declined three 5% year over year to 299000 <unk>.

Average <unk> declined by six 7% year over year to $8 4 million.

Primarily driven by declining VA, you invest means slot ammonia and <unk>.

Despite the decline in average <unk>, Romania, we're encouraged to see stabilization in slide <unk> in the quarter.

Our focus on tier one Tao.

Also contributed to the decline in average down.

<unk> increased three 8% year over year to 81.

As for our financial guidance for 2023, we are revising our revenue range to $2 55 to 256 5 billion.

And we now expect credit adjusted EBITDA between 825 and $832 million.

We expect capital expenditures of approximately $95 million.

While we are focused today on our Q3 performance. It is important to acknowledge the current warrant Israel and the potential impact of future business performance.

The ongoing conflict is dynamic and highly uncertain.

While we are not providing specific guidance for next year at this point, we want to make it clear then escalated conflict manage reduce various challenges that may impact our financial performance.

We will continue to adapt and respond as needed to attempt to ensure the best outcome for our company our employees and for our shareholders.

We kindly request that questions. During this earnings call remain focused on our business developments and financial performance for the quarter, allowing us to provide you with the most relevant and important updates.

Thank you for your understanding and support with that we'd be happy to take your questions.

Thank you at this time, we will now conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Please stand by while we compile the Q&A roster.

Our first question comes from the line of Aaron Lee of Macquarie. Your line is now open.

Your line is muted please on mute it.

Hey, guys, sorry about that thanks for taking my question.

I wanted to touch on the acquisitions of <unk> in play.

Just at a high level can you just talk a little bit more about the overall strategy there and how much marketing support you tend to support these games with I'm, just trying to better understand if the opportunity is more about revenue synergies are just running these gains a little bit more efficiently.

<unk>.

Sure. Thanks for the question, Eric I think both acquisitions are very different and play as a growth asset where we see a lot of potential and a very interesting new genre.

Thats a title where.

We intend to ramp up marketing and invest.

And I think if you look at the deal documents that were posted alongside the deal Youll see that it was structured in a way to allow us to invest and grow that asset I think when you look at a title like.

Governor Poker and Euro games Youre looking at a much more mature portfolio that is established.

And as an opportunity to leverage our live ops expertise and further optimize and help grow that business and so I think.

And Thats a business Thats EBITDA accretive day, one so I think each opportunity is very different one was more attractive on a relative valuation perspective.

Sure.

Franchise and the other one is an asset that will continue to invest in and grow.

Perfect that's very helpful. Thanks.

And also wanted to ask about your.

The user acquisition tools, you mentioned last quarter, the AI based solutions any color on the status or impact of those tools are they performing how you expected or.

Do you think it might need some more refinement.

Hey, Thanks for the question, it's Nicole Jack basic as CMO, so basically.

Said before this is an ongoing process that we're going to keep leveraging AI for internal tools.

We do see some improvement in some of the area, but we are keep testing it parallel to the other tools.

But I can tell that going forward, we will keep using AI tools into the marketing activity on a daily on an activity basis.

Great. Thank you very much.

Alright. Thank you one moment for our next question.

Our next question comes from the line of Arthur Chu of Bank of America. Your line is now open.

Hey, good morning, guys Arthur off Omar. Thanks, so much for taking the question. So I have a question on the DTC platform. I think you guys probably already have the highest DTC penetration.

The industry a lot of your peers see your DTC penetration and serve as a benchmark.

I was just wondering like how should we think about the potential for more uptake longer term like do you have sort of longer term target in line or just anything to Ken Ken.

Ken kind of help us think about that would be super helpful. Thank you.

Thank you for your question.

Spoke a few quarters ago.

We target to 30% of our.

Our revenues and now we are willing target we're growing this year.

We're feeling very.

Very confidence about the future.

<unk>.

And this year, we are launching.

Solid we're launching June Germany, and we believe it would help.

Grow the percentage, but again this is a very powerful tool of play pickup. This is a tool that we started a few years ago and it's a big adventure and vintage of us not only by revenues is by our ability.

To be more free and a more independent total sales. Thank you.

<unk>.

Thank you.

Thank you one moment for our next question.

Our next question comes from the line of Eric Sheridan of Goldman Sachs. Your line is now open.

Thanks, so much for taking the question I know it might be a little early to talk about next year, but in terms of what's being implied in terms of exit velocity for the business can you unpack a little bit of the elements of acquired games developed games it internally and how should we be thinking about the growth algorithm for the business exited.

2023.

Against maybe a broader view of what you think the end market or the industry might grow as we move into next year. Thanks, So much.

Sure. Thanks, Eric so.

Our focus continues to be executing on our largest franchises and investing in growth there.

And harvest June's journey Bingo Blitz.

Reinvesting in slot ammonia continuing to be the number one slot game in the category.

We're also working on reestablishing our leadership position in slots are a central slides strategy the opportunity to really efficiently across pollinate all of our titles with our best slot content.

And then layer on M&A, we just did two acquisitions this past quarter I think.

The market environment is such that.

With high interest rates depressing valuations plus more challenging marketing environment for smaller studios.

Combined with our large cash position and free cash flow, we generate we are very well positioned.

To continue acquiring great assets, and so I think thats really where our focus is going into next year.

On the earnings call for Q4 in February we intend to give guidance for 'twenty four.

Strategically hopefully that gives you a sense of what we're planning.

Alright. Thank you for your question one moment for our next.

Our next question comes from the line of Colin Sebastian of Baird. Your line is now open.

Thank you and glad to hear everyone in the team in Israel is safe and know that you are in our thoughts.

I guess first off given some of the sequential trends in the business.

Maybe it'd be helpful to provide some additional context on where you see the health of the broader market and what Youre seeing maybe from from your competitors.

And related to that regarding the additional performance marketing spend is that something we should.

Thank you.

Should expect more of as well through Q4.

And does that does that sort of part of our stabilization plan for the core franchises. Thank you.

Sure. Thanks.

Q3 seasonally is the slowest quarter of the year. So I think looking at sequential comparisons there are sometimes challenging there invest.

And best of luck kind of year over year.

That said.

The quarter was probably most impacted by the performance of <unk>.

<unk> is our biggest title.

I think as you look at sort of if you look at third party sites and look at more recent performance.

Over the last.

Several weeks you will see that that title is a bounce back in so I think if you look at our guidance for the year that we provided.

Youll see confidence there and.

As we look going forward, we will continue to invest in our biggest titles, where we see the best growth potential and best ROI. So I think as we look at the industry more broadly big brands large franchises that can invest more material and marketing definitely have an advantage in UC performed kind of better in the rankings.

That position positions us quite well and then combine that with our M&A capabilities in a mature market that that's consolidating we feel pretty well positioned.

Okay, and anything any comments on sort of the pace of performance marketing spend.

So regarding the performance marketing basically this was part of our strategy from the beginning focusing more on quality versus quantity.

So in some of the games, where we see a potential home performance marketing side, we will keep invest in that as a special that we can add right now.

Okay. Thanks, guys I appreciate it.

Thanks.

Alright. Thank you for your question.

As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced.

Please standby, while we wait for additional questions.

Okay, I am showing no further questions at this time.

Well actually we just had one pop up there one moment, while I pull this one off.

This question comes from Matthew cost of Morgan Stanley. Your line is now open.

Hi, Tim This is Dave will cargo on for Matthew Cross. Thanks for taking the question I was wondering if you could speak to expectations on any differences in performance versus social performance of social versus casino games heading into next quarter and maybe into 2004.

So thanks for the question Dan.

Yes, when we are reporting we're always speaking about social casino and social casino, but we as a company and we said in the past we are always looking game by game and this is a this is al.

Strategic how we're running our old games, so those even in the social casino aspect.

Craig said before with lots of money.

It becomes very stable.

We fixed many things in the last in the last quarter and we see we see a future with the future until it's only depend where we've put together a marketing money, where we decided to put the marketing money and when we see potential of growing it doesn't meet the social casino casual or other kinds of game. This is where we are doing.

This.

So till now.

Ill happy with what's happening in your own social casino.

Happy more than happy about what happened and run this look Romania. Because this is our biggest title in this genre and we see a good future for this thank you.

Thanks.

Thank you for your question.

I'm showing no further questions at this time I'd.

I'd like to thank you for your participation in today's conference. This does conclude the program you may now disconnect.

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Good day and thank you for standing by welcome to the <unk> Q3 2023 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.

To ask a question during the session you will need to press star one on your telephone you will then hear an automated message advising your hand is raised.

To withdraw your question. Please press star one again.

Please be advised that today's conference is being recorded I would now.

Now I'd like to hand, the conference over to your first speaker today Daily SVP corporate finance and Investor Relations. Please go ahead.

Welcome everyone and thank you for joining us today for the third quarter 2023 earnings call for <unk> holding Corp join.

Joining me on the call today are Robert ended the call co founder and CEO and Craig Abrahams play Diaz, President and Chief Financial Officer.

I'd 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.

These statements and other comments are not a guarantee of future performance, but rather.

They are subject to risks and uncertainties some of which are beyond our control.

The 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 the call.

We have posted an accompanying slide deck to our Investor Relations website, which contains information on forward looking statements and non-GAAP measure. We will also post our prepared remarks immediately following the call for a more complete discussion of the risks and uncertainties. Please see our filings.

With that I will now turn the call over to Robert.

Good morning, and thank you everyone for joining our call today.

Before we speak about our business and financial results.

I would like to take a moment to address the current situation in Israel, which has affected us all.

As you all know well Israel recently faces tragic intensiveness actual steadily.

Has left our.

Heavy with grief.

Fortunately I can report that all play to get team members are currently accounted for and safe.

This expansion, we do know that some of our colleagues are experiencing a greenfield having lost loved ones.

I will have go out to them and we offer our deepest condolences and support.

We are committed to ensuring the safety of our team the success of our businesses and our unwavering support for our community.

We conduct significant operation in Israel, and most of our senior management is based in our city office.

Most corporate function led from the U S.

We have approximately 1100 employees in Israel, which represent approximately 29% of our global workforce.

As Tom this week about 14% of our call HPV has been excavated from the Israeli inhibitor.

As we continue to closely manage this situation we are beginning our business contingency planning and we will make necessary adjustment as situations drug risks.

Currently our team members in Israel are mostly working from home, we support from our colleagues across the global offices of Politico.

We have moved the limited number of employees, but it means.

So Paul in Romania.

To provide redundancy in case the situation in Israel escalates.

Our technology April Thanks, Joe stands as a critical pillar supporting the performance of Hollywood game.

Ensuring uptime.

You May know fall against the opera ads on our private clouds, which are maintenance through Q <unk> in the U S and that's a tender in the EU the quality and corporate infrastructure.

We want to emphasize that the company with a history of operating in the region facing geopolitical challenges. We believe we are well prepared to navigate the challenges with Diwali in Israel.

We remain committed to safeguarding our operation our employees and the interests of our shareholders.

We have faced adversity before and we have always emerged stronger and more United.

I will now turn it over to Craig to speak about the quarter.

Thank you Robert.

Before we dive into the business and financial results for the quarter.

I would like to highlight our recent strategic acquisitions of in play labs and Utica games.

Our acquisition of N play offers an expansion into a new exciting luck battle genre with a growing player base.

<unk> is an Israeli based company known for the recently rebranded title animals and coins.

Animals and coins is an emerging title with high growth potential and.

And we structured the earn out to be reflective of our goal to fuel this growth profile.

This transaction is a testament that our footprint in mobile gaming hubs around the world continues to benefit us as we evaluate local M&A prospects.

Earlier in the quarter, we also announced a carve out acquisition of the Utah games portfolio known for their largest franchise governor of poker.

We are encouraged by the fact that we not only acquired this portfolio at an attractive multiple.

It is also EBITDA accretive on day one.

This transaction has an earn out structure in place to incentivize the team to maximize EBITDA contribution and focus on profitable growth.

This transaction also serves as a testament to our proficiency and executing complex acquisitions.

In this instance, we.

<unk> acquired an asset of another business in a region, where we lacked an existing footprint, while enhancing our portfolio with a proven franchise.

As we look to next year, we have a positive view of the M&A market conditions and remain committed to capitalizing on favorable opportunities.

The robust free cash flow generation of our business model and large cash position enables us to self finance, our acquisitions, which is a competitive advantage in the current market environment.

Furthermore, I am also excited to highlight our recent partnership with Netflix, where we launched our internally developed title goes detectives a hidden object game built by our <unk> studio.

A significant milestone that represents our ability to deliver best in class entertainment experiences to global audiences across many platforms.

For the quarter, we generated $631 million of revenue down, 2% sequentially and two 7% year over year net.

Net income was $37 $9 million, including the impact of an impairment charge of $41 $6 million related to <unk>.

Compared to net income of $68 2 million in Q3 of 2022.

Credit adjusted EBITDA was $205 6 million.

Down four 4% sequentially and up 1% year over year.

Our credit adjusted EBITDA margin was 32, 6% in the quarter compared to 33, 4% in Q2 and 31, 4% in Q3 last year.

We generated $161 million in revenue from our direct to consumer platforms down two 6% sequentially and up six 8% year over year.

Our direct to consumer business now makes up 25, 6% of our overall revenues down slightly from 25, 7% last quarter.

Turning now to our business results for the quarter revenue across our casual game games declined two 1% sequentially and was flat year over year.

The double digit growth year over year in June's journey installs of our grain harvest was offset by declines in other titles, such as bingo Blitz, best beans and <unk>.

<unk> revenue was $149 7 million down four 3% sequentially and four 6% year over year.

While we saw slight declines in bingo topline performance, we are confident in the long term health and growth profile of this game.

<unk> remains the number one game in its category with a strong community of dedicated and loyal players.

Solgel Grant harvest revenue was $79 1 million.

Down three 3% sequentially off a record Q2, and up 13, 7% year over year.

Shifting to our social casino themed games, social casino themed game revenue declined one 7% sequentially and down six 6% year over year.

<unk> revenue was $141 9 million down one, 9% sequentially and down five 5% year over year.

Despite the seasonal headwinds in the third quarter, we are encouraged to see sequential stabilization in slot ammonia and whilst <unk> continues to decline year over year. We are encouraging note just pace of decline has moderated compared to prior quarters.

We have started to invest more in marketing in the studio alongside content packages released in the quarter.

Turning now to specific line items in our P&L for the second quarter.

Cost of revenue decreased four 3% year over year, primarily due to an increase in revenues flowing through our direct to consumer platforms.

Operating expenses declined 3% year over year.

R&D decreased by 11, 2% year over year.

The lower R&D expenses were driven by savings in labor costs from our reduction in force earlier, this year and savings from various discretionary operating expenses across the organization.

G&A expenses increased by seven 4% year over year savings across certain discretionary G&A categories were offset by a reversal in contingent considerations that we booked in Q3 of fiscal year 2022 regarding M&A retention payments related to the earn out of our <unk> acquisition.

Adjusted basis, G&A declined by six 9% year over year.

As of September 30, we had approximately $878 $2 million in cash and cash equivalents.

Looking at our operational metrics average GPU declined three 5% year over year to 299000.

Average <unk> declined by six 7% year over year to $8 4 million.

Primarily driven by declining da you invest means slot ammonia and <unk>.

Despite the decline in average <unk>, Romania, we're encouraged to see stabilization in slide <unk> in the quarter.

Our focus on tier one DAU also contributed to the decline in average down.

<unk> increased three 8% year over year to 81.

As for our financial guidance for 2023, we are revising our revenue range to $2 55 to 256 5 billion.

And we now expect credit adjusted EBITDA between 825 and $832 million.

We expect capital expenditures of approximately $95 million.

While we are focused today on our Q3 performance. It is important to acknowledge the current warrant Israel and the potential impact of future business performance.

The ongoing conflict is dynamic and highly uncertain.

While we are not providing specific guidance for next year at this point, we want to make it clear then escalated conflict manage reduce various challenges that may impact our financial performance.

We will continue to adapt and respond as needed to attempt to ensure the best outcome for our company our employees and for our shareholders.

Thank you for your understanding and support with that we'd be happy to take your questions.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of Aaron Lee of Macquarie. Your line is now open.

Your line is muted please on mute it.

Hey, guys, sorry about that thanks for taking my question.

I wanted to touch on the acquisitions of <unk> in play.

Just at a high level can you just talk a little bit more about the overall strategy there.

How much marketing support you tend to support these games with I'm, just trying to better understand if the opportunity is more about revenue synergies are just running these gains a little bit more efficiently. Thanks.

Sure. Thanks for the question, Eric I think both acquisitions are very different.

Clay as a growth asset, where we see a lot of potential and a very interesting new genre and thats a title where.

We intend to ramp up marketing and invest.

And I think if you look at the deal documents that were posted alongside the deal Youll see that it was structured in a way to allow us to invest and grow that asset.

When you look at a title like.

Governor Poker and Euro games Youre looking at a much more mature portfolio that is established.

And as an opportunity to leverage our live ops expertise and further optimize and help grow that business and so I think.

And Thats a business Thats EBITDA accretive day, one so I think each opportunity is very different one was more attractive on a relative valuation perspective with the more mature.

Franchise and the other one is an asset that will continue to invest in and grow.

Perfect that's very helpful. Thanks.

And also wanted to ask about your.

The user acquisition tools, you mentioned last quarter, the AI based solutions any color on the status or impact of those tools are they performing how you expected or.

Do you think it might need some more refinement.

Hey, Thanks for the question, it's Nicole Jack basic as CMO, So basically as we said.

Before this is an ongoing process that we're going to keep leveraging AI for internal tools.

We do see some improvement in some of the area, but we are keep testing it parallel to the other tools.

But I can tell that going forward, we will keep using AI tools into the marketing activity on a daily on that an activity basis.

Great. Thank you very much.

Alright. Thank you one moment for our next question.

Our next question comes from the line of Arthur Chu of Bank of America. Your line is now open.

Hey, Good morning, guys. This is Arthur off Omar. Thanks, So much for taking my question. So I have question on the DTC platform. I think you guys probably already have the highest DTC penetration.

The industry a lot of your peers see your DTC penetration and serve as a benchmark.

I was just wondering like how should we think about the potential for more uptake longer term like do you have sort of longer term target in line or just anything to Ken Ken.

Ken.

Help us think about that would be super helpful. Thank you.

Thank you for your question.

Bulk a few quarters ago.

We target to 30% of our revenues and now we are willing target we're growing this year.

<unk>.

We're feeling very confident about the future of <unk>.

And this year, we are launching.

Solid we're launching June Germany.

We believe it will help.

Grow the percentage, but again this is a very powerful tool of play to go. This is a tool that we started if you were to go and it's a big advantage and vintage of us not only by revenues is bio <unk>.

It.

To be more free and a more independent total sales. Thank you.

Thank you.

Thank you one moment for our next question.

Our next question comes from the line of Eric Sheridan of Goldman Sachs. Your line is now open.

Thanks, so much for taking the question I know it might be a little early to talk about next year, but in terms of what's being implied in terms of an exit velocity for the business can you unpack a little bit of the elements of acquired games developed games it internally and how should we be thinking about the growth algorithm for the business exiting <unk>.

23 against maybe a broader view of what you think the end market or the industry might grow.

We move into next year. Thanks, so much.

Sure. Thanks, Eric so.

Our focus continues to be executing on our largest franchises and investing in growth there South Africa's harvests June's journey Bingo Blitz.

Reinvesting in slot ammonia continuing to be the number one slot game in the category.

We're also working on reestablishing our leadership position in slots are a central slots strategy the opportunity to really efficiently cross pollinate all of our titles with our best slot content.

And then layer on M&A, we just did two acquisitions this past quarter I think.

The market environment is such that.

With high interest rates depressing valuations plus more challenging marketing environment for smaller studios.

Combined with our large cash position and free cash flow, we generate we are very well positioned.

To continue acquiring great assets, and so I think thats really where our focus is going into next year.

On the earnings call for Q4 in February we intend to give guidance for 'twenty four.

Or at least strategically hopefully that gives you a sense of what we're planning.

Alright. Thank you for your question one moment for our next.

Our next question comes from the line of Colin Sebastian of Baird. Your line is now open.

Thank you and glad to hear everyone in the team in Israel Safe and know that you are in our thoughts.

I guess first off given some of the sequential trends in the business.

Maybe it would be helpful to provide some additional context on.

You see the health of the broader market and what Youre seeing maybe from from your competitors.

And related to that regarding the additional performance marketing spend is that something we should.

I think that we should expect more of as well through Q4 and does that does that sort of part of our stabilization plan for the core franchises. Thank you.

Sure. Thanks, So Q3 seasonally the slowest quarter of the year. So I think looking at sequential comparisons there are sometimes challenging there invest.

And best of luck kind of year over year.

That said.

The quarter was probably most impacted by the performance of <unk>.

<unk> is our biggest title.

I think as you look at sort of if you look at third party sites and look at more recent performance.

Over the last.

Several weeks, you'll see that that title is bounce back and so I think if you look at our guidance for the year that we provided.

Youll see confidence there.

As we look going forward, we will continue to invest in our biggest titles, where we see the best growth potential and best ROI. So I think.

As we look at the industry more broadly big brands large franchises that can invest more material and marketing definitely have an advantage in UC performed kind of better in the rankings.

I think that position positions us quite well and then combine that with our M&A capabilities in a mature market that that's consolidating we feel pretty well positioned.

Okay, and anything any comments on sort of the pace of performance marketing spend.

Yes.

So regarding the performance marketing basically this was part of our strategy from the beginning focusing more on quality versus quantity.

So in some of the games, where we see a potential home performance marketing side, we will keep invest them that nothing special that we can add right now.

Okay. Thanks, guys I appreciate it.

Thanks.

Alright. Thank you for your question.

As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced.

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Wait for additional questions.

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Well actually we just had one pop up there one moment, while I pull this one off.

This question comes from Matthew cost of Morgan Stanley. Your line is now open.

So thanks for the question Dan.

Yes, when we are reporting we're always speaking about social casino and social casino, but we as a company and we said in the past we are always looking game by game and this is a this is al.

Strategic how we're running our old games, so those even in the social casino aspect.

Craig said before with lots of money.

It becomes very stable and we fixed many things in the last in the last quarter.

We see we see a future with the future until it's only depend where we put together a marketing money, where we decided to put the marketing money and when we see potential of growing it doesn't meet the social casino casual or other kind of game. This is where we're doing this so they allow well.

Happy with what's happening here, one social casino.

Are we happy more than happy about what happened and can run this look Romania. Because this is our biggest title in this genre.

We see a good future for this.

You.

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