Q2 2024 Playtika Holding Corp Earnings Call
Good day and thank you for standing by.
Operator: to the 2024 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, one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star, one, one again. Please be advised that today's conference is being recorded. I would now like to turn the call over to your first speaker today, Tae Lee, SVP of Corporate Finance and Investor Relations. Please go ahead.
Speaker Change: 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 1 1 on your telephone.
Speaker Change: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again.
Speaker Change: Please be advised that today's conference is being recorded. I would now like to turn the call over to your first speaker today, Tae Lee, SVP of Corporate Finance and Investor Relations. Please go ahead.
Speaker Change: Joining me on the call today are Robert Antokol, co-founder and CEO of Playtika, and Craig Abrahams, Playtika's president and chief financial officer.
Tae Lee: 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 guarantees of future performance but rather are subject to risks and uncertainties, some of which are beyond their control. We undertake no obligation to update these statements after this call. We've posted an accompanying slide deck on our investor relations website, which contains information on forward-looking statements and non-GAAP measures, and we'll also post our prepared remarks immediately following the call. With that, I'll now turn the call over to Robert.
Speaker Change: 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 their control.
Speaker Change: For a more complete discussion of the risks and uncertainties, please see our filings with the FCC.
Speaker Change: With that, I'll now turn the call over to Robert.
Robert Antokol: Good morning, and thank you everyone for joining our call today and our strategic initiative. Starting with our largest franchise title and a slight quarter over quarter decline, I'm excited to announce that we plan to launch our latest new game, Claire's Chronicles, in Q2 of 2025. And we are confident in the studio's ability to rebound and perform strongly. Anyone who wants coins and Governor of Poker 3.
Robert Antokol: As we review our second quarter results, it is important to note that this quarter aligns with our historical seasonality and the roadmaps we have set forth.
Robert Antokol: While our overall revenue for the quarter reflects some roadmap challenges.
Robert Antokol: starting with our largest franchise title.
Robert Antokol: We observed trades in direct-to-consumer revenue, and we believe there is still upside remaining.
Robert Antokol: We continue to enhance the game with new features and content to keep our players engaged and excited.
Robert Antokol: June journey experienced some feature delays in the first half.
Vurga: Our team at Vurga is committed to delivering high quality, engaging content that resonates with our players, and we are confident at the studio's ability to rebound and perform strongly.
Speaker Change: Additionally, I would like to highlight the performance of our recent acquisitions.
Speaker Change: Anne-Marie Coyne and Governor of Forklift III.
Robert Antokol: Governor Poker 3 has shown consistent growth, increasing quarter over quarter since the acquisition. We're actively looking for opportunities to broaden our game offering and to improve our market position. We are taking strategic steps to ensure sustained growth and profitability. I will hand over to Craig for a more detailed review of our performance this past quarter.
Speaker Change: We are pleased with the progress of both studios.
Speaker Change: We're actively looking for opportunities to broaden our game offering and to improve our market position.
Speaker Change: We are taking strategic steps to ensure sustained growth and profitability.
Speaker Change: We remain committed to delivering value to our players and shareholders and our focus on the execution remains strong.
Speaker Change: We are confident in our path forward, and we believe that our strategic initiative
Speaker Change: will position us for success in the coming quarters.
Speaker Change: I will hand over to Craig for a more detailed review for our performance this past quarter.
Craig Abrahams: Third-party research consistently positions Flautamania as the number one grossing sociopathy game in the industry. As part of our ongoing initiatives, I am pleased to announce a new licensing deal with IGT. R&D increased slightly by 0.3% year-over-year.
Craig Abrahams: Third-party research consistently positions Slotomania as the number one grossing social casino-themed game in the industry.
Speaker Change: However, we have faced challenges in recent years as we have lost market share in a highly competitive category.
Craig Abrahams: Next, I would like to address the performance of our acquired titles from last year.
Craig Abrahams: Governor Poker 3 continues to perform in line with our expectations, and we are pleased with the performance from the game.
Craig Abrahams: To best position the studio for long-term growth, we amended the terms of the earn-out to spend incremental marketing dollars this year on the game while lowering the maximum cap of the earn-out.
Craig Abrahams: Net income was $86.6 million, up 63.4% sequentially, and 14.4% year-over-year.
Craig Abrahams: We are pleased with the continued strength in our direct-to-consumer platforms as we generated $173.7 million, up 1.3% sequentially, and 5.1% year-over-year.
Craig Abrahams: The studio is on track for its second half roadmap, and we remain optimistic about the outlook for the rest of the year for this title.
Speaker Change: Our social casino team gains declined 2.9% sequentially and 3.4% year-over-year.
Speaker Change: Slotimania revenue was $133.8 million, down 1.2% sequentially, and 7.5% year-over-year. We are focused on reengaging dormant players through targeted initiatives, and are also pursuing strategic opportunities, such as our new licensing agreement.
Speaker Change: Cost of revenue decreased 5.7% year-over-year, driven by a change in revenue mix between direct-to-consumer platforms' revenue and third-party platforms' revenue, as well as decline in overall revenue.
Speaker Change: R&D increased slightly by 0.3% year-over-year.
Speaker Change: Majority of the growth in sales and marketing spend year-over-year was related to our newly acquired studios and incremental spend in our largest titles, such as Bingo Blitz and Slotomania.
Speaker Change: G&A expenses declined by 35.1% year over year. The decline in G&A expenses were due to lower accrued expenses related to our long-term cash compensation program and a favorable adjustment of payable contingent considerations.
Speaker Change: As of June 30th, we had approximately $1.1 billion in cash, cash equivalents, and short-term investments.
Speaker Change: Finally, we expect revenue to be within the bottom end of the range for revenue guidance and middle of the range for credit adjusted EBITDA guidance. We are revising our capital expenditure range to $95 million to $100 million for the year.
Operator: At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A list.
Speaker Change: Thank you.
Speaker Change: At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.
Speaker Change: Our first question comes from Colin Sebastian of Baird. Your line is now open.
Colin Sebastian: Thanks and good morning, good afternoon everybody. Maybe just to follow up on some of the sequential declines in social casino and in games like bingo I guess.
Colin Sebastian: And then my follow-up question would be just in terms of new game launches, is there any sort of strategic shift at the company between allocation of capital to M&A versus funding new games, or is that still relatively consistent with the prior strategy? Thank you.
Speaker Change: Thanks, Colin. You know, listen, as we look at the second quarter, you know, there is some seasonality if you look at prior years from Q1 to Q2. You know, our focus has been on our top five franchises that are number one in their respective categories.
Speaker Change: Within the quarter, if you look at a title like Bingo Blitz, our largest title, that was flat issue every year, down just 0.4%, but direct-to-consumer there grew double digits year over year. We're seeing positive trends in the Q3, and so a lot of confidence in our biggest franchise.
Speaker Change: As we look at June's journey, you know, Q2 was affected by some feature launches that were delayed from the first half of the year to the second half of the year, and they're also looking at ramping up their D2C business. So I think overall, you know, we continue to focus on growing the biggest franchises and
Robert Antokol: And this is still our strategic decision. We believe in M&A. We think the ROI will be much better for the future. However, we have always said that Google Studio is a different studio in our portfolio. It comes with a lot of innovation, a lot of creativity, and we have a good opportunity to launch an amazing game, and we have really good hopes for the game. So it's not changing our strategic decision, but when we see good opportunities, we are going very strong on them. So we are really optimistic about the future. Thank you.
Speaker Change: And this is still our strategic decision. We believe in M&A. We think...
Speaker Change: The ROI is much better for the future, what?
Speaker Change: However, we always said that Google Studio is a different studio in our portfolio.
Speaker Change: Thank you.
Operator: The next question comes to us from Drew Crum of Stifle. Your line is now open.
Speaker Change: Next question comes to us from Drew Crum of Stifle. Your line is now open.
Craig Abrahams: And then, on a related note, a competitor earlier this week suggested that the free-to-play sweepstakes category is having a negative effect on the social casino category. Could you comment on this and whether you believe it's impacted your casino titles? Thanks.
drew Crum: And then I guess on a related note, a competitor earlier this week suggested that the free-to-play sweepstakes category is having a negative effect on the social casino category. Could you comment on this and whether you believe it's impacted your casino titles? Thanks.
Craig Abrahams: Sure, thanks for the question, Drew. So in terms of new content, you know, we're focused on getting new content live by the end of this year and into next year, and we're excited about that because it goes across Slotomania, House of Finance, Users Casino, so across our Slot theme portfolio. You know, listen, in terms of referencing the sweepstakes market, that market's grown into a multi-billion dollar market, you know, as we think about that product.
Speaker Change: Sure, thanks for the question Drew. So in terms of new content...
Speaker Change: You know, we're focused on getting new content live by the end of this year and into next year, and we're excited about that because it goes across.
Speaker Change: Slotimania House of Finance User's Casino, so across our slot-themed portfolio. You know, listen, in terms of referencing the sweepstakes market, you know, that market's grown into a multi-billion dollar market. You know, as we think about that product,
Speaker Change: Got it. Okay. And then, Craig, you mentioned the majority of the uptick in performance marketing spend was related to the recently acquired studios. And I think last quarter,
Speaker Change: You suggested that you expected the year-on-year increase to moderate as the year progressed. We obviously saw that in 2Q. Is that still your expectation as you move into the second half through the balance of this year? Thanks.
Craig Abrahams: Yeah, that is the expectation.
Operator: Thank you. Please take a moment for our next question.
Speaker Change: Our next question comes from Aaron Lee of Macquarie. Your line is now open.
Operator: Hey, good morning. Thanks for taking my question. Can you touch on your M&A pipeline and how that's evolved? You know, where seller expectations are now versus maybe a year or two ago and what opportunities you're seeing out there in the market?
Aaron Lee: Hey, good morning. Thanks for taking my question. Can you touch on your M&A pipeline and how that's evolved, you know, where seller expectations are now versus maybe a year or two ago and what opportunities you're seeing out there in the market? Thank you.
Speaker Change: I still think that as we sort of look at ourselves and our execution on the M&A front, you know, the years 23 through 25 are really going to be the years that drive growth 26 and beyond. And for us, you know, continuing to execute and add.
Speaker Change: New titles and hybrid titles into our portfolio is going to be a key part of the portfolio mix going forward.
Speaker Change: Is this something that could still be an opportunity or just how does this rank among your priorities?
Speaker Change: I don't know if it's related to AI or not, but for us, as we always said, this was one of our main priorities for growing the business.
Speaker Change: Thank you.
Craig Abrahams: Thanks, Craig. Thanks, Robert.
Speaker Change: Best of luck.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: We're working really, really hard, and I think we're doing well compared to the market.
Speaker Change: Just to follow up on the second question about the marketing, it's Nir Korczak, Playtika CMO.
Speaker Change: So, just as a reminder, as you know, we have a big portfolio with different games from different genres, different maturity.
Speaker Change: And the way we look at our business is we look at things for the long term. We look at LTV, not for the short term, to optimize things. So when we look at ROI, when we look at the long term, we definitely see some opportunities. We are shifting all the time budgets between different games and different sources.
Speaker Change: But as Craig mentioned at the beginning, most of the majority of the marketing activity goes to the new acquisition and the leading games, and there we still see room for improvement and for growth. Thank you.
Speaker Change: And so those two questions. And then finally, the ad tech environment is very dynamic. Improvements happen all the time. You know, is there something that's happening in the environment in the ad tech ecosystem that is compelling this? Thank you.
Speaker Change: But the industry is super dynamic, so at the end of the day what we're always looking for, we're always looking for opportunities. Sometimes you have new channels that are growing and that's when I say the opportunity. Sometimes we see a new channel and we see opportunity and we go deep on that section. But we have a very diverse portfolio, obviously this is not the case with all of our games and we are always trying to optimize and shift budget to areas that we see growth. Just as an example, Craig also mentioned about Bingo Blitz and things like that. We keep increasing the marketing there and we are trying to optimize things and to improve results.
Speaker Change: So yes, we still see opportunity, but obviously this is a very dynamic landscape, so we cannot identify exactly how the next year will look like right now.
Speaker Change: Thanks, appreciate the answer.
Operator: Our next question comes from Eric Handler of Roth Capital. Your line is now open.
Speaker Change: Our next question comes from Eric Handler of Roth Capital. Your line is now open.
Craig Abrahams: Good morning and thanks for the question. Craig, I wonder if you could just quantify how much of the GNA decline was one time and what that line item looks like going forward.
Eric Handler: Okay, thanks. And then...
Craig Abrahams: Okay, thanks, June's journey. So if you could talk about maybe what's been happening with the decline in that game and what you're doing to sort of get that back on track.
Speaker Change: Sure, so I think as with all games, you know, there's volatility quarter-to-quarter. You need to look at long-term trending. You know, it's one of our most successful acquisitions if you look at
Speaker Change: Thank you. One moment for our next question.
Operator: Our next question comes from Clark Lampen of BTIG. Your line is now open.
Speaker Change: Our next question comes from Clark Lampen of BTIG. Your line is now open.
Craig Abrahams: Hey, good morning, everybody. Thanks for taking the question. Craig, I just wanted to know, as we think about sort of progress with DTC launches, I understand that you're still in the process of establishing both Junes and Solitaire in that environment, but you are also approaching, you know, we're getting close to that sort of 30% target you've established previously for mix. Is it realistic to assume that now either the base or maybe bull case for DTC mix should be higher? And if so, is there a new target that you're comfortable sharing with us?
Clark Lampen: Is it realistic to assume that now either sort of the base or maybe bowl case for DTC mix should be higher? And if so, is there a new target that you're comfortable sharing with us?
Craig Abrahams: Thanks for the question, Clark. You know, it continues to be an area of focus for us in execution. We're not changing our target at this time. But obviously, DTC is a differentiator for us; it really helps differentiate our M&A strategy in terms of a tool that we can use for acquired titles, as well as pitching studios, as to how we can help them further enhance their business. And so I think, you know, as we have updates on our roadmap there and execute, we'll update the market accordingly.
Speaker Change: DTC is a differentiator for us. It really helps differentiate as well our M&A strategy in terms of a tool that we can use for acquired titles as well as pitching studios.
Speaker Change: ...as to how we can help them further enhance their business. And so I think, you know, as we have updates on our roadmap there and...
Speaker Change: and Execute, we'll update the market accordingly.
Speaker Change: If I may also, you mentioned, I think, is one of the bullets in.
Speaker Change: in the presentation deck and IGT partnership. I don't think that's come up on the call thus far, so I was hoping maybe you could provide a little bit more detail around...
Speaker Change: Sure, so this is a licensing agreement that we recently signed with IGT to help
Speaker Change: bring their real-world content into our top slot-themed games and both Slotomania, Caesars Casino, and House of Fun.
Operator: Thank you.
Operator: Our next question comes from Matthew Cost of MS. Your line is now open.
Speaker Change: Our next question comes from Matthew Cost of MS. Your line is now open.
Matthew Kost: Hi, good morning everyone. Thanks for taking the question. Maybe just starting with Slotimania, as you mentioned in the prepared remarks, it's been a challenging couple of years for the franchise. I guess when you think about
Speaker Change: Your expectations for Slotomania in the second half of this year. Are the marketing changes that you're making and the IGT deal Are those enough you think to get the game to a point where you can you can stabilize it? I guess what are your expectations from here to the end of the year given those those new initiatives?
Craig Abrahams: Yeah, absolutely. Our focus has been on stabilizing that product and investing in it. I think as we look at other strategic partnerships and other opportunities to bring great content and increase the competitiveness of that game within a category, as well as bolster it with further marketing, hopefully setting that up for success. It still is the number one game in the category. And we're obviously spending time and effort to improve the product and bring a better entertainment experience for our consumers.
Speaker Change: And then I have one follow-up. Thank you.
Speaker Change: partnerships and other opportunities to bring great content and increase the competitiveness of that game within a category as well as bolster it with further marketing. Hopefully sets that up for success. It still is the number one game in the category and we're obviously spending time and effort to improve
Speaker Change: the product and bring, you know, a better entertainment experience for our consumer.
Speaker Change: Great, thank you. And then on the new title from WUGA that's coming out, I think it was 2Q next year, I guess, any way to think about your expectations or, you know, is it going to be comparable to June's Journey or anything else in the portfolio in the bull case, if it's a success? Like, how should we size the potential for that title?
Craig Abrahams: Sure, so they are best known for story-driven games, that's where WUGA Studios excels, and here's another opportunity to bring another story-driven game to the marketplace. And so, you know, more details to come in the future. Obviously, this is just one of the previews with the market, and as that game gets into soft launch and relaunch, we'll update accordingly.
Speaker Change: Sure, so it's, you know, they are best known for story-driven games. That's where the WUGA Studios excelled, and here's another opportunity to bring another story-driven game to the marketplace. And so, you know, more details to come in the future. Obviously, this is just one of the previews with the market, and as that game...
Operator: Thank you. One moment for our next question. Our next question comes from Christopher Scholl of UBS. Your line is now open.
Speaker Change: gets into soft launch and rail launch. We'll update accordingly.
Speaker Change: Our next question comes from Christopher Scholl of UBS. Your line is now open.
Robert Antokol: Great, thank you. Earlier this year, you streamlined the management structure, and you pushed marketing strategies back to the studios. Any early learnings you can share from this shift? And then maybe just taking a step back, there's been a debate about how much of the mobile market pullback in recent years has been due to competition, macro, or issues related to targeting. What do you believe has been the biggest factor and how does that inform your outlook for the industry in the second half and in 2025?
Christopher Scholl: Great, thank you. Earlier this year you had streamlined the management structure and you pushed marketing strategies back to the studios. Any early learnings you can share from this shift?
Christopher Scholl: And then maybe just taking a step back, there's been a debate about how much of the mobile market pullback in recent years has been due to competition, macro, or issues related to targeting. What do you believe has been the biggest factor, and how does that inform your outlook for the industry in the second half and in 2025? Thank you.
Robert Antokol: So, thanks for the question. We have started the change. We see the same players, we don't see a huge change in the top-grossing games in the U.S. or other places, we don't see new players coming, it's become a tough market. This is like the second phase of the industry, the mobile industry, understanding operations, marketing, and understanding how to retain the community. So for us, again, I can speak a little bit more about Playtika and the scent of the market. This is the goal. This is what we are doing very well. This was always our advantage. And I'm a big believer in 25.
Speaker Change: Two, three months ago, this is a very big change after working differently for eight years.
Speaker Change: The only thing that we can see immediately, it's a different strategic between the games.
Speaker Change: They're thinking differently. It's a very big advantage for us. Now as a company, we can do many things, different things with many games. So to tell you that I see right now something moving, it's really early, but I'm very optimistic about it. And I see a change of behavior in the company.
Speaker Change: What was the second question regarding the market in the last few years?
Speaker Change: Can you repeat it? Yes, when you look at the market performance in the past two years, how much of this do you think has related to macro competition or targeting issues? And how are you thinking about the shape of the market's recovery here in the second half of 2025?
Speaker Change: We see the same players.
Speaker Change: So now, when you look very carefully at the studios, the advantage will be for companies that know understanding operations.
Speaker Change: This is like the second phase of the industry, the mobile industry, and the same operation.
Speaker Change: So, for us, again, I can speak a little bit more about Playtika and scent of the market. This is the target, this is what we are doing very well, this was always our advantage, and I'm a big believer in 25.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Thanks for watching!
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