Good day and thank you for standing by. Welcome to the Playtika Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today Tae Lee, SVP of Corporate Finance and Investor Relations.

Welcome everyone and thank you for joining us today for the fourth quarter 2022 earnings call for Playtika Holding Corp. 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. 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 are subject to risk and uncertainties, some of which are beyond our control. These forward-looking statements apply as of today and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. For a more complete discussion of the risks and uncertainties, please see our filings with the SEC. We have posted an accompanying slide deck to our Investor Relations website and we'll also post our prepared remarks immediately following the call. With that, I will now turn the call over to Robert.

Thank you everyone for joining our call today. First, I want to thank all our employees globally for their contribution to our success this year. I am pleased to report that we ended the year on a strong note and I am proud of what we achieved in 2022. We met our financial guidance and we remain focused on our mission to deliver the best mobile gaming experience to players worldwide and maximizing value for our shareholders. We believe that we have the best people, technology, and platform for navigating the current macro environment facing mobile gaming. The action we took in 2022 will allow us to be an even stronger company with solid operating results and free cash flow. For the full year 2022, we maintained our leading position across five different game categories. We also have nine of the top 100 highest grossing mobile games in the US, and we will continue to be an industry leader while identifying opportunities in every segment of the business. I'm excited about the next phase of growth for Playtika. Our people are our strongest asset, and we pride ourselves on our ability to develop and support them with the best technology and tools needed to be the leading mobile gaming company. Our Digital Studio platform, powered by AI, continues to grow and take a bigger role across our studios' game operations while optimizing monetization. Our vision to digitize the gaming operation space is progressing across all relevant gaming functions from user acquisition to content generation and player experience. We are focused on optimizing the capabilities of our platform with a long-term plan of integrating digital studios' capabilities across all our games. To summarize, I'm confident we will strengthen our position in the mobile gaming industry, continue to grow cash flow, while maximizing long-term shareholder value. I will now turn it to Craig, who will discuss the quarter and the year in greater detail, and provide our guidance for fiscal year 2023.

Thank you, Robert. We posted financial results that were better than implied Q4 guidance this past quarter and made significant strategic decisions to position the company for future success. We made several strategic decisions in 2022 to position the company for continued success after recognizing that the industry landscape was evolving and impacting our portfolio. We are prioritizing our investment decisions to align the company's expense profile with revenue trends. At every level of the organization, we are actively managing costs and streamlining the company while still making key investments such as our digital studio initiative that will support our next phase of growth for Playtika. We have shifted our strategy for new game development and we'll focus the new game evaluation process out of the creative team in our Wooga studio. While we saw that our new games received positive feedback from our players and achieved strong retention numbers, the marketing environment and increasing CPIs for new games made it challenging for us to scale these games profitably. Based on the current marketing environment, we made the decision to temporarily suspend our new game development pipeline until the ROI for new games is economically viable. Complementing this strategic shift, we are leveraging our mobile gaming and regional expertise to make strategic investments in high-growth potential studios. This past quarter, we announced our investment in Ace Games, the developer of Fiona's Farm. Our investment in Ace Games is a great example of how we will continue to seek exposure to games with high growth potential and access to world-class product teams. With our existing portfolio of industry-leading titles, we continue to focus our marketing efforts on higher-quality traffic sources and generating ROI driven by our scale and AI technology. Our marketing strategy of combining our user acquisition efforts with offline campaigns is a competitive advantage for Playtika, and we'll continue to maintain our focus on Tier 1 markets and shifting more of our user acquisition spending to our growth titles. Turning now to our business results for the quarter. Going forward, we'll be providing revenue detail for our top three highest grossing games. Revenue across our casual team games grew 2.7% versus a year ago. Bingo Blitz revenue was $155.1 million, up 18.4% year-over-year driven by several in-game live ops celebrations around the game's 12-year anniversary and other special themes throughout the quarter, including unique mini-games. We introduced a new team gameplay mechanism where our players can now work together to complete missions that earn virtual rewards in the game. We made technology improvements in the game through our Play Now initiative, which significantly decreased the waiting time to start a new Bingo round by 65% on average. We saw that this did not only improve the overall experience for our players, but encouraged them to play more. Solitaire Grand Harvest revenue was $72.8 million, up 18.7% year-over-year. We are excited by the momentum in the studio. The strong combination of albums and collections events around Halloween, Christmas, and New Year's Eve all contributed to the studio's success this quarter. It was a record quarter for Solitaire for both revenue and paying users. In addition, the studio broke the $1 million daily revenue mark for the first time. Social casino team games revenue for the fourth quarter was down 8.6% versus a year ago. This was driven primarily by lower results in Slotomania, which had a revenue of $149.2 million down 9% year-over-year. As previously discussed, Slotomania is a strategic priority for the company, and we are focused on stabilizing the game. We saw improvements in KPIs in the past quarter driven by the launch of major features such as new piggy cards and new jackpot mechanisms and improvements to Slotomania clan. We are shifting the focus back to the core of the game with better slot-style content and optimizing the game economy. We will continue to provide updates on our progress. Before we turn to an overview of our consolidated results, I'll spend some time talking about the presentation of adjusted EBITDA going forward. This will be the last quarter where we discuss retention plan adjusted EBITDA, which we previously referred to as adjusted EBITDA with add backs for our long-term cash compensation plan and M&A-related retention payments. Going forward, we will refer to our credit adjusted EBITDA when discussing historical performance and in providing guidance. As a reminder, the Playtika 2021 to 2024 retention plan ends after 2024. For the year, we achieved results within our financial guidance range. We generated $2.616 billion of revenue, which is up 1.3% year-over-year, $275.3 million of net income, down 10.8% year-over-year, and $919 million of retention plan adjusted EBITDA, down 6.5% year-over-year. In the fourth quarter, revenue was $631.2 million, down 2.7% year-over-year. Net income was $87.5 million, down 14.5% and retention plan adjusted EBITDA was $228.9 million, up 7.7% year-over-year. Our retention plan adjusted EBITDA margin was 35.1% for the year and 36.3% for Q4. Credit adjusted EBITDA for the year was $805.1 million, a decrease of 5.1% year-over-year. For the fourth quarter, credit adjusted EBITDA was $202.6 million, an increase of 15% from the fourth quarter of 2021. Our credit adjusted EBITDA margin was 30.8% for the year and 32.1% for Q4. For the year, we generated $383.7 million in free cash flow, defined as cash flow from operations minus capital expenditures. We spent $110 million in capital expenditures, which includes the purchase of property and equipment, capitalization of internal use software, and purchases of software for internal uses below our 2022 guidance of $125 million to $130 million. We successfully executed our tender offer in Q4, returning $600 million to shareholders and retiring over 51.8 million shares. Recognizing the macro headwinds facing the industry, we slowed the pace of hiring earlier in the year and we ran the business with a focus on cost discipline across the entire organization. We are highly committed to ensuring that our expense profile is aligned with our growth outlook. We're starting to see the positive impact of these strategic decisions in our financial results. Turning now to specific line items for the fourth quarter. Cost of revenue declined 1.1% year-over-year, and operating expenses declined by 9.1% year-over-year. Our credit adjusted EBITDA margin increased sequentially every quarter this year starting in the first quarter. While we experienced revenue headwinds throughout most of the year, our focus on efficiencies enabled us to achieve these results. R&D was stable, increasing by 0.9%. Sales and marketing declined by 17.7%. The decline in sales and marketing expenses were driven by the timing of some of our offline campaigns, the strategic decisions that we made this year regarding our new games pipeline, and the reduction in marketing expenses in Redecor. Q4 of 2021 showed outsized spending for offline campaigns. G&A expenses declined by 7.3%. This was primarily driven by decreases in share-based compensation and our long-term cash compensation plan. GAAP net income was $87.5 million. As of December 31, we had approximately $768.7 million in cash and cash equivalents. Our effective tax rate for the year was 23.7%. Looking at our operational metrics, average daily paying users increased 0.6% year-over-year to $313,000. Average daily active users declined 14.6% year-over-year to $8.8 million. Average revenue per daily active user increased 14.7% year-over-year to $0.78. Turning to marketing. As mentioned, we had less production costs this quarter for offline campaigns and production compared to the prior year and less user acquisition spend due to shifts in marketing strategy. Turning now to more details behind our efficiency initiatives. In December, we announced an initiative to reduce our workforce globally. While it was a very difficult decision, it was necessary as we look to operate more efficiently. We expect that all of the impacted employees will no longer be on our headcount by the end of the second quarter. We expect the year-over-year impact to credit adjusted EBITDA from the reduction in force to be approximately $33 million. Turning now to our guidance and financial outlook for 2023, I'll begin with our revenue expectations. We expect to deliver full-year revenue between $2.57 billion and $2.62 billion compared to $2.616 billion in 2022. We expect to generate credit adjusted EBITDA between $805 million and $830 million, compared to $805.1 million in 2022. We expect to deploy $115 million to $120 million in capital expenditures. As we look at the outlook for our business in 2023, we are confident in our roadmap in each of our studios. We will continue to prioritize and invest in our strongest franchises across our full game portfolio to build on the momentum they've achieved. Finally, this year will be another year where we'll continue to be focused on cost discipline, prioritizing our investment decisions on high ROI projects, while navigating a difficult macroeconomic environment for mobile gaming that we expect to improve in 2024 and beyond. With that, we'd be happy to take your questions.

Thank you. Your first question comes from Eric Sheridan with Goldman Sachs. You may proceed.

Thanks so much for taking the questions. Maybe two if I can. With the way you're approaching the portfolio now, can you help us understand how we should be thinking about the portfolio's overall growth vis-à-vis sort of broader mobile growth? Because it appears there's going to be titles where you're investing in growth and titles for maybe you have a focus for harvesting cash as well just because of various things you're seeing in the marketing dynamic? And the second part of it would be coming back to the marketing landscape comment you made. I would love to get a better sense of how far off you think the marketing landscape is ROI possible as a measurement tool there to where you could see a correction in marketing that would bring you back into making more aggressive growth investments as we go through 2023. So, just better understanding what that gap might be between what you're trying to solve for and where the landscape is today? Thanks so much.

Sure. Thanks Eric. So in terms of the portfolio, we continue to invest in our biggest franchises. That's where we see our best returns, and having the most success. And so I think there's been a strategic shift, where we're making those investments into those titles. I think there's also been a strategic shift in our mindset around cost management and margin improvement. And I think, obviously, our revenue guidance reflects our view sort of our top line, and the implied EBITDA growth reflects our discipline around cost management. In terms of the marketing environment, we continue to invest in offline campaigns, creating demand for our portfolio of games. We continue to leverage our AI technology to be more efficient in our media buying and continue to buy from a variety of diverse sources. And so I think we continue to navigate a tough environment and doing a great job at that. I'm not sure exactly what needs to change further for us to invest more. Everything is very scientific and ROI-based. I think the biggest impact that we saw in 2022 was to new game launches, and we made strategic adjustments since and are now focusing on investing externally in world-class partners, where we can see opportunities to invest in new games while temporarily suspending most new game development internally, excluding Wooga.

Thank you.

Thank you. Our next question comes from Matt Cost with Morgan Stanley. You may proceed.

Hi, good morning. Thanks for taking the question. Maybe following up on some of the comments you just made about the pipeline. So other than Wooga, the pipeline has kind of paused for the time being, is the decision to restart investments in the pipeline really just a function of when the marketing environment normalizes, or are there other factors? And then based on whatever it is you're using to make that decision, do you have an expectation that that might change in the near term, or is this pause of the pipeline something that based on what you know today could persist for quite some time? And then secondly, just one more thing on marketing, should we expect the typical step-up in the first quarter in marketing, where you lean in a little bit more aggressively after holidays as you have in past years? Thanks.

So thanks for the question Matt. So in terms of the new game pipeline, we continue to develop great games throughout 2022 with great retention and monetization metrics. The real big difference from years past was the cost of installations and with the CPI going up so much, the match around return on investment just wasn't working. And so until that fundamentally changes, we don’t believe it's prudent for us to invest significant dollars in new game development. That said, there are certain categories that we find interesting and we have an innovation lab at Wooga, still evaluating new opportunities. And we did make a $25 million investment in each game in the fourth quarter, which has a fantastic game Fiona's Farm. And so I think what we find is that great product teams with great products will make investments and be strategic about it. But in terms of the new game pipeline, the mathematics around marketing just doesn't work right now.

Great. Thank you. And then just on the first quarter step up.

In terms of marketing, we don't give kind of quarter-over-quarter guidance. I think what I would say is, we do invest and find the first quarter is a good quarter for marketing investments but no specific guidance.

Great. Thank you.

Thank you. Our next question comes from Douglas Creutz with Cowen & Company. You may proceed.

Hey, thank you. We're two months into 2023. It looks to us based on some of our work that you're having a pretty healthy start to the year, particularly Bingo Blitz and Solitaire Grand Harvest. So, could you comment a bit about what you're seeing in the first two months and how that sort of folds into your thinking about guidance for the year? Thank you.

Sure. So, 2022 was a year where we saw downward pressure throughout the year, but I think we started to see things turn around in the middle of the fourth quarter. And so you've seen positive improvements over the last few months. And obviously that was taken into consideration when we provided guidance. And so while we've seen some positive progression over the last few months, there's not much we can comment further on in this call.

Okay. Thank you.

Thank you. Our next question comes from Stephen Ju with Credit Suisse. You may proceed.

Okay. Thank you. So, I guess if you're having difficulty scaling new franchises, we would have to think that a similar backdrop is prevalent for other companies as well. So, has the environment changed in terms of assets becoming available for you to potentially acquire. And secondarily, I mean given the current environment, has your attitude towards running more in-app advertising to generate more revenue changed at all? Thanks.

So regarding the ads, we are not changing our policy. We never believed in hedged revenues. We tried; I can say here we tried to do a few tests, but it never worked well for us. And especially when you look at the environment today in the market when the CPIs are high, so today if you are a paying user in-app, your retention is much better, much stronger than any other ad revenues. So it makes your game healthy and it makes your revenue more stable. And actually one of the main things that we achieved this year was bringing more paying users to our circle. And this was one of our targets. So, this is right now you can see the advantage of Playtika that we are focusing on in-app purchases, and it helps us to grow our user base and bring in more paying users. This is a big advantage that we have over our competitors.

Stephen, to your first part of your question on the M&A environment related to marketing, I think there's two sides to it. The first side is, you're seeing fewer startups being successful in their ability to scale new games, which obviously creates fewer M&A opportunities. On the other side of that, given the difficulty to scale, you're seeing opportunities to invest at better valuations and potentially acquire companies as they struggle in this environment. So I think those are the kind of two sides of the coin there.

Thank you.

Thank you. Our next question comes from Drew Crum with Stifel. You may proceed.

Okay. Thanks. Hey guys, good morning. As you enter 2023, can you address how the company is prioritizing uses of cash? You've announced a proposal to make a fairly sizable acquisition. In light of that, what leverage multiple are you comfortable with? And then separately, on the direct-to-consumer platform, it's a little more than 23% of revenue in 2022. What are your expectations for 2023? And is your longer-term goal still to be at 30%. Thanks.

Thanks, Drew. So, in terms of our priorities, we're consistent with what we've said in the past and that M&A continues to be a priority for us in terms of adding franchises to our portfolio. If you look at our nine titles in the top 100 in 2022, seven of them came through M&A. So that continues to be for us the means with which we want to bring titles onto the portfolio. In terms of leverage, historically we've said that one to three times net leverage is our target range. But for the right M&A opportunity, we'd consider going above that. But that's our public comments in the past and nothing's changed there from management's perspective. And then lastly, in terms of direct-to-consumer, we continue to have that 30% target. We are adding two new titles onto the D2C platform in 2023. And so as we add titles into the casual portfolio on the D2C platform, we hope to see continued progression there.

And Craig, sorry, what are those two new titles?

Yeah. June's Journey and Solitaire Grand Harvest.

Got it. Okay. Thanks guys.

Thank you. Our next question comes from Omar Dessouky with Bank of America. You may proceed.

Hi. Thanks for taking my question. Shortly after your third-quarter call, you released an 8-K that showed that you were lowering your performance stock unit investment thresholds. So, for example, previously the 50% threshold was 6% growth for 2023 to 2025 within each year. And then subsequently it was 1% growth. And I just wanted to know if there was any reason that investors should not take that as some sign of your confidence in 2024 and 2025 growth of revenue.

Hey, Omar, thanks for the question. We're not going to comment further on decisions made by the Board in terms of the compensation committee. What I would say is that the market today is more challenging than it was just a few years ago in terms of growth for the overall market. That being said, as we mentioned earlier on the call, we have seen over the last few months continued positive progression.

Okay. And if I could just ask one follow-up on a different topic. Maybe since you guys are the experts and you see so many games across the industry, can you give us a sense of just thinking game-theory here, what's the end game for the mobile gaming market? Is this a market that we'll see a lot of exits in a couple of years if things don't turn around on the marketing side and the user acquisition side, or should we think that all of these smaller studios and smaller games will be acquired? I guess how does competition eventually play in? And what happens to capital in this industry over the next, I would say two to three years? Is it an extinction event, or is it just going to be consolidation, or will simply smaller studios just accept low returns on capital?

Thanks. So we see mobile as the dominant form factor for video gaming going forward. I mean, if you look at people today, everyone has a phone in their hand. Children have phones in their hands, and as everyone gets older, that's going to be the device they use to communicate with, play games with, and conduct commerce with. So I think as we look at the fact that we have nine titles in the top 100, we continue to grow our market share in the mobile gaming market. Our view is that it's going to continue to be a highly strategic asset owning mobile games and owning market share within the top grossing apps in the App Store. So I think there will be continued consolidation just given how difficult it is to launch mobile franchises at scale today. And so those that have long-lasting franchises with great brands will continue to have real value.

Craig, I apologize for just clarifying the question. How do you see the level of competition within the industry as you go forward? And the reason I asked about potential exits, is you'd assume as an investor if exits increase, competition would fall and potentially your market share would grow as well as profitability in the industry. That's really what I was getting at is the intensity of competition as if the environment doesn't improve.

I think the theme of consolidation is a good theme and that you'll continue to see consolidation in the industry in terms of competitive dynamics beyond that it's hard to comment.

Thank you.

Thank you. Our next question comes from Aaron Lee with Macquarie. You may proceed.

Hey, good morning. Thanks for taking my question. So we're nearing the second anniversary of IDFA deprecation, and you've noted in your remarks that CPIs remain elevated. So has any of your thinking changed around cross-sell between your games or any other strategies to kind of supplement the pay user acquisition funnel?

Hi, it's near. So basically, we keep with the same strategy. It's a new era. We learn how to measure things how to optimize differently, and the fact that we have a very diverse portfolio with lots of different sources and also we leverage mass market media in order to get great results. That's basically how we tackle the iOS area. In addition to that, we leverage also internal AI capabilities that give us the flexibility and allow us to be very aggressive on opportunities in the market, and we all keep buying whatever we can in our iOS.

Okay, got you. As a follow-up, in the past you've talked about the early success you've had with localizing some of your game titles. Can you just talk about whether this is still an opportunity, or do you have other priorities right now? Thanks.

So obviously, we are always looking for opportunities where we can increase our market share. If we see an opportunity in a specific market where we have a localized game, it's also something that we look at. So we did something on the path, and we'll continue exploring this further.

Our next question comes from Eric Handler with Roth MKM. You may proceed.

Good morning, and thank you for the question. Two questions. First, as you look at the social casino business, do you have any sense of when revenue might stabilize?

Eric, thanks for the question. I think we've already started to see the stabilization in Q4. If you look at Slotomania, Slotomania in the quarter was down 0.6% sequentially. So real stabilization there, and we've been seeing positive trending with those titles.

Can you provide an estimate of your spending for new game launches in 2023? With the halt in new game launches, will that money contribute to savings or will you be reallocating those funds?

So, that's all reflected in our guidance that we provided in terms of our guidance range for this year. So it's baked in. And so, we don’t have that new game spending. But obviously, there's no revenue associated with those titles either, but both are baked into the top line and bottom line guidance for next year.

Okay. Thanks.

Thank you. Our next Question comes from Clark Lampen with BTIG. You may proceed.

Hey guys. Good morning. Craig, I know you don't guide specifically to quarters, but I'm curious whether you could help us with directional assumptions. It sounds like based upon comments that you made so far, maybe we should expect a more stable, I guess, first half and greater back half sequential improvement. Is that right? And as it relates to the end of year workforce adjustments that you guys made in December, I assume we'll see the full impact of that in Q1. Should we expect relatively flat expenses from there forward? Thank you.

Sure. So in terms of seasonality, the only consistent trend is that the summer months are seasonally weak relative to the rest of the year. I don't think there's any other specific guidance we'll kind of provide in terms of quarter-to-quarter. And then in terms of cost savings initiatives, the majority of that will be realized starting in Q1. So we'll see that going forward. And obviously, there's a focus throughout the company on cost management.

Thank you. And that concludes the Q&A session. And this concludes today's conference call. Thank you for participating. You may now disconnect.