Good day, and thank you for standing by. Welcome to the Playtika Q1 2024 Earnings Call. 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, Corporate Finance and Investor Relations. Please go ahead.

Welcome, everyone, and thank you for joining us today for the first quarter 2024 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 would 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 risks 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. We've posted an accompanying slide deck to our Investor Relations website, which contains information on forward-looking statements and non-GAAP measures, and 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 the SEC. With that, I'll now turn the call to Robert.

Good morning, and thank you, everyone, for joining our call today. Last year, I said that 2023 was our year of efficiency. And I'm pleased to report that we have made steps in optimizing our operation and our resource allocation. Our efforts last year have established a solid foundation, and I'm pleased to note that 2024 is our year of execution. As a part of this new phase, we have made some changes to our executive leadership team and better aligned with our strategic goals. We recognize the evolving landscape of our industry and the importance to act swiftly, and we have decided to reorganize our leadership team. Our goal with this reorganization is to better align our management structure with our strategic priority of growing our leadership positions in mobile gaming. We have decided to streamline our executive leadership team by eliminating the role of Chief Revenue Officer and Chief Operating Officer. This adjustment is designed to flatten our leadership and bring studios under my direct oversight. In addition, all shared services operations will now report directly to me, which includes our talented technology and HR teams. This change simplifies our reporting structure, but also enhances my direct involvement in both our revenue generation strategy and operational management. This ensures we are as agile and effective as possible. Recently, Nir Korczak, our Chief Marketing Officer, who previously reported to our CRO, will now report directly to me. We are pushing to enhance the synergy between our marketing efforts and studio operations by more closely integrating marketing directly within our studios. We are paving the way for more tactical and cohesive campaigns. I also want to extend my heartfelt gratitude to our departing executives, who have played critical roles in our journey. Their contributions have been invaluable and they leave behind a strong legacy of having helped build Playtika into an industry-leading mobile gaming company. As we move forward, we are excited about the opportunities that these changes bring. Our streamlined and flatter structure will enhance decision-making and accelerate our plans, allowing us to better serve our community of players and create value for our shareholders. I am confident in our direction and the steps we are taking, and I look forward to updating you on our continued progress throughout the year. I will now turn it over to Craig to talk in more detail about the business and the financial results.

Thank you, Robert. I'd like to start by emphasizing the importance of our capital allocation principles, which we introduced last quarter. Our strategy focuses on balancing capital returns to shareholders and capital deployment for M&A. This approach helps ensure that every dollar invested is maximized for shareholder value. I'm pleased to announce that our Board of Directors has authorized a new share repurchase program of $150 million. This initiative highlights our financial stability and our ongoing commitment to delivering long-term value to our shareholders. Together with our quarterly dividend, the share repurchase program is a key component of our strategy to systematically return capital to our shareholders. Additionally, I want to update you on the performance of our recently acquired studios. Over the past two quarters, we have successfully added these new games to our overall operations. I'm pleased to report that they've continued to demonstrate strong performance. This performance reaffirms our confidence in the value creation potential of our M&A strategy and our capability to replicate the success in future acquisitions. Turning to our financial results. For the quarter, we generated $651.2 million in revenue, up 2.1% sequentially and down 0.8% year-over-year. Our increased investment in performance marketing had an impact on our credit adjusted EBITDA margins this past quarter as we generated credit adjusted EBITDA of $185.6 million, down 1.7% sequentially and down 16.7% year-over-year. Net income was $53 million. We saw strong results from our direct-to-consumer platforms as we generated $171.5 million, up 6.1% sequentially and 13.2% year-over-year. The strength in D2C was led by existing games on our platforms as we experienced sequential growth in our D2C business across Bingo Blitz, Slotomania, Caesars Casino, House of Fun, and World Series of Poker. We're in the early innings of our D2C business in Solitaire Grand Harvest and June's Journey, and we expect to see incremental revenue contributions from D2C in the coming quarters. Turning now to our business results for the quarter. Revenue across our casual games grew 2.9% sequentially and 1.3% year-over-year. The sequential growth in our casual games was led by Bingo Blitz, Solitaire Grand Harvest, and Animals and Coins. Bingo Blitz revenue was $157.5 million, up 4.8% sequentially and down 1% year-over-year. Following sequential revenue stability in Q4 of last year, I'm pleased to report the strong sequential growth in Bingo, as this is a significant indicator of the resilience and growth potential of the Bingo Blitz franchise. While our revenue was down slightly year-over-year, the comparison is against the highest revenue quarter in Bingo's history. In addition, we are very proud of our Bingo Blitz team for their continued success in growing our D2C business. I'm happy to report that Bingo Blitz's D2C revenues grew double digits year-over-year. Solitaire Grand Harvest revenue was $77.8 million, up 2.7% sequentially and down 8.9% year-over-year. Solitaire Grand Harvest saw its revenue decrease over several quarters last year following an exceptionally strong Q1. However, we are now seeing signs of positive momentum in the studio, and we remain optimistic about our roadmap this year. Our social casino theme games grew 1.4% sequentially and declined 3.5% year-over-year. The sequential growth in social casino theme games is led by World Series of Poker, Governor of Poker 3, and Caesars Casino. Slotomania revenue was $135.4 million, down 1.1% sequentially and 7.6% year-over-year. In response to the competitive landscape for Slotomania, we have increased our performance marketing investments. Our efforts are aimed at increasing installs and engagement to solidify our position in a competitive market. Additionally, we're making other strategic and tactical adjustments as we prioritize this franchise. We remain optimistic about our ability to stabilize and grow Slotomania over time and believe that our ongoing efforts will gradually reflect an improved revenue performance. Turning now to specific line items in our P&L for the first quarter. Cost of revenue decreased 4.7% year-over-year, driven primarily by growth in our D2C business and operating expenses increased by 16%, driven primarily by increased performance marketing spending. R&D increased by 4.4% year-over-year. Higher R&D expenses were primarily due to a shift in our workforce composition towards higher-cost locations combined with merit-based compensation increases. These factors contributed to the rise in expenses despite a decrease in overall headcount. Sales and marketing increased by 32.5% year-over-year. Growth in sales and marketing expenses was the result of the increase in performance marketing spend that we guided to on our last earnings call. The majority of the growth in performance marketing spend year-over-year was related to our newly acquired studios. We typically spend more in the first quarter than any other quarter. And so we expect the year-over-year growth in spending to taper off in the coming quarters. G&A expenses declined slightly by 0.3% year-over-year. As of March 31, we had approximately $1 billion in cash and cash equivalents. Looking at our operating metrics, average DPU increased 1% sequentially and decreased 5.2% year-over-year to 309,000. Average DAU increased 2.3% sequentially and decreased 3.3% year-over-year to 8.8 million. ARPDAU increased 1.3% sequentially and year-over-year to $0.81. Finally, we expect revenue to be within the previously provided range of $2.52 billion to $2.62 billion and credit adjusted EBITDA in the range of $730 million to $770 million. Our outlook on CapEx remains unchanged. With that, we'd be happy to take your questions.

Our first question comes from Colin Sebastian of Baird.

I have a couple of questions. First, Robert, can you discuss how the marketing strategy will change under your leadership and what that evolution might look like? Also, given what you've observed today with Slotomania, why not increase spending across more of the legacy portfolio? I have a follow-up as well.

So first, thanks for the question, a very important one. So eight years ago, Playtika was working differently than today. Each studio had its own marketing people and its own market strategy. Eight years ago, we decided to put everything under one CMO. Now I have started to feel that we need to go in a new direction and we need to give more independence to the studios. The changes we're making today, actually, involve building two new teams that will work, one with Bingo and one with Slotomania, and each of them will operate a bit differently than the others. It will provide us, as a company, with a better view of the market to conduct better tests. By the way, for Slotomania, in the last quarter, we have always been critical about why we are not investing enough if the market is not good enough. I think we need to do things a little bit differently. And now, with the independence of the studio, I feel it can help us to grow the business because we believe in the game, we trust the studio, and we have high hopes for the future.

Okay. And then on the D2C platform and Solitaire and June's Journey, I guess, how quickly would you expect those to ramp up on D2C? And overall, I think your 26%, 27% of revenues now through your D2C. Where can we see that move up to over the next couple of years?

Our target remains at 30%, as we have stated before. We are not altering our targets. I am excited that we still have five games that are not yet on our platform, and we plan to add two more in the next 12 to 14 months. I believe we will surpass the 30% mark, but I am not changing the target. We have consistently been pioneers in D2C, and we have always believed it is the right path to achieve independence, better margins, and improved cash flow. This is one of Playtika's biggest advantages.

Our next question comes from the line of Aaron Lee of Macquarie.

It's great to hear that you've reaffirmed your confidence in the M&A strategy. With regard to that, I guess, how are you thinking about investments in studios versus full acquisitions? In the past, I think you've done a few of those. Any takeaways from those? And is this something you would consider going back to?

Sure. Thanks for the question. So, as part of doing M&A and diligence on a variety of companies, I think it's important to be close to the entire ecosystem. So having the ability to make investments is an important part of the toolkit as we develop relationships with various studios. Obviously, our preference is to make acquisitions where we can leverage our live ops capabilities and help these businesses grow. We've done that as well as with some investments. Obviously, this hopefully is a longer-term path where we make a good investment toward hopefully acquiring that business or just developing a better relationship with that business. However, our priority is clearly M&A. Having that investment capability in our toolkit is also important.

Understood. That makes sense. And then just curious to hear the latest state of the union regarding your ad tech and marketing tools and whether it makes sense to kind of flex your R&D budget a bit to accelerate any efforts there?

Yes. So I think the ad tech ecosystem is rapidly changing. What we're finding is that it's best to look at each opportunity individually and in some examples, use internal tools and in others, use third-party tools. It doesn't always need to be built in-house. As we look at certain tools, whether it's for attribution or budget allocation, there are new AI tools, either in-house or from third parties, that are helping us. We'll continue to look for the best-in-class ways to help us optimize marketing. I think, overall, our big advantage in marketing is that we have a large portfolio of games and we can reallocate the budget wherever we see the best returns and constantly make changes over time. This allows us to navigate a shifting environment. Additionally, the fact that we're able to conduct offline campaigns on television and leverage iconic celebrities in the games as well as advertising helps with customer engagement. So we continue to navigate the market and execute.

Next question comes from the line of Brian Fitzgerald of Wells Fargo.

Maybe a follow-on to the last kind of train of thought on these AI-based marketing solutions. Can you give us a general idea of are you deploying them? Are they permeated across your whole portfolio of games? Are they running against the newly acquired studios? And maybe secondly, are you seeing the leverage there that you want? Lastly, is the success you're having with these AI-based marketing solutions impactful in terms of, hey, now is the right time to streamline the marketing leadership team?

So I would not correlate the two decisions. We've been using AI tools for years to help our employees across various parts of the company solve difficult problems and aid them in making better decisions. That has been ongoing for years. What has really changed in the marketplace is the development of great third-party tools that can further assist our employees in decision-making. I think regarding the reorganization, it was a separate decision, as Rob referenced earlier.

The next question comes from the line of Omar Dessouky of Bank of America.

This is Arthur on for Omar. Is there any metric or statistic you could share to help us quantify how much you're spending on user acquisitions in some of the newly acquired games versus more mature games? It could be like a percentage of booking or any difference in terms of a payback period or ROAS? I think anything at all would be super helpful.

No. I think if you look at the incremental spend year-over-year, a good portion of that was dedicated towards our newly acquired titles as we're investing there for growth. I think we've called out Slotomania in the past, as well as having increased marketing budgets. We're also seeing good results at Bingo Blitz and are investing there. So I think in general, there's nothing specific we're going to call out quantitatively, but we previously called out the decision to invest more to help bring certain franchises growth opportunities.

All right. I am showing no further questions at this time. This does conclude the question-and-answer session and the program. Thank you for your participation in today's conference. You may now disconnect.