Participants

Tae Lee; IR Contact Officer; Playtika Holding Corp

Robert Antokol; Chairman of the Board, Chief Executive Officer; Playtika Holding Corp

Craig Abrahams; President, Chief Financial Officer; Playtika Holding Corp

Clark Lampen; Analyst; BTIG, LLC

Arthur Chu; Analyst; Bank of America Merrill Lynch

Eric Sheridan; Analyst; The Goldman Sachs Group, Inc.

Matthew Cost; Analyst; Morgan Stanley & Co. LLC

Colin Sebastian; Analyst; Robert W. Baird & Co. Incorporated.

Eric Handler; Analyst; Roth Capital Partners

Albert Kim; Analyst; UBS Securities LLC

Aaron Lee; Analyst; Macquarie Group

Presentation

Operator

Good day, and thank you for standing by. Welcome to the Playtika Holding Corp. Q4 2024 earnings conference call. (Operator Instructions) 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.

Tae Lee

Welcome, everyone, and thank you for joining us today for the fourth 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 Adams, 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 guarantees 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. I 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 over to Robert.

Robert Antokol

Good morning, and thank you, everyone, for joining our call today. As we reflect on 2024, I am pleased to share that we have made noteworthy progress in educating our return to growth strategy and are moving in a positive direction for the company. We achieved significant milestones in 2024.
We started the year about outlining our capital allocation framework for investors. We initiated our quarterly dividend authorized a buyback program and outlined our plan to restart our M&A engine, which has been instrumental in generating growth and creating value for our shareholders in the past.
One of the year high lines was completing the largest acquisition in our history by acquiring Super play, one of the most attractive independent studios in the marketplace. And in the process, adding two strong game franchise to our portfolio. This acquisition is a testament to our commitment to boosting our portfolio and driving future growth.
As we look ahead to this year, we remain focused on execution. Over the next 12 to 18 months, we plan to bring to the market three new games including Clears Chronicles and new slot teams games and Disney Solitaire scheduled for a global launch in Q2. Early metrics for this isolator have been very promising, and we are excited to bring this experience to all players very soon.
Alongside this pipeline, we will continue to explore M&A opportunities that support our goals. Meanwhile, we are also investing in our existing portfolio with focus on titles that hold leadership positions and exhibit strong growth potential. We are optimistic that these initiatives will help us generate consistent top line growth once again. Thank you for your continued support and confidence in Playtika. I will hand over to Craig for more detailed review of our performance this past quarter.

Craig Abrahams

Thank you, Robert and good morning, everyone. Last quarter, we began discussing our portfolio management approach, focusing on making targeted investments based on the scale, leadership position and growth potential of our games.
This strategy is part of a broader framework where we allocate resources to maximize returns and drive growth. For games with both scale and growth potential, we invest significantly to drive further expansion. For those with scale, but limited growth potential, we focus on defending market share through targeted spending.
Conversely, games that lack scale, but show promising growth potential receive outsized investments including our recently acquired studios. Historically, our growth strategy was based on acquiring and growing new studios. In this next phase, we are acquiring new studios and developing a pipeline of games.
The objective is to revitalize our portfolio rather than focusing on individual game performance. By adding more games to our portfolio, we'll become less dependent on any single game, making the portfolio approach more important and relevant.
While we continue to highlight the performance of our top three games in the quarter, we will also provide regular updates on our acquired titles to highlight their progress. These titles include animals and coins, Governor of Poker I die streams and Domino Dreams.
Finally, we are changing how we present our EBITDA metrics with the conclusion of the 2021 to 2024 retention plan -- we no longer need to distinguish between retention plan adjusted EBITDA and credit adjusted EBITDA.
Starting in Q1 2025, we will refer to credit adjusted EBITDA as simply adjusted EBITDA. This change simplifies our reporting without altering the definition of adjusted EBITDA. In line with this transition, we are adopting a more market-based executive compensation structure.
This shift moves away from cash-centric plans emphasizing compensation that is tied not only to our business results, but also our stock price performance and total shareholder returns. By further aligning executive awards with the company's business results and adding stock market success as a driver, we aim to foster a culture of even greater ownership and accountability, ensuring that our leadership's interests are fully aligned with those of our shareholders.
Turning now to our financial results for the year. We generated $2.549 billion of revenue, down 0.7% year-over-year $162.2 million of GAAP net income compared to $235 million of GAAP net income in 2023 and $757.7 million in credit adjusted EBITDA, a 9% decline year-over-year. Our net income margin was 6.4% compared to 9.2% in 2023. Our credit adjusted EBITDA margin was 29.7% compared to 32.4% in 2023. We generated $396.8 million of free cash flow, a 9.1% decline year-over-year.
We define free cash flow as cash flow from operating activities minus capital expenditures. For the quarter, we generated $650.3 million of revenue, up 4.8% sequentially and up 1.9% year-over-year. GAAP net income was negative $16.7 million compared to GAAP net income of $39.3 million in Q3 and $37.3 million in Q4 of $23 Credit adjusted EBITDA was $183.9 million, down 6.7% sequentially and down 2.6% year-over-year.
Our net income margin was negative 2.6% compared to 6.3% in Q3 and 5.8% in Q4 last year. Our credit adjusted EBITDA margin was 28.3% compared to 31.8% in Q3 and 29.6% in Q4 of last year. We generated $174.6 million in revenue from our direct-to-consumer platforms, up 0.1% sequentially and 8% year-over-year.
Turning now to our business results for the quarter. Bingo Blitz revenue for the quarter was $159.1 million, down 0.5% sequentially and up 5.8% year-over-year. It was another record quarter for Bingo's D2C business, and we are pleased to see the underlying growth in year-over-year average daily paying users for the largest game in our portfolio. Slotomania revenue for the quarter was $118.4 million, down 7.9% sequentially and 13.5% year-over-year. It was a disappointing quarter for the Slotomania team as game economy issues negatively affected performance for much of the quarter.
Although these challenges were addressed in January, they contributed to significant underperformance in Q4. On a positive note, the studio's launch of Cleopatra II successfully reengaged dormant players leading to increased activity. We recognize the importance to maintain our leadership in the slots category by delivering innovative content that reactivates our extensive base of inactive players.
To this end, we are developing a new slots game to help regain market share in the category with further details to be announced in the future. Solitaire Grand Harvest revenue for the quarter was $72.5 million, which was down 8.1% sequentially and down 4.3% year-over-year.
Overall, Solitaire underperformed our expectations this past quarter, but we are encouraged to see the positive ramp in D2C revenues coming from the studio. This success underscores the effectiveness of our D2C platforms and deepening engagement with our most loyal players across different genres.
In the fourth quarter, our acquired titles continue to demonstrate robust performance. Animals and coins achieved another record quarter, showing strong sequential growth in delivering its best ever results during the Black Friday period. Governor of Poker I maintained its robust momentum from Q3 into Q4 and with notable contributions from its D2C revenues.
Finally, SuperPlay contributed approximately $48 million in revenue for the quarter, alongside minus $10 million in adjusted EBITDA losses. The SuperPlay acquisition closed mid-quarter, so these results reflect only a partial period contribution.
These outcomes underscore the value of our acquisitions and their role in enhancing our portfolio's performance. Turning now to specific line items in the P&L for the fourth quarter. Cost of revenue decreased 1% year-over-year and operating expenses increased by 13.7% year-over-year.
The increase in operating expenses were primarily driven by our acquisition of SuperPlay. R&D costs decreased 5.1% year-over-year. The decline in R&D was largely due to savings in labor costs. Our ongoing efforts to optimize operational efficiency while sustaining our R&D capabilities were reflected in our results this quarter. Sales and marketing increased 23.6% year-over-year.
The increase was primarily due to higher media buy expenditure coming from the acquisition of SuperPlay and the investments behind Diestreams and Domino Dreams. G&A expenses increased 18.3% year-over-year primarily due to deal-related costs associated with our Super play acquisition. These expenses include transaction fees and other onetime costs related to the completion of the deal.
As of December 31, we had approximately $565.8 million in cash and cash equivalents. Looking at our operational metrics, average DPU increased 12.6% sequentially and 10.8% year-over-year. Average DAU increased 5.3% sequentially and decreased 7% year-over-year. ARP DAU was $0.89 in the quarter, flat sequentially and an increase of 11.3% year-over-year.
Turning now to our guidance and financial outlook for 2025. We expect to deliver full year revenue between $2.8 billion and $2.85 billion. We expect adjusted EBITDA between $715 million and $740 million. We expect to deploy $95 million in capital expenditures. We estimate that our effective tax rate for the current fiscal year to be 35%. This projection is based on current tax laws and our expected income distribution across various jurisdictions.
We are focused on building long-term sustainable revenue growth by transitioning our portfolio away from some of our declining legacy titles and expanding through recently acquired studios. While the end of the cash retention program yields cost savings, we are reinvesting a portion of these savings to support the development of our growth titles.
The resulting near-term pressure on EBITDA reflects both the cost of scaling our growth titles, which often face early-stage losses but are expected to become strong EBITDA contributors as they scale and the ongoing decline in our slot portfolio. At the same time, we are taking deliberate steps to stabilize our business. We are launching a new slots game to help mitigate declines in our slot portfolio while continuing to bolster our higher-margin DTC channels.
Looking ahead, 2025 will be a transitional year as these investments and portfolio shifts unfold. Despite the EBITDA pressure this year, our strategy will position the business for renewed momentum as new titles scale and our slot games stabilize. Beginning in 2026, we expect our in-play and super play studios to become positive EBITDA contributors further enhancing our long-term financial profile.
We remain confident that our return to growth strategy will yield meaningful financial results supported by sustainable cash flow and stronger revenue mix. As we previously mentioned, we are updating our capital allocation framework to reflect our ongoing commitment to disciplined fiscal management.
The overall premise remains unchanged. We intend to use the free cash flow that we generate to execute our capital allocation framework. We are proud of our attractive free cash flow profile, which demonstrates our ability to execute the business with a focus on maximizing free cash flow. This is a competitive advantage, providing financial flexibility to invest in growth opportunities and return capital to shareholders. It is a key tool we leverage to generate shareholder returns.
We currently offer an attractive dividend yield and initiated share repurchases in Q4. The objective of our buyback program is to provide another layer of systematic capital return to investors specifically by offsetting dilution from vesting employee equity.
Regarding M&A, as previously discussed, we expect our M&A activities to be bolt-on in nature going forward. Over the next three years, we anticipate deploying $300 million to $450 million for M&A. This range does not include any potential future earnout obligations related to our past deals.
Our approach to capital allocation is both disciplined and balanced, focusing on returning capital to shareholders while investing in growth opportunities. By maintaining this approach, we aim to drive long-term value creation for our investors. With that, we'd be happy to take your questions.

Question and Answer Session

Operator

(Operator Instructions) Clark Lampin, BTIG.

Clark Lampen

Craig, first on the organic growth trajectory for '25. I'm curious if you could help us understand sort of what's embedded, I guess, organically for the existing portfolio and sort of recently acquired titles, if we were to put aside the three game launches that Robert mentioned, when we try to strip out the super play impact from casual, it seems like that segment was trending around flat.
It also sounds like the economy issue that you faced for Slotomania feels like it's maybe transient. So if we're thinking high single for the casino business and flattish for casual, are we directionally consistent with where you think you should be?
And then you mentioned bolt-on activity and sort of what you guys want to deploy over the next couple of years. I know it's a lot harder to sort of predict organic development. But curious if you have enough like visibility around your development capacity or the pipeline to say whether we should think about Playtika or beyond '25 being a company that sort of organically develops a couple of new titles every year as well.

Craig Abrahams

Sure. Thanks for the question, Clarke. So there was definitely a few themes embedded there. I'll start new games. Obviously, that is a bit of a shift from our previous approach with the acquisitions of SuperPlay, bringing a pipeline with world-class IP as well as a second title coming after that. We're pretty excited about coming to market there. Disney is now in for Q2. We also have Clare Chronicles as well as a new Slots game.
So we have all the costs there embedded in our guidance. From a top line perspective, I would say, in '25, it's not material but baked in. And as we look going forward, I think the portfolio is going through a bit of a transition as we invest in growth in our new titles. And so I think as we see studios like super play and in-play trend into '26 and go from negative EBITDA to positive EBITDA contributors, we expect to kind of see that turnaround going into '26 and going forward.
And as we acquire studios where they have new game development is part of their DNA. It will be part of our strategy that we execute on. So I definitely think we're all excited about having a whole another leg of growth added to the company.

Operator

Arthur Chu, Bank of America.

Arthur Chu

It's Arthur on for Omar. So there's been a lot of excitement recently around the potential to serve nongaming as particularly e-commerce as mobile games. I'm curious what your view is on that. And if that opportunity could actually change your view on ENA advertising as money physician strategy, which I know you guys have not particularly focused on.

Craig Abrahams

Thanks for the question. I think I'll cover the first part around in-app advertising versus in our purchases. We've traditionally focused on in our app purchases. We believe that our expertise in live operations allows us to have better monetization and better long-term retention as a result of that focus.
And while we do have some games that do have in-app advertising, we don't see that as a driver for us. And in terms of the trending that's been happening around e-commerce, I don't think we're sort of fit to comment on that.

Operator

Eric Sheridan, Goldman Sachs.

Eric Sheridan

Coming back to the DTC strategy, what key learnings as the DTC strategy has sort of scaled in 2024? And how do you think about the mix of game and or the pathway to the higher levels of mix you've talked about that will sort of transition DTC as we move through 2025, just to understand how that channel evolves?

Robert Antokol

Thanks for the question. So as we put a target for DTC three years ago, we are on track on the target of the revenues. This year -- last year, actually, last quarter, we started with this strategy with two games, June Journey and the solider doing very well and in our vision, DTC is one of the most growth engine for EBITDA.
This is how we're using it. It's helping us to work much easier with the games and we were one of the first companies that focus in this direction, and our numbers are great. We grew 8% year-over-year.

Operator

Matt Cost, Morgan Stanley.

Matthew Cost

I guess -- just thinking about the new game pipeline, you have Disney Solitaire kind of in the late stages of testing. I guess how is that game trending and testing versus what you would like to see at this stage? And more broadly, how should we think about the potential contribution from a revenue perspective from these new games over the next 12 to 18 months? And then I have one follow-up.

Robert Antokol

So to tell you, true that we are so, so excited about launching this game because this is actually emerge between our ability to acquire a company like SuperPlay that have the knowledge and the experience of launching new games and prove themselves in the last two games that they launched in the last three years.
So taking this advantage, together with a brand like Disley and with our understanding in the solitaire category. So altogether, this is going to be one of our growth engines in the coming two years. This is how we look at it. It's going to be I think, is going to be our top three or four games in a year from now. And we are very, very -- again, very exciting, and this is a very big news for us, very big news.

Operator

Colin Sebastian, Baird.

Colin Sebastian

I guess, first off, in terms of what's embedded in the 2025 outlook from new games -- is it safe to say that is somewhat immaterial for this year in terms of the guidance that it's organic and M&A? Or are you anticipating that they will contribute materially this year?

Craig Abrahams

Thanks for the question, Colin. So to be consistent with my answer before, from a cost perspective, we have all the development costs baked and from a revenue perspective, I would call it immaterial in terms of what's baked into the guidance.

Colin Sebastian

And there's no other M&A embedded in the guidance at this point?

Craig Abrahams

No, there's not.

Colin Sebastian

And then -- and just in terms of the trends, I guess, quarter-to-date, you mentioned some improvements in Slotomania here in January or through January, is that something that you're seeing that is sustainable, you think, through the rest of Q1? And to what extent did you see an improvement?

Craig Abrahams

Sure. So I think the area that we had called out specifically was making changes and adjustments as it relates to the game economy and seeing a near-term improvement. We are also continuing to add new content to improve performance there as well.
And I think further more strategically, we're investing in a new slots title as well, leveraging our know-how and 10-plus years’ experience in the space to really build a new application that takes our best-in-class know-how on how to manage a slots game and bringing it to something that's much more modern from a look and feel perspective, so really excited about that and more details to come.

Operator

Eric Handler, Roth Capital.

Eric Handler

Two questions actually. First, another question on DTC, I guess, given how well you're doing there, what goes into bringing a game to the DTC platform? Because I guess when I think about it as like why don't you bring more of your games to DTC, particularly the recently acquired games. So I'm just trying to get a sense of what needs to happen to bring a new game to the DTC platform.

Robert Antokol

So thanks for the question. Yes, this is the strategy at the end of the day that everyone will run on our DTC. It's taking time. It's dependent on the maturity of the game. It depends how the technology of the game be. There is a lot of things that it's a formula.
But definitely, the new games that we acquired in the last year like Animal Coins and the Governor of Poker both of them already on the target to go. I don't know when, but this is one of the targets and of course, the games of SuperPlay. So I believe that in two years from now, we will see most of our games, if not everyone running on our platform.

Eric Handler

That's very helpful, Robert. And then I guess from a big picture perspective for the social casino genre, how do you see that genre over the next couple of years? Is it -- can it grow? Just broadly speaking, not your games, just the genre in general and how competitive is it still at this point.

Robert Antokol

Listen, it's a very good question. It's a very good question because when we look at the history of the genre, this channel was actually the channel that started with the mobile increasing revenues in 2010 and was leading the categories of the mobile. In the last few, we see more stability and big players dominating this area. And I think I don't see a huge growth coming in this area, but I still see a place even for Playtika to take market share from their competitors. This is what we're doing.
This is why we're launching a new title because we know what we know about this category. We have the experience, we have the users, the players. So I believe for the company itself, this is a huge opportunity for the industry, time we tell.

Operator

Chris Schoell, UBS.

Albert Kim

This is Albert Kim on the line for Chris. So I know the company has experienced with operating multiple apps, similar archetype and Texas holding in slots and et cetera, but how are you approaching the launch of these additional solitaire games? How do you see in targeting different audiences. And I know it might still be a bit early, but do you see any potential competitive pressure with candy presale launching just given that they have such a huge franchise recognition.

Robert Antokol

So thank you for the question. So Playtika, our biggest advantage is the huge portfolio. And now when we look in the new launch of Disney Solitaire coming from our last acquisition, SuperPlay. And this is sitting on their road map, and they have their own the activities to launch it and they're doing this in the same way they launched the other two games in the last few years. So on our side, this is the advantage of Playtika.
We have many studios. We have many games, huge portfolio, and each of them is working independently. So I don't see any issue in this case. On the other case of Candy Crush, I think it's a very good opportunity to the industry because I will look a little bit about the history of games.
We launched our social casino again Slotomania many years ago. And a few years after two big or even three big competitors came to the industry with the amazing content and everything. And what happened in the category grew dramatically. The category become one of the biggest categories. So when I look at the solider today, it's an amazing for us that we have a Candy Crush coming to this category.
And of course, we're coming with the Disney, and we have Grand Harbors they're doing amazing and still leading the category. So I'm very optimistic about the future here.

Operator

Aaron Lee, Macquarie.

Aaron Lee

Now that you're live with IGT content, is there anything more you can share just in terms of what you're seeing in terms of performance and engagement from your users? And also what the road map looks like for introducing more IGT content?

Craig Abrahams

Sure. So thanks for the question, Aaron. So the IGT content for us has been limited and what's rolled out. We rolled out Cleopatra II. In the prepared remarks, we referenced how well it has performed in terms of reengagement and execution.
I think we're excited about the rest of the content that we kind of coming out, not only in Slotomania, but in Caesars and House of Fun as we roll those out through the rest of the year as well. So there's definitely been excitement that's built as a result of the success thus far with Cleopatra II.

Operator

Thank you. I'm showing no further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.