Participants

Craig Abrahams; President & CFO; Playtika Holding Corp

Robert Antokol; CEO; Playtika Holding Corp

Nir Korczak; Chief Marketing Officer; Playtika Holding Corp

Chris Shaw; Analyst; UBS

Drew Crum; Analyst; Stifel

Eric Handler; Analyst; Roth Capital

Matt Kaplan; Analyst; Morgan Stanley

Aaron Lee; Analyst; Macquarie Group

Omar Siddiqui; Analyst; Bank of America

Presentation

Craig Abrahams

(Technical difficulty)
In summary, we have the potential to super play acquisition brings and confident in our ability to enhance our growth profile, all while maintaining a firm focus on financial discipline. With that, let us dive into our Q3 financial performance. For the quarter, we generated $620.8 million of revenue, down 1% sequentially and down 1.5% year over year. Credit Adjusted EBITDA margins improved over Q2 as we generated credit adjusted EBITDA of $197.2million, up 3.2% sequentially and down 4.1% year over year. Net income was $39.3 million, down 54.6% sequentially and up 3.7% year over year. Our direct-to-consumer business continues to outperform the overall business as we generated $174.4million, which was up 0.4% sequentially and up 8.3% year over year.
Turning now to our business results in the quarter. Revenue across our top three games was up 1.1% sequentially and down 20% year over year. Bingo Blitz revenue was $159.9 million, up 2.7% sequentially and up 6.8% year over year. Bingo continued strong execution of its direct to consumer business in the quarter, helping drive DGC revenue to a record high. In addition, Bingo achieved its highest revenue month in history in July. Solitaire Grand Harvest revenue was $79 million, up 6.5% sequentially and down 0.2% year over year. We are optimistic about the roadmap going into next year as Solitaire continues to regain its footing and drive incremental success. Slotomania revenue was $128.7million, down 3.8% sequentially and down 9.3% year over year. While we increased our user acquisition spend per Slotomania this year, Q3 results did not meet our expectations. Moving forward, we are realigning our strategic focus in the studio, placing a greater emphasis on the product in future roadmap to drive a meaningful increase in paying users. Shipped includes the introduction of historic high bay such just Cleopatra-2 launching in Q4 as the first in a series of leading titles under our licensing agreement with IGT. Additionally, we are implementing key product changes such as modifying the in-game experience for albums and automating a club which are designed to it enhance engagement innovation opportunities. Turning now to specific line items in our P&L for the quarter. Cost of revenue decreased by 3.3% year over year, driven by a change in revenue mix between direct to consumer platforms revenue and third-party platforms revenue as well as the decline in overall revenue. R&D expenses declined by 2.9% year over year. The decline in R&D were due to the extensive cost management implemented consistently throughout the year. Sales and marketing expenses increased by 5% year over year. The increase in sales and marketing expenses was primarily due to the increase in performance marketing. As discussed in our Q1 earnings call, we anticipated that sales and marketing spend would be the highest in Q1, which year over year growth tapering in subsequent quarters. Accordingly, sales and marketing expenses declined by 11% sequentially. G&A expenses declined by 3.5% year over year. The decline in G&A expenses was driven by a one-time favorable adjustment of payable contingent considerations and reduced compensation expenses from lower head count. As of September 30th, we had approximately $1.2 billion in cash, cash equivalents and short-term investments. This does not incorporate the contemplated upfront payment of $700 million for the super play acquisition. Looking at our operating metrics, average DPU increased 1% sequentially and 0.7% year over year (inaudible). Average DAU decreased 6.2% sequentially and 9.5% year over year to $7.6 million. The decline in average DAU year-over-year was primarily due to the strategic decision to reallocate marketing dollars in R&D resources away from some of our smaller casual titles such as display one-by-one. RBR increased 4.7% sequentially and up 9.9% year over year to $0.89.
We are adjusting our guidance for the year as follows. Revenue is now expected to range from $2.505 billion to $2.52 billion, reflecting our revised outlook. Meanwhile, we are raising our credit adjusted EBITDA guidance to a range of $755 million to $765 million. Finally, we are lowering our capital expenditure guidance to $90 million as we remain focused on maximizing free cash flow. Our guidance does not incorporate the impact of the Super play acquisition as the acquisition is still pending, and we expect to close later this quarter.
With that, we'd be happy to take your questions.

Question and Answer Session

Operator

(Operator Instructions)
Chris Shaw with UBS.

Chris Shaw

Great. Thank you. Craig, just taking the midpoint of your full-year guidance, I believe, implies a higher revenue decline, but improvement on EBITDA 4Q. Can you help us think through the drivers there? And when you announced the super play deal and you mentioned coming back to the market with capital allocation and future M&A plans, any updated thoughts you can provide at this stage?

Craig Abrahams

Thank you for the question. So I'll start with the second part first. After our Q4 earnings post the closing of the super play transaction, we will update both on the guidance for 2025, as well as discuss our capital allocation framework as it relates to M&A as well. In terms of this year, obviously, overperforming in terms of raising the guidance for EBITDA based on cost management and being selective on marketing investments to the highest ROI opportunities. When you look at top line slot of many of them, some of the casino game titles underperformed relative to expectations as we started the quarter. And so that, yes, help dictate lower guidance for the quarter.

Chris Shaw

Great. Thank you. If I can just say one more. I believe you mentioned that a new product and feature roadmap for Slotomania. Just how are you thinking about the time line for stabilization here and any shifts in competitive dynamics you would call out.

Robert Antokol

Hi, so as in Slotomania, I spoke last third quarter were very strong plan during regarding a content, especially with the deal that we did was IGP. We're going to start launching video content in the end of this year already. And together with the product changing or believe that makes you are going to be a very interesting and promising here to Slotomania.

Chris Shaw

Okay. Thank you very much.

Operator

Drew Crum with Stifel.

Drew Crum

Okay. Thanks, guys. Good morning. As it relates to your revenue mix, the DTCP has continued to increase sequentially as a percentage of the total. I know you haven't updated that 30% target, but is there anything forthcoming that would cause a material change in the mix? And then I have a quick follow-up.

Craig Abrahams

No, I think we have continued execution as it relates to new title launches. So in terms of the execution we have in June's journey, the execution that we have and Solitaire Grand Harvest continues to help there. But nothing outside of the performance that you've seen the last few quarters. It's pretty consistent and steady. And post Super play acquisition, we'll have to reassess their roadmap and opportunities to integrate DTCP there as well.

Drew Crum

Got it. Okay. And then just on the casual side of your portfolio, you mentioned the record performance for animals and coins and the strong performance for Bingo and stabilization for solitaire. If you isolate those, it looks like the revenue was weaker and anything to call out or flag terms of what drove that decline? Thanks.

Craig Abrahams

So I think what you're seeing is that as we continue to focus investments on our biggest titles that are number one in their respective categories as we see better performance there. And some of these smaller titles where we've taken away R&D and marketing resources from them add, those titles will continue to stagnate or decline. And so we're managing the portfolio, Leo, for growth from the biggest titles and more so on profitability from some other smaller titles.

Drew Crum

Got it. Thanks, guys.

Operator

Eric Handler with Roth Capital.

Eric Handler

Good morning and thanks for the question. You guys have always done a very good job of driving higher average revenue per port start with daily paying users and your player conversion. But as you sort of look at your portfolio of Growth titles versus sort of like your smaller titles, ultimately, you want those larger titles to keep expanding the funnel in terms of DAUs. Can you maybe talk a little bit about the dynamic that's going on? Like what are you seeing growth in DAUs use with your focus titles?

Craig Abrahams

So as we look at further diversification of the portfolio, both through future acquisitions and the acquisitions we've done over the last few years as we see growth and those titles in terms of growing the user base. And as we look at more of the legacy titles, sales into more consistent, what you've seen over the kind of the last eight quarters in a more consistent decline in the DAU base as we focus on higher quality customers and Tier-1 markets, I think what you see is DPU this quarter was up both year-over-year and sequentially. And that is the metric that we're that we're most focused on driving some of the smaller titles like 1V1 and Redecor, both at bigger declines as we pulled back on marketing dollars from India, you played, I think if those were low revenue producing titles to begin with. So it's not the same user base in terms of quality.

Eric Handler

Great, Thanks, Craig.

Operator

Matt Kaplan with Morgan Stanley.

Matt Kaplan

Good morning. Thanks for taking the questions. I guess on the marketing side, Craig, you're very clear and Neil message pretty clearly throughout the year that there'd be this step-up in marketing in 1Q and then kind of decline or kind of mean reversion over the rest of the year. But as we look at kind of the 4Q guide, where revenue and EBITDA moving in opposite direction, it seems like you're being a little more selective on the marketing side. I think you said so I guess what are you seeing there? I mean, would you look back on the marketing that you did in the first half and say, you know, it didn't pan out as well as you had hoped And so you're just really paring down as we move into the second half, like what is changing in that UA environment.

Nir Korczak

Hey, It's Nir, Playtika CMO.
Thanks for the question. So basically, as we have a variety of different game, so the obviously the story is different for each one of them. In H1, we tried different approach than some of the things that we made around the offline activity didn't meet our expectation and we did the shifting towards, say, performance. I think that overall in the marketing arena, we see lots of things that they can be beneficial for us in the future. An example for that, what we are seeing with the policy change of Google that they announced that the Google ad sale, we start rolling out personalize that Photoshop because they know this is the great news for us, an opportunity basically to put there slots, poker and bingo under the same role, I would say as a casual games. So this is a it can be beneficial for us from just as an example, for marketing retargeting and also for improved algorithm that we are using with Google. So we are seeing I think that can help us in the future. And we're going to focus the small on the performance side and moving forward.

Matt Kaplan

Great. Thank you. And then just on the on the revenue guide. Should we think of slotomania is the main driver of like the lower revenue guide on? Are there other big movers that you would call out?

Craig Abrahams

No, I think it's a mix of slotomania and the smaller titles.

Matt Kaplan

Got it. Thank you.

Operator

Aaron Lee with Macquarie.

Aaron Lee

Hey, good morning, guys. Thanks for taking the question. Once I start with super play, are there any opportunities for synergies or just cross-pollination of best practices were monetization in between this acquisition and some of your existing titles like maybe board games or animals coins?

Robert Antokol

So of course, a, you know, when you look at the founder of super play, you know, the guys exited Playtika kind of careful, Playtika and there's a lot of, you know, look and feel in the Super Glue Playtika a well known to this point of the deal. And we're not speaking about synergies right now. This is the focus of synergy super play has the bill and roadmap, and they're going to walk independently and get to the targets. You know, always in the future, things can happen. But right now, there's no real conversation regarding this.

Aaron Lee

Okay. Fair enough. That makes sense. As a quick follow-up. I know last quarter you mentioned a new game being developed by Claire's chronicles. Does that seem still on track for a second quarter 25 launch? And how are you thinking about growing that and also growing June's Journey? Is there going to be any cross-sell there? Or is it really just trying to focus on growing both at the same time?

Robert Antokol

So yes, we mentioned Gamble for you guys going to be launched next year. We're already doing better days were already doing again more launches in the some small places, there is no way a connection between this game and a roadmap of June's journey. It's a different team and different targets. June's Journey have amazing roadmap for next year. June's Journey was growing and credibility in the last six years, one of our leading titles, and it's going to say one of our leading titles.

Aaron Lee

Okay. Robert, appreciate the color.

Operator

Omar Siddiqui with Bank of America.

Omar Siddiqui

Thanks a lot. We've been noticing a trend towards hybrid monetization. And just wanted to get your updated thoughts on whether you think that's a growth vertical from your initial thoughts and advertising have changed at all since the last couple calls we've talked to you.

Craig Abrahams

I think most part of our portfolio is and effort and focus. We have titles like animals & coins which has advertising natively built into the game as a part of it from the design beginning and some other titles as well but no anticipation of shifting strategy there strategically.

Omar Siddiqui

Okay, got it. Thanks. Appreciate it.

Operator

I'm showing no further questions in queue at this time. So thank you all for your participation. This concludes today's program. You may now disconnect.