Welcome to the Playtika Q1 2023 earnings call. At this time, all participants are on listen only mode. After the speaker's presentation, there will be a Q&A session. To ask a question during this 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. Now, I would like to hand the conference over to our speaker today, Tae Lee, SVP of Corporate Finance and Investor Relations. Please go ahead. Welcome, everyone. Thank you for joining us today for The First Quarter 2023 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 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. For a more complete discussion of the risks and uncertainties, please see our filing with the SEC. We have posted an accompanying slide deck to our investor relations website. We will also post our prepared remarks immediately following the call. With that, I will now turn the call over to Robert. Good morning. Thank you everyone for joining our call today. Building on momentum from last quarter, we shipped sequential growth across both casual and social casino themes title. I'm proud of our incredible global talent for our achievements and for setting the pace for the rest of the year. We are on track to meet our financial guidance provided on our last quarterly call. We are excited about our content roadmap slide this year. Overall, we generate revenues of $656.2 million and Credit Adjusted EBITDA of $222.7 million. Several months ago, we took meaningful steps to further focus on our core strength of live operation. Our leadership position in mobile gaming was built on a best-in-class live game operation services, which enable us to provide innovative and personalized content to our players at optimal point in their game journeys. This quarter, we took positive strides towards further developing and implementing our AI technology in our Digital Studio. Our proprietary technology platform, combined with evergreen nature of our titles, has allowed us successfully drive engagement and monetization year after year. Our technical capabilities allow us to deliver an improved, more personalized experience to our loyal community of players. I truly believe there is a lot of more growth potential across all our games. To summarize, I am confident we will strengthen our position within industry this year and that we will outperform our peers in the mobile gaming sector. I will now turn it over to Craig. Thank you, Robert. We are pleased with our performance to start the year. We saw continued positive revenue trends that we started to see in Q4 across all of our games. Our top nine games grew revenue per day sequentially quarter-over-quarter. In addition, we are starting to see the flow through from our focus on efficiency and changes that we have made to how we allocate capital. For the quarter, we generated $656.2 million of revenue, up 4% sequentially and down 3.1% year-over-year. Q4 last year marked a stabilization point for our portfolio, and we're encouraged by the organic sequential growth we experienced to start the year, particularly the strength within our casual games. We made the strategic decision to shift more of our user acquisition spend to our casual growth titles. Our focus on higher margin growth is evidenced in our financials this quarter, generating strong Credit Adjusted EBITDA. Credit Adjusted EBITDA was $222.7 million, up 9.9% sequentially and 12.8% year-over-year. Our Credit Adjusted EBITDA margin was 33.9% compared to 32.1% in Q4 2022, and 29.2% in Q1 2022. Net income was $84.1 million, down 3.9% sequentially and up 1.1% year-over-year. We generated $151.5 million of revenue from our direct-to-consumer platform, up 0.9% sequentially and down 0.6% year-over-year. Our direct-to-consumer platform is comprised of all of our social casino theme titles and Bingo Blitz, our only casual title on the platform. direct-to-consumer platform revenues were slightly down year-over-year, given the decline in our social casino theme titles, offset by strength in Bingo Blitz. Looking ahead, we're excited to introduce Solitaire Grand Harvest and June's Journey to the platform starting in the second half of 2023. Turning now to our business results for the quarter. Revenue across our casual games grew 7.1% sequentially and 4.1% year-over-year. This growth was driven by strength in Bingo Blitz, Solitaire Grand Harvest, and June's Journey. Our casual games now represent 56.3% of total revenue. Bingo Blitz revenue was $159.2 million, up 2.6% sequentially and up 13% year-over-year. We are extremely proud of our Bingo Blitz team for another quarter of record revenue. Bingo Blitz is a game that we acquired over a decade ago and is still one of our fastest-growing titles. In the quarter, we saw strong results from content packs and promotional features surrounding the Super Bowl, Valentine's Day, and St. Patrick's Day celebrations. We also introduced new mini-games and rolled out the new pets feature, which has received positive feedback from our players. We experienced tangible benefits from Digital Studio's AI capabilities in Bingo Blitz. We are now able to identify new segments of top players much earlier in their player journey. As a result, we're able to provide these players with personalized content, which led to an uplift in revenue for the studio. The success of this program has encouraged us to roll out these capabilities to additional studios this year. Solitaire Grand Harvest revenue was $85.5 million, up 17.4% sequentially and 29% year-over-year. We are encouraged by this level of growth at such a large-scale studio. On our last call, we spoke about the strong momentum that we're seeing in Solitaire. This past quarter, we introduced changes into the game, giving our players expanded game mode selection, which increased player engagement. In addition, we increased the number of levels by over 3x, driving retention and improving satisfaction amongst our community of players. Finally, we introduced our biggest meta feature to date with the new farm that is helping increase player engagement. Solitaire Grand Harvest is a game that we acquired over four years ago, and the continued success of this franchise is a testament to our proven capability to drive meaningful organic revenue growth. Shifting to our social casino theme games. Social casino theme games revenue was up 0.3% sequentially and down 11% year-over-year. The year-over-year decline was driven primarily by lower s-results in Slotomania. Slotomania revenue was $146.6 million, down 1.7% sequentially and 12.1% year-over-year. From Q3 2022 to Q4 2022, Slotomania's revenue per day declined by 0.6%. From Q4 2022 to Q1 2023, revenue per day increased by 0.4%. We're encouraged to see Slotomania revenue stabilize for the second consecutive quarter, and we're pleased to see the positive trends in average daily paying users in the studio. Turning now to specific line items in our P&L for the first quarter. Cost of revenue decreased 0.6% year-over-year, and operating expenses decreased 13.9% year-over-year. R&D decreased by 9.1% year-over-year. The lower R&D expenses were largely driven by the reduction in force that we announced at the end of the fourth quarter. Sales and marketing decreased by 20% year-over-year. Like last quarter, savings in sales and marketing expenses were driven by the timing of some of our offline campaigns and the reduction of user acquisition expenses in Redecor and New Games. In addition, we had savings driven by the reduction in force. G&A expenses decreased by 6.7% year-over-year. This was largely due to an increased focus on cost reduction across the organization that we began to implement in the first half of 2022. As of March 31st, we had approximately $767.2 million in cash and cash equivalents. Looking at our operational metrics, average DPU increased 4.2% sequentially and 0.9% year-over-year to 326,000. Average DAU increased 3.4% sequentially and decreased 9.9% year-over-year to 9.1 million. ARPDAU increased 2.6% sequentially and 8.1% year-over-year to $0.80. We are reaffirming our full year guidance to deliver full year revenue in the range of $2.57 billion-$2.62 billion and Credit Adjusted EBITDA in the range of $805 million-$830 million. We continue to expect capital expenditures between $115 million-$120 million. With that said, we'd be happy to take your questions. All right. Thank you. At this time, we will conduct the Q&A session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from Stephen Ju from Credit Suisse. Please go ahead. All right, thank you. Robert and Craig, can you update us on your stance toward new game development right now and how that might be evolving? You know, talk about your ongoing M&A efforts. It seems like it's an ongoing difficult environment, particularly for the smaller studios. Are you seeing an increased number of assets come up for sale? Thank you. Thank you for the question. Regarding first, regarding the M&A, we see today more opportunities coming to the market. As we said last year, the market is going to be tough for new players, for small players. The companies that will have an issue with and lack understanding with the operation will find themselves depending on the marketing effort. If you depend on marketing effort, it's really hard to grow a business. We as a company that leading the operations in the gaming industry, this is a big advantage for us to help small companies to grow their business. Yes, we see more opportunities in the market. We see more companies approaching us, and we think that this is going to be very positive year. Regarding new games, as we said last year, we decide to focus of investing in startups, investing in the games that we are promising, less dependent of internal developing of new games. We believe this is the right approach to a company like Playtika. Till now, we see very good results in this direction. Thank you. All right. One moment for our next question. Our next question comes from Matt Cost from Morgan Stanley. Please go ahead. Hi, everybody. Thanks for taking the questions. I have two. The first is just, you know, on the stabilization that you're seeing with Slotomania and I guess, you know, with the casino portfolio more broadly. Can you just give a little more detail about what's driving that and then sort of your view on how sustainable that re-acceleration is from here? The second question is just about generative AI. I was wondering if you could talk a little bit about, you know, some of the opportunities that you have to drive efficiencies using those tools, but also are there any risks for your business that you would highlight as those tools proliferate? Thank you. Thanks for the question. Regarding the Slotomania, we said, I think two quarters ago that we have a target. Our target to stabilize Slotomania, and actually, we did very well in the last two quarters, especially in this quarter. I think the different was our approach. We are focusing at the core games. We are focusing on the thing that's really important to the players. We are bringing more paying users to the circles of paying users in Playtika. It's working very well for us. We are very optimistic about the future. I think we will keep seeing Slotomania and not only Slotomania, the social casino, teams games stabilize, and we are even optimistic of growing them. What was the second question? AI, okay. The next question was around generative AI. As you know, we are investing in AI already a few years. We always believed in AI. Today everyone is speaking about AI and become like a buzzword, but Playtika always believed in this. Our first investment was around 2017, 2018. We are happy to announce that I can say this quarter, we see very good results, especially in Bingo Blitz. We saw the growth of Bingo Blitz. We saw what's happening with the game that, as Craig said in the call, we launched this game, we acquired this game, 10 years ago. With the help of AI, we see a very promising growth. By the way, we're going to take this learning and this experience to our games. The AI is here to stay, and I always saying AI is not going to replace employees. It's going to help them to grow their business with less mistakes, with more promising things. For us, we are not looking at efficiency, we're looking of growth right now with the all around our Digital Studio. Great. Thank you. All right. Thank you. One moment for our next question. Our next question comes from Douglas Creutz from Cowen and Company. Please go ahead. Hey, thanks. If I just take your Q1 results and annualize them, I'm a touch above the top end of your guidance range on revenue and pretty significantly above it on EBITDA. I understand it's early in the year, is there anything that you've seen in kind of early Q2 that suggests to you that your run rate you achieved in Q1 is slowing down and/or are you guys looking at any sort of increase in your cost base as the year goes on? Thank you. Hey, Doug. Thanks for the question. In terms of our guidance, you know, we just gave guidance, just a couple months ago, as part as re-reporting for the fourth quarter. Obviously we executed very well in terms of sequential growth with, you know, nine of our top titles all growing sequentially per day. I feel very good about where we are, but it is still early in the year. I think given the, you know, the macro environment, felt it was best to keep guidance there on top line. I think in terms of costs and expenses, we're looking at opportunities to ramp marketing throughout the year as well as, you know, some expenses are getting deferred to later in the year. I don't think you can just look at run rate in Q1. We decided to keep guidance at this point. Okay. Thank you. All right. Thank you. One moment for our next question. Our next question comes from Aaron Lee from Macquarie. Please go ahead. Hi. Thanks for taking my question, and congratulations on the results. You know, there's a nice pickup in the DAUs and especially the DPUs, which you called out. Can you talk about how trends look as you moved through the quarter from January to March and how things have looked in early 2Q? We don't discuss kind of out of quarter results. I would say that, you know, we perform well throughout the quarter in terms of Q1. We have been focused, as we talked about on prior calls, on DPU. You know, DPU is the best metric for us in terms of monitoring the health of our, of our user base. And, you know, Q1 typically has higher marketing spend, and so you will see some top of the funnel growing as a result. We continue to focus on live ops and conversion and driving that DPU number going forward. Gotcha. Thanks. Just in terms of macro and the health of the consumer, can you talk about what sort of macro impact you might be seeing on your players and how that's changed in recent months? Obviously, the first quarter results were very nice. Does it seem like you're still fighting against macro, or has that improved a bit? Thank you. I think what we've seen since kind of middle of the fourth quarter last year is that the environment's been doing well and we see kind of a healthy environment for mobile gaming, and obviously, it's represented in our results. Given, you know, we have last year, we had nine titles in the top 100, I think we have a very good sense of, you know, the health of the overall mobile gaming system and feels pretty good right now. Okay, great. Thank you very much. All right. Thank you. One moment for our next question. Our next question comes from Eric Handler from Roth MKM. Please go ahead. Thank you and good morning. Craig, just sort of looking at your expenses, R&D has come way down as, you know, you've taken some cost out of the equation. I assume that's, you know, all people cost. As you look at how you're staffed across, you know, your studios and corporate, is that $102 million sort of a relatively stable number you see going forward, or will that increase as the year progresses? You know, what can you tell us about that? I guess what I'll comment is, from a headcount perspective, we feel like things should be pretty consistent where we are. We obviously made a difficult decision last year to make some changes. We focused on efficiency. Now we, you know, we're seeing, you know, a more efficient organization and one that is able to make quick decisions and move quickly. We feel good about the direction we're headed and feel the we're, you know, the expense structure is in a good place. Okay. Just as a quick follow-up, you know, in looking at your CapEx was quite low in the first quarter. Can you maybe talk about how that ramps as we progress through the year, you know, to get to your $115 million-$120 million outlook? Sure. It's just timing of when purchases were made, so we still expect it to be in the range of guidance. Nothing specific from quarter to quarter that we're going to provide. Okay. Thank you. You got it. Thank you. One moment for our next question. Our next question comes from Colin Sebastian from Baird. Please go ahead. Hi, good morning. This is Reese on for Colin. Thanks for taking our questions. I was just curious if you guys could provide an update on the localization strategy. Another question is, how are you guys thinking about kind of the future of, you know, the mobile landscape potentially as Google makes changes next year? Yeah, it'd be great to hear that. Thanks. Sure. I'll take localization and then Nir, our CMO, will talk about the broader landscape in terms of mobile advertising. In terms of localization, we continue to see opportunities to localize our games in different markets. We just had some successful campaigns with Bingo Blitz in Europe, and we're looking at some other opportunities as well in some other jurisdictions. I think we, you know, we keep seeing that leveraging our 360 approach with, you know, television combined with performance, is working well as we launch in these new markets and changes in, you know, local CRM as well as local language is making a difference. We'll continue to push on that opportunity as well. Hey, guys. Nir Korczak, Playtika CMO. Regarding, I would say, the privacy area around Android. I think that we learn a lot from, obviously from the IDFA. We have a very close relationship with Google as a strategic partner of us. I assume that most of the things that we have learned we can implement in the new area, and we are working with them step by step to be ready to whatever that will come. Thanks. All right. Thank you. One moment for our next question. Our next question comes from Eric Sheridan from Goldman Sachs. Please go ahead. Thanks so much for taking the questions. Maybe if I could get two in. First, you know, I know you talked about AI broadly and the investments you made over a number of years. Can you talk a little bit about how that might factor into long-term content and game creation costs and how to think about the potential to drive efficiencies on that side of the business over the medium to long term? Second, you know, always interested to hear any updated thoughts on capital allocation and how you guys are thinking about the broader M&A landscape out there in terms of potentially allocating capital against inorganic growth. Thanks so much. Cool. Thank you. I will answer regarding the AI. Craig will take the M&A. As I said in the beginning of the call, we always believe in AI, and it took us time to really understand how to use this magnificent tool. I think the first implement and the first effect that we see from working with AI is more optimization of our current feature and current product. We need to remember the product that we developed five, six, seven years ago in our games, and now with the AI tools, we can optimize them much better to do segmentation, to understand how to provide this product to the players, to learn from this, to be more ready for new A players that entering the game. I think this is a very big change in actually how we're thinking of building a product from scratch. It changing how we are thinking to approach to a customer. It's a game changer, I can say, but still there is a lot of work to do. The good news for Playtika that we are using this really in one game and we see and it's going to be implemented in all our games, and it's a very big key success in our future. Hey, Eric, it's Craig. In terms of capital allocation, I think we're pretty consistent with our messaging over the last couple calls in terms of M&A being an area of focus and priority for us, especially given the changes we made in terms of our pipeline and new games. M&A continues to be a core part of our strategy in terms of bringing on new franchises. I know we've talked about it earlier, but I think the, you know, the additional recent consolidation in the industry just plays into the fact that, you know, mobile gaming entertainment is one of the most attractive categories of, you know, within the broader entertainment landscape, and we expect consolidation to continue. With that, I think there's gonna be opportunities for us to continue adding franchises under our portfolio. Great. Thanks so much. Thank you. One moment for our next question. Our next question comes from Franco Granda from D.A. Davidson. Please go ahead. Thank you for letting me ask a couple of questions here. Craig, you've pointed out the success you're seeing in shifting more of your UA budget over to your casual growth titles. Can you perhaps talk a little bit more about your own UA practices in terms of what is working, what is not, and what kind of return on ad spend assumptions you have embedded into the guide for the year? For my second question, you know, how should we think about the mix of online versus online marketing for this year? Thanks. Sure. I would say broadly, we're investing in the titles where we see the most potential for future growth, and we have the best return on ad spend. You know, the three fastest-growing titles in the portfolio are Bingo Blitz, Solitaire Grand Harvest, and June's Journey. Those titles are all seeing increased budgets associated with that. I think in terms of the tactical specifics, we just don't share that publicly. But in terms of the types of things we're doing, you know, you can see some of the efforts on TV, and then that's backed up by, you know, continued performance marketing efforts. Combined with localization and opportunities to bring our games to new markets as well. I think it's consistent with previous strategy. I just think we're leaning in more towards our biggest and fastest-growing titles. We're constantly evaluating as we've made product changes, throughout the rest of the portfolio opportunities to ramp marketing there as well for growth. All right. Thank you. All right. Thank you. One minute. All right. Our last question comes from Omar Dessouky from Bank of America. Please go ahead. Hi. Thanks for fitting me in. I'm happy to hear that Bingo Blitz has improved, it seems like partly because of the AI technology, and I wanted to double-click into that. We've had a couple of questions on AI on this call so far, but I wanted to know specifically whether the difference and the timing of this improvement came from models, AI models that were recently released or AI models that have been around for a long time and that you just started to use them. When I say recently released, I'm really talking about the ones that were released by OpenAI and, you know, have been discussed very frequently in the media and in the technology ecosystem. No. I think just to be, I guess, give more clarity, this is all tied to our Digital Studio efforts. Our Digital Studio efforts are providing tools to our studios to help improve their games and make better decisions. In terms of the product feature we referenced, in the script as it relates to Bingo Blitz, it was really about using segments to really personalize the experience to our players. That personalization and better segmentation tools really help that game. I don't have, you know, more technical answers in terms of specifically what did it, but this is all part of our broad Digital Studio efforts, which is something we've been developing internally for some time. I want to add something and to make things clear. Our growth in Bingo Blitz is not coming only from AI capabilities and AI effort. It's helping us. The growth is coming from the amazing job that the teams and the new product and the new feature they are launching. Of course, we are speaking about a thing that can help us to grow in the future, but to make things clear, this is not what is growing dramatically the growth of the business. It's helping the growth. Thank you. Sure. Thanks. Has Playtika started using the large language models and the models that OpenAI has commercialized? Yeah, I don't. It's not something I can follow up with that. It's not something that I'm aware of in terms of the types of tools that the team's using. My belief it's mostly focused on our own proprietary tools. Got it. Thanks a lot. Appreciate it. Thank you. All right. That concludes the Q&A session. Thank you all for participating in today's conference call. This does conclude the program. You may now disconnect.