Playtika Holding Corp.PLTKNASDAQ
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Operator: Good day, and thank you for standing by. Welcome to the Playtika Q3 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first 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 Third Quarter 2025 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 and more specifically, the future performance of our individual titles, such as Slotomania or our recently launched Disney Solitaire. 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 have 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 will now turn the call over to Robert.
Robert Antokol: Good morning, and thank you, everyone, for joining our call today. As we approach the end of 2025, I want to start with SuperPlay. Our SuperPlay portfolio is driving exceptional growth led by Disney Solitaire, which has scaled faster than any title in our 15-year history. Disney Solitaire continues to outperform expectations, establishing itself as one of 2025 standout new mobile launches. The title is tracking at annualized run rate above $200 million, supported by strong engagement and rising D2C mix. Building on that momentum, I am pleased to announce that we have expanded our collaboration with Disney and Pixel Games and they're developing a new title in the SuperPlay pipeline. We will share additional details at the appropriate time. Turning to the quarter. I'm proud to share that Playtika continues to execute with a focus and discipline. This quarter, we delivered another record in direct-to-consumer revenue, reaching an all-time high with a broad-based contribution from Bingo Blitz, June Journey, Solitaire Grand Harvest and our SuperPlay portfolio. This performance reinforced the strength of our strategy to deepen player relationship and protect our operating margins supported by recent policy changes that opened new payments channels and expanded our ability to route transactions through direct-to-consumer platforms. As we look at 2026, our portfolio transition will continue. This includes ongoing work to strengthen our slot business. Slotomania remains strategically important to Playtika. And while it continues to be significant headwind for the business, we are focused on stabilizing the franchise over time. In parallel, we will continue relocating resource towards higher return opportunities and away from titles that no longer meet our ROI thresholds. We believe this strategy will strengthen our portfolio mix and enhance long-term cash generation. With that context, Craig will walk through the details behind our record D2C numbers, provide updates on our top titles and review the quarter's results in greater detail.
Craig Abrahams: Thank you, Robert. Our performance in the third quarter reflects the strength of our operating model and disciplined approach to investment. Our direct-to-consumer mix continued to expand margins and SuperPlay's performance underscores the strategic rationale behind our acquisition strategy. We also advanced targeted investments in our new games pipeline and platform capabilities, including AI-driven initiatives in our House of Fun Studio that replace manual processes, improving efficiency and scalability across live operations. We are reassessing our cost structure across the organization to sharpen operating efficiency while protecting capacity to invest behind our highest return opportunities. On spending, we executed the planned step down in second half marketing and CapEx remains on track to finish below our full year guidance. With that, let's get into the details of the quarter. We generated $674.6 million of revenue in the quarter, down 3.1% sequentially and up 8.7% year-over-year. GAAP net income was $39.1 million, up 17.8% sequentially and down 0.5% year-over-year. Adjusted EBITDA was $217.5 million, up 30.2% sequentially and up 10.3% year-over-year, driven primarily by the planned step down in sales and marketing for our SuperPlay titles and continued margin momentum from our D2C business. D2C revenue crossed the $200 million threshold to $209.3 million, up 19% sequentially and up 20% year-over-year. Growth was broad-based across the portfolio with the majority of D2C revenue coming from our casual games, consistent with the portfolio transition underway to position the company for long-term success. We develop and operate our own D2C platforms, which enable us to achieve outstanding approval rates, reduce reliance on third-party providers and optimize processing methodologies for even stronger results. As Google Play policies evolve in the U.S. following recent court rulings, we see a potential tailwind for further D2C adoption and economics subject to final implementation and our own testing. D2C represented 31% of total revenue this quarter, and we are working to achieve 40% on a run rate basis in the next 2 years. Now let's review the performance of our top 3 titles. Bingo Blitz delivered another record quarter with revenue of $162.6 million, up 1.5% sequentially and 1.7% year-over-year, underscoring the franchise's resilience and ongoing leadership in this category. The studio drove results through seasonal programming, personalized promotions and VIP engagement, supported by pacing enhancements and optimized offer packaging to sustain payer mix and time and game. These initiatives reflect our continued investment in live ops cadence, personalized merchandising and routing more transactions through DTC channels, strategies that not only drove strong engagement but position Bingo Blitz for incremental margin and mix benefits as adoption scales. Slotomania revenue was $68.5 million, down 20.8% sequentially and 46.7% year-over-year. This performance reflects the deliberate rebalancing of the game economy we initiated earlier this year, work we anticipated would create revenue pressure as we recalibrate progression, rewards and pricing to support healthier long-term cohort returns. While we work through these changes, we intentionally reduced performance marketing to avoid inefficient spending, which contributed to lower Slotomania DAU in the quarter. Once the pace of decline moderates, we plan to selectively reaccelerate performance marketing to rebuild scale. We are not assuming a near-term revenue recovery, and our focus remains on improving game experience, payer retention and ROI disciplined marketing with the goal of stabilizing the franchise. Looking ahead, we remain on track to launch our new slot title, Jackpot Tour this quarter, but we do not expect material contributions to 2025 results. June's Journey revenue was $68.3 million, down 1.2% sequentially and down 2.7% year-over-year. The franchise remained resilient, supported by a strong live ops cadence and personalized in-game offers, and we aligned our content theming with an updated live ops and monetization strategy. During the quarter, we deepened monetization through economy updates and new features, which lifted ARPDAU. D2C adoption continued to rise in the quarter, where adoption is tracking ahead of plan. These initiatives reinforce June's Journey's position as a durable, high-quality franchise and provide a foundation for incremental margin benefits as we scale these levers. Turning now to specific line items in our P&L. Cost of revenue increased 6.1% year-over-year, reflecting both our revenue growth and higher amortization expense associated with the SuperPlay acquisition. Operating expenses were up 21.6% year-over-year, driven primarily by higher performance marketing investment and the GAAP impact of increased contingent consideration, both related to the SuperPlay acquisition. R&D decreased by 0.4% year-over-year, primarily driven by the termination of our long-term cash compensation program, offset by increases in employee compensation related to increased headcount. Sales and marketing increased by 37.6% year-over-year, primarily driven by incremental performance marketing spend for the SuperPlay portfolio. As planned, we saw a meaningful sequential decline in performance marketing during Q3, which contributed to the improvement in adjusted EBITDA. We expect the seasonal pattern of heavier spend in the first half and a step down in the second half to continue next year, reflecting the cadence of our marketing strategy and earn-out timing rather than a structural change to long-term margin levels. G&A expenses increased by 18.8% year-over-year, including a $30.8 million GAAP expense related to the revaluation of contingent consideration from the SuperPlay acquisition. Given SuperPlay's momentum, we remind investors that the acquisition-related contingent consideration may fluctuate and any fair value remeasurement would flow through GAAP G&A, but is excluded from adjusted EBITDA. Our adjusted EPS also excludes this impact. Excluding adjustments related to contingent consideration, G&A would have declined year-over-year by 23.7%, largely driven by the termination of our long-term cash compensation program. As previously disclosed, SuperPlay's first year earn-out is tied to year-over-year portfolio revenue growth of the SuperPlay games versus a $342 million baseline. When revenue growth exceeds 60%, the multiple applied to incremental gross revenue steps up to 2x from 1.25x, subject to the portfolio achieving adjusted EBITDA above negative $10 million. I am pleased to say the business is currently tracking towards that 60% growth threshold, subject to the same conditions. As of September 30, we had approximately $640.8 million in cash, cash equivalents and short-term investments. Looking at our operating metrics, average DPU declined by 6.3% sequentially and increased 17.6% year-over-year to $354,000. Our average DAU decreased 6.8% sequentially and increased 7.9% year-over-year. ARPDAU increased 2.3% sequentially and was flat year-over-year. Finally, we expect to finish the year within our guidance range for both revenue and adjusted EBITDA. With that, we would be happy to answer your questions.
Operator: [Operator Instructions] Our first question comes from Colin Sebastian from Baird.
Colin Sebastian: I guess, first off, could you expand a bit maybe on the commentary around reallocating resources and then the AI initiatives at the studio level, maybe which games could be impacted and where you're seeing the most productive uses of AI?
Craig Abrahams: Colin, thanks for the question. So we continue to look at our acquired titles, investing in growth there in our biggest franchises as well. I think we've had, obviously, a lot of benefit from DTC expansion this quarter and looking at rolling that out across all titles as well as our SuperPlay titles. In terms of capital allocation, we continue to look to return capital shareholders through dividends and buybacks as well as pursuing selective accretive M&A. So I think nothing has changed there. In terms of your question as it relates to AI, constantly looking at ways that we can enhance our player experience and do it in a way that allows our studios to be more efficient and move more quickly as they release features for our customers to improve our products. Personalizing products is probably where we see a lot of the upside in terms of our live ops capabilities as well as providing player support.
Colin Sebastian: And maybe just as a follow-up on your commentary on marketing, the conversion and monetization metrics look pretty solid here even with the step down in marketing. So I guess, is the need to lean back into spending on paid acquisition? Is that more about supporting new games or some of the other factors that you mentioned, including D2C?
Craig Abrahams: Sure. If we look at our growth titles, with the structure of the SuperPlay earn-out, a lot of the marketing was heavy in the first half and pared down in the second half. So we expect that to ramp up again starting next year. As it relates to our biggest franchises and our other growth titles, marketing is a key to continue to drive growth where we have strong return on investment. So we apply that return on investment criteria as we analyze all of our investment opportunities. And where we see opportunities to invest, we're going to deploy capital and where we see opportunities where the UA costs are high or doesn't make sense, we'll pull back.
Operator: Our next question comes from Omar Dessouky from Bank of America.
Omar Dessouky: Craig, good to hear that SuperPlay is working well. As we get to the end of 2025, I was wondering if you could share any thoughts about the dividend in 2026 and you're thinking about capital allocation in 2026, if it's any different than 2025.
Craig Abrahams: Thanks for the question. We can't share anything now on the future. What we can say is we're constantly evaluating our capital allocation framework, making sure it makes sense in light of what's going on in the business and the market more broadly. And SuperPlay has had tremendous performance. We gave a slide in the presentation that we uploaded to the IR site this morning that shows that SuperPlay is on track to grow at the 60% threshold, so 60% growth over the $342 million baseline. And so it's tremendous performance from a studio that is continuing to focus on scaling their margins and becoming more profitable as they look into next year. And so with that, it's really impressive growth.
Operator: Our next question comes from Aaron Lee from Macquarie.
Aaron Lee: Nice results this quarter. There was also recent news that Google is borrowing Sweepstakes from advertising under the social casino category. Just curious, do you see this as being a meaningful tailwind for your business at all?
Craig Abrahams: We don't comment on speculation, but obviously, it's a situation we'll continue to monitor. And wherever we see opportunities, we'll deploy capital.
Aaron Lee: Okay. Fair enough. And then on Jackpot Tour, nice to see that still on track for a fourth quarter launch. In the past, you've said that the game will be differentiated from your other slot titles. Do you expect any cannibalization of your current slot portfolio once that launches?
Robert Antokol: Thanks for the question. No, as I said in the past, Jackpot Tour is going to be a little bit different and will approach different audience. And today, when we look at our portfolio, the social casino, we see some places that we didn't been in the past. So we are very excited about it, and we think it will help us to support the issues that we had in Slotomania in the past. And this is a very good direction for us for next year for growth, of course. Thank you.
Operator: Our next question comes from Doug Creutz from TD Cowen.
Douglas Creutz: I just wanted to ask about the big acceleration in D2C growth you had. I think you mentioned that SuperPlay was a contributor. When did you move their titles on to your DTC platform or all their titles on it? And was there anything else that you call out that you did specifically in the quarter that drove that big step-up in DTC growth?
Robert Antokol: So as we spoke in the past, one of our biggest advantage is our D2C platform. And by the way, this is our own platform that we are developing, we are supporting. We are not working with any third parties. This is always for me, very important to say. We are not speaking about each game differently, but most of our games already is on our platform, on the D2C platform. We are very focused on this. We are very -- as Craig said in the past, we are very disciplined with the expense, and we are very focusing of the cash flow, the revenues. And for us, this is one of the biggest channels to grow our EBITDA for next year. As I said, this is one of our biggest advantage, and there will be more surprises in the future.
Craig Abrahams: Doug, specifically in the third quarter, U.S. iOS was the major catalyst driving growth.
Operator: Our next question comes from Eric Sheridan from Goldman Sachs.
Eric Sheridan: Two, if I could. On Slotomania, how should we be thinking about what's going into stabilizing that title broadly on the operational side and how to think about the duration path to stabilizing that? That would be number one. And then number two, when you think about allocating marketing dollars and incremental investments into the user base, how would you characterize the different return profiles you're seeing right now from user acquisition versus user retention and driving more frequent behavior among existing users?
Robert Antokol: So I will speak a little bit on Slotomania and then Nir our CMO, will speak about your second question. So regarding Slotomania, as we said in the beginning of the year, we know what is our focus. We are working very hard, and we believe we can stabilize the game. We believe we can make the game better. We are working on the economy of the game. We did many, many different approaches this year. And by the way, when you look at our history and you look at WSOP game that had been decreasing in the last few years, and this year is doing very well. We know how to fix game. And we are very positive in our ability to do it for Slotomania. Regarding marketing Nir can answer.
Nir Korczak: Regarding the marketing, so it's basically really depends on the game and the different KPIs that we are looking. But theoretically, for each game, we have some games that are 15 years old. So obviously, we are always bringing back players the churn, and we believe that the environment and the excitement that we provide to them is something that will keep them playing. So for each game, we have different allocation for retargeting and for user acquisition. In some places, the retargeting can be heavily shift the marketing budget.
Operator: Our next question comes from Eric Handler from ROTH Capital.
Eric Handler: Given the success that you've had in scaling Disney Solitaire thus far this year, I'm curious if that's having -- making you change any of your thoughts or desires with other internally produced games.
Craig Abrahams: Well, I think you -- thanks for the question, Eric. I think you can see this quarter that we announced on this call, the new fourth game from SuperPlay is a Disney title. And so obviously, the success of Disney Solitaire has given us and our partner confidence in launching a fourth title. SuperPlay is 3 for 3 in terms of launching successful games at scale. I'm not sure of any other studio in the West I can think of that's had that recent success. And so further investing with them in a fourth title and a branded one at that is something we're really excited about. So I think there, it definitely has had an influence on our thinking. We have Jackpot Tour coming out later this year, and we're constantly looking at other pipeline opportunities to grow as we look forward.
Operator: Our next question comes from Albert Kim from UBS.
Craig Abrahams: We can't hear you.
Operator: Our next question comes from Matthew Cost from MS.
Matthew Cost: So EBITDA for the quarter came in very strong, really strong margins, well ahead of expectations. Help us think through the moving pieces to hold the EBITDA guide steady for the year? What are kind of the puts and takes there? And then in terms of users and payers, I think we're down just a bit quarter-on-quarter in the third quarter. Is that just a function primarily of Slotomania and Casino?
Craig Abrahams: Sure. So on the first question, we had guided previously that marketing would come down in the second half. I think, obviously, that we never kind of laid out the split quarter-to-quarter. So marketing came down this quarter. We're expecting to invest more in marketing. as we look into the fourth quarter, as we see opportunities for investment, I think the enhancement on D2C and the nice jump that we had there in terms of penetration to 31% helped drive some margin tailwind as well. And as we look at the portfolio as a whole, we continue to selectively look for opportunities for investment on the marketing side. So we've decided to keep guidance stable. In terms of the KPIs, we don't break out the mix. What I can say is we did pull back on Slotomania as we saw the underperformance there, and we'll continue to invest more as we add product enhancements and see stabilization there and invest behind growth opportunities.
Operator: Our next question comes from Albert Kim from UBS.
Albert Kim: Hopefully, you can hear me now. But I just wanted to follow up on Slotomania and the wider social casino category. Are there any shifts in the competitive dynamic that you call out since last quarter? And you mentioned that there was some strength in the U.S. and iOS business. Where does the international opportunity stand in your point of view? And which regions could you drive the most upside in the coming years?
Craig Abrahams: A clarification on U.S. iOS. What we were saying was that we saw a strong D2C performance in that channel. It wasn't a comment on broader performance for that market. As we look at international markets, I think as we've seen through the SuperPlay acquisition, we've seen very strong performance in markets like Japan and other markets opening up for us. And so with the success of Disney Solitaire. So I think that we always look at continued international growth. But U.S. iOS and U.S. Android opportunities continue to be probably the biggest market for us. As regards to the competition for Slotomania, I don't think the market has changed quarter-to-quarter. The dynamics there have been pretty consistent.
Operator: All right. I am showing no further questions at this time. Thank you for your participation in today's conference. This concludes the program. You may now disconnect.