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    Playtika Holding (PLTK)

    Q3 2024 Earnings Summary

    Reported on Nov 7, 2024 (Before Market Open)
    Pre-Earnings Price$8.21Last close (Nov 6, 2024)
    Post-Earnings Price$7.82Open (Nov 7, 2024)
    Price Change
    $-0.39(-4.75%)

    What went well

    • Playtika is launching new content and strategic partnerships for key titles like Slotomania, including introducing historic IP such as Cleopatra II under a licensing agreement with IGT, starting at the end of this year. They believe that next year will be very interesting and promising for Slotomania, potentially revitalizing revenue growth. ,
    • Google's policy change to allow personalized ads for social casino games presents a significant marketing opportunity for Playtika. This enables them to include Slots, Poker, and Bingo in personalized Google Ads, potentially improving user acquisition and marketing effectiveness.
    • By focusing investments on their biggest titles that are #1 in their respective categories, Playtika is seeing better performance and growth in those areas. They have recorded increases in Daily Paying Users (DPU) both year-over-year and sequentially, indicating effective resource allocation and strong portfolio management. ,

    What went wrong

    • Lowered revenue guidance due to underperformance of key titles like Slotomania and casino-themed games, as Craig Abrahams stated: "Slotomania and some of the casino themed titles underperformed relative to expectations as we started the quarter. And so that helped dictate lower guidance for the quarter." This indicates potential challenges in their core business segments.
    • Declining Daily Active Users (DAUs) in legacy and smaller titles, due to reallocation of marketing and R&D resources: "Some of these smaller titles where we've taken away R&D and marketing resources from them, those titles will continue to stagnate or decline." Additionally, "as we look at more of the legacy titles, it's more consistent with... a more consistent decline in the DAU base." This could limit future revenue growth.
    • Marketing efforts in H1 did not meet expectations, leading to a strategic shift: "In H1, we try different approach. Some of the things that we did around the offline activity didn't meet our expectation, and we did shifting towards performance." This suggests that prior marketing investments did not yield the desired results, potentially impacting user acquisition and revenue growth.

    Q&A Summary

    1. Revenue Guidance and Drivers
      Q: What are the drivers behind lower revenue guidance but higher EBITDA?
      A: Management noted that Slotomania and some casino-themed titles underperformed, leading to lower revenue guidance. However, they are raising EBITDA guidance due to cost management and being selective on marketing investments focusing on the highest ROI opportunities.

    2. Marketing Strategy Shift
      Q: Has there been a change in marketing strategy affecting revenue and EBITDA?
      A: Yes, the company is becoming more selective with marketing spend. In H1, they tried different approaches, but some offline activities didn't meet expectations, prompting a shift towards performance marketing. A policy change by Google allowing personalized ads for social casino is expected to be beneficial for future marketing efforts.

    3. Slotomania's Performance and Outlook
      Q: What is the outlook for Slotomania following its underperformance?
      A: Despite recent underperformance, management has strong plans for Slotomania, including launching new content at the end of this year through a deal with IGT. They believe next year will be promising for Slotomania due to these content and product changes.

    4. SuperPlay Acquisition and Capital Allocation
      Q: Are there updates on capital allocation and synergies post-SuperPlay acquisition?
      A: The company will update guidance for 2025 and discuss capital allocation framework and M&A plans after Q4 earnings and the closing of the SuperPlay transaction. Currently, there are no plans for immediate synergies with SuperPlay, which will operate independently.

    5. Direct-to-Consumer Revenue Mix
      Q: Will there be changes to the DTC revenue mix target?
      A: The DTC revenue mix continues to increase sequentially, but there are no anticipated changes to the 30% target. Post-SuperPlay acquisition, they will reassess opportunities to integrate DTC.

    6. User Base Trends
      Q: Are focused titles seeing growth in daily active users (DAUs)?
      A: Yes, titles from recent acquisitions are growing their user base. However, legacy titles show a decline in DAUs as focus shifts to higher-quality customers in Tier 1 markets. Daily Paying Users increased both year-over-year and sequentially, which is a key focus.

    7. New Game Development
      Q: Is Wooga's new game Claire's Chronicles on track, and how does it relate to June's Journey?
      A: Yes, Claire's Chronicles is on track for launch next year, with beta tests and small launches already underway. It is a separate project with no connection to the roadmap of June's Journey, which continues to have an amazing roadmap for next year.

    8. Monetization and Advertising Strategy
      Q: Has the company's view on hybrid monetization and advertising changed?
      A: The company remains primarily in-app purchase focused, with titles like Animals & Coins having advertising built in from the start. There is no anticipation of shifting strategy towards hybrid monetization.

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