Expion360 Q1 2024 Earnings Call Transcript

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Provided by Quartr
May 9, 2024

There are 9 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the Playtecha Q1 2024 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Tay Lee, SVP, Corporate Finance and Investor Relations.

Operator

Please go ahead.

Speaker 1

Welcome, everyone, and thank you for joining us today for the Q1 2024 earnings call for Playtecha Holding Corp. Joining me on the call today are Robert Antical, Co Founder and CEO of Playtecha and Craig Abrams, Playtecha'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. 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 their control. These forward looking statements apply as of today, and you should not rely on them as representing our views in the future.

Speaker 1

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, 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'll now turn the call over to Robert.

Speaker 2

Good morning and thank you everyone for joining our call today. Last year, I said that 2023 was our year of efficiency and I'm pleased to report that we have made steps in optimizing our operation and our resource allocation. Our efforts last year have established a solid foundation and I'm pleased to know that 2024 is our year of execution. As a part of this new phase, we have made some changes to our executive leadership team and better aligned with our strategic goals. We recognize the evolving landscape of our industry and the importance to act swiftly and we have decided to reorganize our leadership team.

Speaker 2

Our goal with this reorg is to better align our management structure with our strategic priority of growing our leadership position in mobile gaming. We have decided to streamline our executive leadership team by eliminating the roles of Chief Revenue Officer and Chief Operating Officer. This adjustment is designed to flatten our leadership and bring studios under my direct oversight. In addition, all shared services operation will now report directly to me, which includes our talented technology and HR teams. This change simplifies our reporting structure, but also enhances my direct involvement in both our revenue generation strategies and operational management.

Speaker 2

This ensure we are agile and effective as possible. Additionally, Nir Korshak, our Chief Marketing Officer, who previously reporting to our CRO will now report it directly to me. We are pushing to enhance the synergy between our marketing efforts and studio operation by more closely integrating marketing directly within our studios. We are paving the way for more tactical and cohesive campaigns. I also want to extend my heartfelt gratitude to our departing executives, who have played critical roles in our journeys.

Speaker 2

The contribution has been invaluable and they leave behind a strong legacy of having helped build Letica into an industry leading mobile gaming company. As we move forward, we're excited about the opportunities that these changes bring. Our streamlined and flatter structure will enhance decision making and accelerate our plans, allowing to better serve our community of players and create a value for our shareholders. I am confident in our direction and the steps we are taking and I look forward to updating you on our continued progress throughout the year. I will now turn it over to Craig to talk in more details about the business and the financial results.

Speaker 3

Thank you, Robert. I'd like to start by emphasizing the importance of our capital allocation principles, which we introduced last quarter. Our strategy focuses on balancing capital returns to shareholders and capital deployment for M and A. This approach helps ensure that every dollar invested is maximized for shareholder value. I'm pleased to announce that our Board of Directors has authorized a new share purchase program of $150,000,000 This initiative highlights our financial stability and our ongoing commitment to delivering long term value to our shareholders.

Speaker 3

Together with our quarterly dividends, this share repurchase program is a key component of our strategy to systematically return capital to our shareholders. Additionally, I want to update you on the performance of our recently acquired studios. Over the past two quarters, we have successfully added these new games to our overall operations. I'm pleased to report that they've continued to demonstrate strong performance. This performance reaffirms our confidence in the value creation potential of our M and A strategy and our capability to replicate this success in future acquisitions.

Speaker 3

Turning to our financial results. For the quarter, we generated $651,200,000 of revenue, up 2.1% sequentially and down 0.8% year over year. Our increased investment in performance marketing had an impact on our credit adjusted EBITDA margins this past quarter as we generated credit adjusted EBITDA of $185,600,000 down 1.7% sequentially and down 16.7% year over year. Net income was $53,000,000 We saw strong results from our direct to consumer platforms as we generated $171,500,000 up 6.1% sequentially and 13.2% year over year. The strength in D2C was led by existing games in our platforms as we experienced sequential growth in our D2C business across Bingo Blitz, Slotomania, Caesars Casino, House of Fun and World Series of Poker.

Speaker 3

We're in the early innings of our D2C business in Solitaire Grand Harvest and June's Journey, and we expect to see incremental revenue contribution from D2C in the coming quarters. Turning now to our business results for the quarter. Revenue across our casual games grew 2.9% sequentially and 1.3% year over year. The sequential growth in our casual games was led by Bingo Blitz, Salta Grand Harvest and Animals and Coins. Bingo Blitz revenue was $157,500,000 up 4.8% sequentially and down 1% year over year.

Speaker 3

Following sequential revenue stability in Q4 of last year, I'm pleased to report the strong sequential growth in Bingo as this is a significant indicator of the resilience and growth potential of the Bingo Blitz franchise. While our revenue was down slightly year over year, the comparison is against the highest revenue quarter in Bingo's history. In addition, we're very proud of our Bingo Blitz team for their continued success in growing our DTC business. I'm happy to report that Bingo Blitz's DTC revenues grew double digits year over year. Saltair Grand Harvest revenue was $77,800,000 up 2.7% sequentially and down 8.9% year over year.

Speaker 3

Saltair Grand Harvest saw its revenue decrease over several quarters last year, following an exceptionally strong Q1. However, we are now seeing signs of positive momentum in the studio and we remain optimistic about our roadmap this year. Our social casino themed games grew 1.4% sequentially and declined 3.5% year over year. The sequential growth in social casino themed games was led by World Series of Poker, Governor of Poker 3 and Caesars Casino. Slotomania revenue was $135,400,000 down 1.1% sequentially and 7.6% year over year.

Speaker 3

In response to the competitive landscape for Slotomania, we have increased our performance marketing investments. Our efforts are aimed at increasing installs and engagement and solidifying position in a competitive market. In addition, we're making other strategic and tactical adjustments as we prioritize this franchise. We remain optimistic about our ability to stabilize and grow Slotomania over time and believe that our ongoing efforts will gradually reflect improved revenue performance. Turning now to specific line items in our P and L for the Q1.

Speaker 3

Cost of revenue decreased 4.7% year over year, driven primarily by growth in our D2C business and operating expenses increased by 16%, driven primarily by increased performance marketing spending. R and D increased by 4.4% year over year. Higher R and D expenses were primarily due to a shift in our workforce composition towards higher cost locations combined with merit based compensation increases. These factors contributed to the rise in expenses despite a decrease in overall headcount. Sales and marketing increased by 32.5 percent year over year.

Speaker 3

Growth in sales and marketing expenses were the result of the increase in performance marketing spend that we guided to on our last earnings call. The majority of the growth in performance marketing spend year over year was related to our newly acquired studios. We typically spend more in the Q1 than any other quarter, and so we expect the year over year growth in spending to taper off in the coming quarters. G and A expenses declined slightly by 0.3% year over year. As of March 31, we had approximately $1,000,000,000 in cash and cash equivalents.

Speaker 3

Looking at our operating metrics, average DPU increased 1% sequentially and decreased 5.2% year over year to 309,000. Average DAU increased 2.3% sequentially and decreased 3.3% year over year to 8,800,000 dollars ARPDAU increased 1.3% sequentially and year over year to 0 point revenue to be within the previously provided range of $2,520,000,000 to $2,620,000,000 and credit adjusted EBITDA in the range of 7.30 dollars to $770,000,000 Our outlook on CapEx remains unchanged. With that, we'd be happy to take your questions.

Operator

Thank you. At this time, we will conduct the question and answer session. Our first question comes from the line of Colin Sebastian of Baird. Your line is now open.

Speaker 4

Great. Thank you very much. A couple of questions for me. I guess, first off, maybe Robert, on the marketing strategy change and the new leadership structure, can you talk about maybe how that the marketing strategy will evolve under your leadership of that? And then I guess based on what you've seen today with Slottomania, why not lean more into spend, I guess, across more of the legacy portfolio?

Speaker 4

And I have a follow-up. Thanks.

Speaker 2

So first, thanks for the question, very important one. So 8 years ago, Plitica was working differently than today. Its studio has its own marketing people, has its own marketing strategy. And 8 years ago, we decided to do to put everything under 1 CMO. Now I started to feel that we need to do more new direction and we need to give more dependency to the studios.

Speaker 2

And the changes we're doing today, actually we're building another 2 teams that will work, one of them with Bingo and one of them with the Sloto, Sloto Money. And each of them will work a little bit differently than the others. It will give us as a company a better view let's say, the last quarter was always been critical why we are not investing enough, if the market is not good enough or and I think we need to do things a little bit differently and now with the dependency of the studio, I feel it can help us to grow the business because we believe in the game, we believe in the studio and we have big hopes for the future.

Speaker 4

Okay. Thank you. And then on the D2C platform and solitaire and June's journey, I guess how quickly would you expect those to ramp up on D2C? And overall, I think you're 26%, 27% of revenues now through DTC. Where can we see that move up to over the next couple of years?

Speaker 4

Thank you.

Speaker 2

So our target is, as we said, always is 30%. We are not changing the targets. As I said, as you said actually, I'm very excited that we are still 5 games that's not running on our platform and going to and we're going to add another 2 of them during the 12 to 14 months. I think we will cross the 30%, but I'm not changing any I'm not changing the target. We were always the first one doing DTC.

Speaker 2

We always felt that this is the direction that give us independence and give us a better margin, better cash flow and I think this is one of the biggest advantage of Playtecha as a company.

Speaker 4

Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Aaron Lee of Macquarie. Your line is now open.

Speaker 5

Good morning. Thanks for taking my question. It's great to hear that you've reaffirmed your confidence in the M and A strategy. With regard to that, I guess, how are you thinking about investments in studios versus full acquisitions? In the past, I think you've done a few of those.

Speaker 5

Any takeaways from those? And is this something you would consider going back to? Thanks.

Speaker 6

Sure. Thanks for the question. So as part of doing M and A and diligence on a variety of companies, I think it's important to be close to the entire ecosystem. So having the ability to make investments is an important part of the toolkit as we develop relationships with a variety of studios. Obviously, our preference is to make acquisitions where we can leverage our LiveOps capabilities and help these businesses grow.

Speaker 6

We've done that as well in some examples with some investments. Obviously, it's that hopefully is a longer term path, where we make a good investment to hopefully acquiring that business or just developing a better relationship with that business. But I think our priority is clearly M and A. But having that investment capability in our toolkit is important as well.

Speaker 5

Understood. That makes sense. And then just curious to hear the latest state of the union with regard to your ad tech and marketing tools, and whether it makes sense to kind of flex your R and D budget a bit to accelerate any efforts there? Thank you.

Speaker 6

Yes. So I think the ad tech ecosystem is rapidly changing, and I think what we're finding is that it's best to look at each opportunity individually, and in some examples use internal tools and in some examples use 3rd party tools. And it doesn't necessarily always need to be built in house. I think as we look at certain tools, whether it's for attribution or budget allocation, there are new AI tools either in house or third party that are helping us there. And we'll continue to look to what's the best in class way to help us continue to optimize marketing.

Speaker 6

I think overall, our big advantage in marketing is that we have a large portfolio of games and we can reallocate budget where we see the best returns, and constantly make changes over time. And that allows us to kind of navigate a shifting environment. I think also the fact that we're able to do offline campaigns on television and leverage iconic celebrities into the games as well as in the advertising helps us as well with customer engagement. So, we continue to navigate the market and execute.

Speaker 5

Understood. Appreciate all the color. Thank you very much.

Operator

Thank you. One moment for our next question. Next question comes from the line of Brian Fitzgerald of Wells Fargo. Your line is now open.

Speaker 7

Thanks. Maybe a follow on to the last kind of train of thought on these AI based marketing solutions.

Speaker 1

Can you give

Speaker 7

us a general idea of are you deploying them? Are they permeated across your whole portfolio of games? Are they running against the newly acquired studios? And maybe secondly, are you seeing the leverage there that you want? And then the last part of the question is just is the success you're having with these AI based marketing solutions, was that impactful in terms of, hey, now is the right time to streamline the marketing leadership team?

Speaker 6

So I would not correlate the two decisions. We've been using AI tools for years to help our employees in a variety of places throughout the company kind of solve difficult problems and aid them in making better decisions. And so that's been going on for years. And I think really changed in the marketplace is that there's been these great third party tools that have been developed as well. It's able to further provide aid to the employees in terms of how they make their decisions.

Speaker 6

So I think there, it's been kind of status quo. Things are just getting better over time. In terms of the reorganization, it was a separate decision, as Robert referenced earlier.

Speaker 1

Okay. All

Operator

right. Thank you. One moment for our next question. Next question comes from the line of Omar DeSouki of Bank of America. Your line is now open.

Speaker 8

Hey, guys. This is Arthur on for Omar. Thanks for taking my question. Is there any metric or statistic you share to help us probably quantify how much you're spending user acquisitions in some of the newly acquired games versus games that are more mature? It could be like percentage of booking or any difference in terms of payback here or ROAS?

Speaker 8

I think anything at all would

Speaker 1

be super helpful. Thank you.

Speaker 6

No, I think if you look at the incremental spend year over year, a good portion of that was dedicated towards our newly acquired titles, as we're investing there for growth. I think we've called out Slotamania in the past as well as having increased marketing budgets. We're also seeing good results at Bingo Blitz and investing there. So I think in general, there's nothing specific we're going to call out quantitatively, but we called out last quarter the decision to invest more to help bring certain franchises growth opportunities.

Speaker 1

Understood. Super helpful. Thank you.

Operator

All right. Thank you. I am showing no further questions at this time. This does conclude the question and answer session and the program. Thank you for your participation in today's conference.

Operator

You may now disconnect.

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Expion360 Q1 2024
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