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Playtika stands firm on full-year earnings guidance despite Q3 decline

| By Robert Fletcher
Social gaming developer Playtika expects to perform in line with adjusted EBITDA guidance despite reducing its revenue outlook following declines in Q3.
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Revenue for the three months to 30 September was $630.1m (£513.9m/€590.3m), a drop of 2.7% from Q3 last year. Playtika noted a decline across a number of business segments during the quarter.

While Playtika now expects full-year revenue to be lower as a result, it remains hopeful in terms of earnings. Several recent developments at the business are also set to support its longer-term growth plans. At the end of Q3, Playtika completed its $300.0m acquisition of Innplay Labs. In August, the developer also closed its purchase of the Youda Games portfolio of content from Azerion.

This M&A activity came on the back of Playtika missing out on Rovio Entertainment, the developer behind the Angry Birds series. Playtika lodged a number of bids for Rovio but eventually dropped out of the running. Sega Sammy eventually acquired Rovio in August.

With Playtika seeking to make further inroads into new markets with new acquisitions, president and CFO Craig Abrahams says this will support the business with its growth plans into Q4 and beyond. 

“Through resolute management we continue to generate robust free cash flow and deliver strong credit adjusted EBITDA margins to invest in strategic, high-ROI activities like our two recent acquisitions of InnPlay Labs and Youda Games,” Abrahams said.

“We will continue to focus on leveraging our proprietary technology and live operations to optimise games and enhance the player experience.”

Mixed segmental results for Playtika in Q3

Focusing on Q3, while Playtika has not published a full financial breakdown, it has released information on segmental performance. Revenue was lower across several core business areas year-on-year.

Casual games revenue remained level when compared to last year but social casino-themed revenue slipped 6.6%. Bingo Blitz revenue was also 4.6% lower and Slotomania revenue fell 1.9%, although Solitaire Grand Harvest revenue climbed 13.7%.

Playtika also noted a 3.5% decline in average daily paying users to 299,000, although average payer conversion was 3.4% higher for Q3.

Net profit down 45% to €34.9m

While group revenue was down, spending increased. Operating costs were 4.6% higher at $540.1m. Cost of revenue was the largest expense for Playtika at $173.9m for Q3.

Interest and other net expenses hit $25.2m, leaving a pre-tax profit of $64.8m, a drop of 39.7% from last year. Playtika paid $26.9m in taxes and accounted for negative foreign currency translation of $4.1m. It was able to gain some of this back, with a $1.1m gain in change in fair value of derivatives.

As such, net profit for Q3 reached $34.9m, down 45.6% on 2022. However, credit adjusted EBITDA was 1.0% higher at $205.6m.

Year-to-date revenue just short of $2.00bn

Looking at the year-to-date, revenue in the nine months to 30 September was €1.93bn. This is 2.8% ahead of $1.98bn at the same point in 2022.

Operating costs were 5.7% lower at $1.55bn and other costs reached $76.9m. This resulted in a pre-tax profit of $304.7m for Playtika, up 13.3%. 

Playtika paid $107.0m in income tax and accounted for $1.2m in negative foreign currency translation. Again, some of this offset by gain in change in fair value of derivatives, with this hitting $6.9m in the period.

This meant that net profit for the year-to-date was $204.6m, up 11.6%. In addition, credit adjusted EBITDA climbed 6.8% to $643.3m.

Reducing full-year revenue guidance

Based on the Q3 performance Playtika revised its revenue guidance, with this now set to be between $2.55bn and $2.57bn. This is down from a forecast in Q2 of $2.57bn to $2.62bn.

However, full-year credit adjusted EBITDA guidance has been increased to between $825.0m to $832.0m. This is higher than the $805.0m to $830.0m range stated in Q2.

Upon announcing the Q3 results, Playtika CEO Robert Antokol took the opportunity to pay tribute to its team and their work against the backdrop of the ongoing conflict in Gaza. Playtika is headquartered in Tel Aviv, Israel.

“Our commitment to operational stability and delivering exceptional immersive gaming experiences remains unwavering amid the backdrop of conflict,” Antokol said. “It is in the very DNA and culture of Playtika to persevere, adapt and thrive. 

“Our team in Israel and around the globe is dedicated to upholding our mission, serving our players and delivering value to our investors, even in the face of adversity.”

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