Playtika Holding Corp

Previous wording

On October 7, 2023, the State of Israel was attacked by Hamas, and the State of Israel subsequently declared war on Hamas. Since that time, Israel has been engaged in armed conflict with combatants located in Gaza, the West Bank, Syria, Iran, Lebanon and Yemen. While these war and conflicts have not had a direct material financial impact on the Company as of the date of this filing, the Company’s headquarters are located in Israel, and the Company employs approximately 1,050 professionals in Israel, including the majority of the Company’s senior leadership team. The Company is actively monitoring the developments in this geographic region.

Current wording

On October 7, 2023, the State of Israel was attacked by Hamas, and the State of Israel subsequently declared war on Hamas. Since that time, Israel has been engaged in armed conflict with combatants located in Gaza, the West Bank, Syria, Iran, Lebanon and Yemen. While these war and conflicts have not had a direct material financial impact on the Company as of the date of this filing, the Company’s headquarters are located in Israel, and the Company employs approximately 1,040 professionals in Israel, including the majority of the Company’s senior leadership team. The Company is actively monitoring the developments in this geographic region.

Previous wording

Impairment charge reflects an impairment related to one of our investments in an unconsolidated entity. We hold certain equity investments in various unconsolidated entities that fall within the scope of ASC 321, Investments - Equity Securities. As permitted within that guidance, we have elected to account for these investments at cost less impairment, adjusted for changes in fair value from observable transactions for identical or similar investments of the same issuer as of the respective transaction dates.

Current wording

Impairment charges in 2024 reflect impairments related to our investments in unconsolidated entities. We hold certain equity investments in various unconsolidated entities that fall within the scope of ASC 321, Investments - Equity Securities. As permitted within that guidance, we have elected to account for these investments at cost less impairment, adjusted for changes in fair value from observable transactions for identical or similar investments of the same issuer as of the respective transaction dates. Impairment charges in 2023 reflect charges recorded for the excess of the carrying amount over estimated fair value of our identifiable intangible assets

Previous wording

Our interest expense includes interest incurred under our December 2019 Credit Agreement and amortization of deferred financing costs. We expect to continue to incur interest expense under our Credit Agreement, although such interest expense will fluctuate based upon the underlying variable interest rates. We entered into multiple interest rate swap agreements in March 2021 and in January 2023, accumulating to a total notional amount of $1.0 billion, reducing our overall exposure to variable interest rates.

Current wording

Our interest expense includes interest incurred under our December 2019 Credit Agreement, as amended, and amortization of deferred financing costs. We expect to continue to incur interest expense under our Credit Agreement, although such interest expense will fluctuate based upon the underlying variable interest rates. We entered into multiple interest rate swap agreements in March 2021 and in January 2023, accumulating to a total notional amount of $1.0 billion, reducing our overall exposure to variable interest rates.

Previous wording

Comparison of the three and six months ended June 30, 2024 versus the three six months ended June 30, 2023

Current wording

Comparison of the three and nine months ended September 30, 2024 versus the three nine months ended September 30, 2023

Previous wording

Revenues for the three and six months ended June 30, 2024 decreased by $15.8 million and $20.8 million, respectively when compared with the comparable period of 2023. Incremental revenues from the acquired studios were more than offset by the decrease in revenues due to reduced monetization off of a lower base of paying users.

Current wording

Revenues for the three and nine months ended September 30, 2024 decreased by $9.3 million and $30.1 million, respectively when compared with the comparable period of 2023. Incremental revenues from the acquired studios were more than offset by the decrease in revenues due to reduced monetization.

Previous wording

Cost of revenue for the three and six months ended June 30, 2024 decreased by $10.1 million and $18.8 million, respectively, when compared with the comparable periods of 2023. The decreases in cost of revenue includes an approximate $10.4 million and $18.2 million decrease in platform fees associated with reduced revenues and a greater percentage of revenue generated from our Direct-To-Consumer platforms for the three and six months ended June 30, 2024, respectively, as well as a $1.6 million and $3.8 million decrease in depreciation and amortization expenses, respectively.

Current wording

Cost of revenue for the three and nine months ended September 30, 2024 decreased by $5.8 million and $24.6 million, respectively, when compared with the comparable periods of 2023. The decreases in cost of revenue includes an approximate $7.5 million and $25.7 million decrease in platform fees, respectively, associated with reduced revenues and a greater percentage of revenue generated from our Direct-To-Consumer platforms for the three and nine months ended September 30, 2024, as well as a $1.2 million and $2.6 million decrease in depreciation and amortization expenses, respectively.

Previous wording

Research and development expenses for the three and six months ended June 30, 2024 increased by $0.3 million and $4.8 million, respectively, when compared with the comparable periods of 2023. The increases in research and development expenses were primarily due to a shift in our workforce composition towards higher-cost locations, combined with merit-based compensation increases and an increased spend in outsourcing. These factors were offset by decreases in expenses related to a reduction in overall headcount.

Current wording

Research and development expenses for the three months ended September 30, 2024 decreased by $3.0 million and for the nine months ended September 30, 2024, increased by $1.8 million when compared with the comparable periods of 2023. Recent headcount reductions have reduced employee compensation costs, including decreased stock-based compensation expense, however, a significant decrease in research and development expenses has not occurred due to the shift in our workforce composition towards higher-cost locations, combined with merit-based compensation increases and an increased spend in outsourcing. These factors were offset by decreases in the amount of expenses capitalized as projects conclude.

Previous wording

Sales and marketing expenses for the three and six months ended June 30, 2024 increased by $28.2 million and $74.9 million, respectively, when compared with the comparable periods of 2023. The increases in sales and marketing expenses were due largely to increased media buy expenses driven by the acquisitions of InnPlay and Youda that were not present in the first half of 2023, accompanied by moderately higher media buy spending across the Company.

Current wording

Sales and marketing expenses for the three and nine months ended September 30, 2024 increased by $7.1 million and $82.0 million, respectively, when compared with the comparable periods of 2023. The increases in sales and marketing expenses were due largely to increased media buy expenses driven by the acquisitions of InnPlay and Youda that were not present in the first half of 2023, accompanied by moderately higher media buy spending across the Company.

Previous wording

General and administrative expenses for the three and six months ended June 30, 2024, decreased by $26.0 million and $26.2 million, respectively, when compared with the comparable period of 2023.

Current wording

General and administrative expenses for the three and nine months ended September 30, 2024, decreased by $2.8 million and $29.0 million, respectively, when compared with the comparable period of 2023.

Previous wording

The decrease in general and administrative expenses for the three and six months ended June 30, 2024 includes an adjustment to reduce expense by $16.2 million related to the change in fair value of the contingent consideration associated with the 2023 acquisition of InnPlay. Without the recent amendment to the Stock Purchase Agreement for InnPlay, the likelihood of InnPlay reaching the thresholds for payment of the contingent consideration would likely have been significantly lower.

Current wording

The decrease in general and administrative expenses for the nine months ended September 30, 2024 includes an adjustment to reduce expense by $16.2 million related to the change in fair value of the contingent consideration associated with the 2023 acquisition of InnPlay. Without the amendment to the Stock Purchase Agreement for InnPlay, the likelihood of InnPlay reaching the thresholds for payment of the contingent consideration would likely have been significantly lower.

Previous wording

In addition, the decreases in general and administrative expenses for the three and six months ended June 30, 2024 includes an approximate $8.0 million and $19.2 million impact, respectively, of recent headcount reductions that reduced employee compensation costs, including decreased stock-based compensation expense. These amounts were largely offset by an increase of $1.8 million and $9.5 million, respectively, to severance expense.

Current wording

In addition, the decreases in general and administrative expenses for the three and nine months ended September 30, 2024 includes an approximate $1.6 million and $20.9 million impact, respectively, of recent headcount reductions that reduced employee compensation costs, including decreased stock-based compensation expense.

Previous wording

During the six months ended June 30, 2024, we recorded an impairment charge of $7.0 million related to one of our investments in an unconsolidated affiliate. During the three and six months ended June 30, 2023, we recorded a $9.7 million write-off of JustPlay.LOL Ltd’s game title.

Current wording

During the three and nine months ended September 30, 2024, we recorded an impairment charge of $29.3 million and $36.3 million, respectively, related to our investments in unconsolidated affiliates. During the three and nine months ended September 30, 2023, we recorded an impairment charge of $41.6 million related to the Redecor game title., Also included in the nine months ended September 30, 2023 is a $9.7 million write-off of JustPlay.LOL Ltd’s game title.

Previous wording

Interest expense for the three and six months ended June 30, 2024 increased by $3.1 million and $4.1 million, respectively, when compared with the same period of 2023 as a result of higher average interest rates on our variable rate debt.

Current wording

Interest expense for the three months ended September 30, 2024 was largely consistent with the same period of 2023. Interest expense for the nine months ended September 30, 2024 increased $2.1 million when compared with the same period of 2023 as a result of higher average interest rates on our variable rate debt.

Previous wording

Interest income for the three and six months ended June 30, 2024 increased by $3.4 million and $8.6 million, respectively, when compared with the same period of 2023 as a result of higher balances held in interest bearing cash, cash equivalents and short-term investments, and higher average interest rates earned on those instruments.

Current wording

Interest income for the three and nine months ended September 30, 2024 increased by $6.5 million and $13.8 million, respectively, when compared with the same period of 2023 as a result of higher balances held in interest bearing cash, cash equivalents and short-term investments, and higher average interest rates earned on those instruments, as well as the recognition of $3.5 million of income associated with a tax refund received in the third quarter of 2024.

Previous wording

The effective income tax rate for the three months ended June 30, 2024 was 28.0% compared to 34.8% for the three months ended June 30, 2023. The effective income tax rate for the six months ended June 30, 2024 was 28.5% compared to 33.4% for the six months ended June 30, 2023. The effective tax rates were determined using a worldwide estimated annual effective tax rate and took discrete items into consideration. The difference between the effective tax rate and the 21% U.S. federal statutory rate for the six months ended June 30, 2024 was primarily due to the inclusion of Global Intangible Low-Taxed Income and non-deductible stock-based compensation expense, partially offset by a non-recurring favorable impact of reversal of accruals related to undistributed earnings. The difference between the effective tax rate and the 21% U.S. federal statutory rate for the six months ended June 30, 2023 was primarily due to tax provisions that do not meet the more likely than not standard and the inclusion of Global Intangible Low-Taxed Income.

Current wording

The effective income tax rate for the three months ended September 30, 2024 was 38.3% compared to 41.5% for the three months ended September 30, 2023. The effective income tax rate for the nine months ended September 30, 2024 was 30.9% compared to 35.1% for the nine months ended September 30, 2023. The effective tax rates were determined using a worldwide estimated annual effective tax rate and took discrete items into consideration. The difference between the effective tax rate and the 21% U.S. federal statutory rate for the nine months ended September 30, 2024 was primarily due to tax provisions that do not meet the more likely than not standard, the inclusion of Global Intangible Low-Taxed Income, and non-deductible stock-based compensation expense, partially offset by a non-recurring favorable impact of reversal of accruals related to undistributed earnings. The difference between the effective tax rate and the 21% U.S. federal statutory rate for the nine months ended September 30, 2023 was primarily due to tax provisions that do not meet the more likely than not standard and the inclusion of Global Intangible Low-Taxed Income.

Previous wording

Upon aggregating all of the components of our results of operations above, net income for the three and six months ended June 30, 2024, increased $10.9 million and $20.2 million, respectively, when compared with the same periods of 2023.

Current wording

Upon aggregating all of the components of our results of operations above, net income for the three and nine months ended September 30, 2024, increased $1.4 million and $18.8 million, respectively, when compared with the same periods of 2023.

Previous wording

Credit Adjusted EBITDA and Credit Adjusted EBITDA Margin as calculated herein may not be comparable to similarly titled measures reported by other companies within the industry and are not determined in accordance with GAAP. Our

Current wording

Credit Adjusted EBITDA and Credit Adjusted EBITDA Margin as calculated herein may not be comparable to similarly titled measures reported by other companies within the industry and are not determined in accordance with GAAP. Our presentation of Credit Adjusted EBITDA and Credit Adjusted EBITDA Margin should not be construed as an inference that our future results will be unaffected by unusual or unexpected items.

Previous wording

(2)Amounts for all periods include costs incurred to evaluate and pursue acquisition activities as well as costs incurred by the Company in connection with the evaluation of strategic alternatives.

Current wording

(2)Includes costs incurred to evaluate and pursue acquisition activities as well as costs incurred by the Company in connection with the evaluation of strategic alternatives.

Previous wording

(3) The amounts for the three and six months ended June 30, 2024 consists primarily of $2.6 million and $11.2 million, respectively, incurred by the Company for severance. The amount for the six months ended June 30, 2024 also includes $5.1 million incurred by the Company related to restructuring activities. The amounts for the three and six months ended June 30, 2023 consists primarily of $0.1 million and $0.7 million, respectively, incurred by the Company for severance and, for the three months ended June 30, 2023, $0.2 million for relocation and support provided to employees due to the war in Ukraine.

Current wording

(3) The amounts for the three and nine months ended September 30, 2024 consists primarily of $2.0 million and $16.7 million, respectively, incurred by the Company for severance. The amount for the nine months ended September 30, 2024 also includes $6.2 million for incurred by the Company related to restructuring activities. The amounts for the three and nine months ended September 30, 2023 consists primarily of $0.8 million and $1.5 million, respectively, incurred by the Company for severance and, for the three and nine months ended September 30, 2023, $1.0 million for tax assessment paid under protest.

Previous wording

We incur capital expenditures in the normal course of business and perform ongoing enhancements and updates to our social and mobile games to maintain our quality standards. Cash used for capital expenditures in the normal course of business is typically made available from cash flows generated by operating activities. We may also pursue acquisition opportunities for

Current wording

We incur capital expenditures in the normal course of business and perform ongoing enhancements and updates to our social and mobile games to maintain our quality standards. Cash used for capital expenditures in the normal course of business is typically made available from cash flows generated by operating activities. We may also pursue acquisition opportunities for additional businesses or social or mobile games that meet our strategic and return on investment criteria. Capital needs are evaluated on an individual opportunity basis and may require significant capital commitments. Payments of initial consideration for the SuperPlay transaction will be made from cash on the balance sheet. Cash for earnout consideration to be

Previous wording

Our primary sources of liquidity are the cash flows generated from our operations, currently available unrestricted cash and cash equivalents, short-term investments, and borrowings under our Credit Facility and Revolver. Our cash and cash equivalents and short-term investments totaled $1,100.4 million and $1,029.7 million at June 30, 2024 and December 31, 2023, respectively. As of both June 30, 2024 and December 31, 2023, we had $600 million in additional borrowing capacity pursuant to our Revolving Credit Facility. Payments of short-term debt obligations and other commitments are expected to be made from cash on the balance sheet and operating cash flows. Long-term obligations are expected to be paid through operating cash flows, or, if necessary, borrowings under our Revolving Credit Facility or, if necessary, additional term loans or issuances of equity.

Current wording

Our primary sources of liquidity are the cash flows generated from our operations, currently available unrestricted cash and cash equivalents, short-term investments, and borrowings under our Credit Facility and Revolver. Our cash and cash equivalents and short-term investments totaled $1,201.7 million and $1,029.7 million at September 30, 2024 and December 31, 2023, respectively. As of both September 30, 2024 and December 31, 2023, we had $600 million in additional borrowing capacity pursuant to our Revolving Credit Facility. Payments of short-term debt obligations and other commitments are expected to be made from cash on the balance sheet and operating cash flows. Long-term obligations are expected to be paid through operating cash flows, or, if necessary, borrowings under our Revolving Credit Facility or, if necessary, additional term loans or issuances of equity.

Previous wording

Net cash flows provided by operating activities for the six months ended June 30, 2024 was $180.1 million compared with $227.5 million for the same period of 2023. Net cash flows provided by operating activities for each period primarily consisted of net income generated during the period, exclusive of non-cash expenses such as depreciation, amortization, stock-based compensation and changes in the fair value of contingent consideration payable, with changes in working capital impacted by the payment of annual and incentive bonuses and payment of long-term cash compensation during the first quarter and other normal working-capital timing differences.

Current wording

Net cash flows provided by operating activities for the nine months ended September 30, 2024 was $337.0 million compared with $336.3 million for the same period of 2023. Net cash flows provided by operating activities for each period primarily consisted of net income generated during the period, exclusive of non-cash expenses such as depreciation, amortization, stock-based compensation and changes in the fair value of contingent consideration payable, with changes in working capital impacted by the payment of annual and incentive bonuses and payment of long-term cash compensation during the first quarter and other normal working-capital timing differences.

Previous wording

Net cash flow used in investing activities for the six months ended June 30, 2024 was $449.1 million when compared with $33.0 million for the same period of 2023. Cash flows used in investing activities generally includes outflows related to the purchase and capitalization of assets and, in 2024, includes $390.1 million of cash outflow for cash deposited into short-term investments.

Current wording

Net cash flow used in investing activities for the nine months ended September 30, 2024 was $125.5 million when compared with $215.3 million for the same period of 2023. Cash flows used in investing activities generally includes outflows related to the purchase and capitalization of assets and, in 2023, includes $160.6 million of cash outflow for a business acquisition.

Previous wording

Net cash flows used in financing activities for the six months ended June 30, 2024 was $48.6 million, compared with $11.4 million for the same period of 2023. Financing activity cash flows for the six months ended June 30, 2024 primarily relates to a cash dividend paid, and in both 2024 and 2023 includes repayments on our bank borrowings.

Current wording

Net cash flows used in financing activities for the nine months ended September 30, 2024 was $96.1 million, compared with $12.1 million for the same period of 2023. Financing activity cash flows for the nine months ended September 30, 2024 primarily relates to a cash dividend paid, and in both 2024 and 2023 includes repayments on our bank borrowings.

Previous wording

The Second Amendment, among other things, effected a refinancing of Old Term Loan with a new $1.9 billion senior secured first lien term loan borrowed under the Credit Agreement (the “New Term Loan”), increased the Revolving Credit Facility to $600 million and extended the maturity of the Revolving Credit Facility to March 11, 2026. The New Term Loan matures on March 11, 2028 and requires scheduled quarterly principal payments in amounts equal to 0.25% of the original aggregate principal amount of the New Term Loan, with the balance due at maturity.

Current wording

We have a $1.9 billion senior secured first lien term loan (the “Term Loan”) and a $600 million revolving credit facility (the “Revolving Credit Facility”) (together, the “Credit Agreement”), maturing on March 11, 2028 and March 11, 2026, respectively. The Term Loan requires quarterly principal payments equal to 0.25% of the original aggregate principal amount of the Term Loan with balance due at maturity.

Previous wording

Also on March 11, 2021, we issued $600.0 million aggregate principal amount of our 4.250% senior notes due 2029 (the “Notes”). The Notes mature on March 15, 2029. Interest on the Notes will accrue at a rate of 4.250% per annum. Interest on the Notes is payable semi-annually in cash in arrears on March 15 and September 15 of each year, commencing on September 15, 2021.

Current wording

On March 11, 2021, we issued $600.0 million aggregate principal amount of our 4.250% senior notes due 2029 (the “Notes”). The Notes mature on March 15, 2029. Interest on the Notes will accrue at a rate of 4.250% per annum. Interest on the Notes is payable semi-annually in cash in arrears on March 15 and September 15 of each year, commencing on September 15, 2021.