Playtika’s performance analysis Q1–2021

& What to expect in Q2?!

(This is Part-1 of 3 of overall analysis)

Playtika is one of the prominent contenders in the Social Casino or casual gaming industry.

This post is about their non-financial performance in Q1 and what to expect in Q2 (results expected by approx Aug 2nd week)

Their non-financial performance gives us more perspective of what can be achieved in the further quarters financially.

Part-1: Non-financial performance of Q1

Analysis of the non-financial performance:

Inferences:

DAUs (-10%) & MAUs(-15%) dropped. No, its not a bad news.

• Generally in casual games, there are more free players than paid players.
• It was clear from their strategy that they focus more on having more revenues from IAPs. Ads as a revenue strategy is not long term sustainable.
  (Just imagine there is lot of ads space looking for advertisers, Or quality ads. Why lose in their competition. Why one has to bet on the other business’s performance)
  (Also, a game cannot ensure quality ads to be shown to their players. One would not like to allow random Tik Tok/Insta videos displayed to their players for example)
  So, letting the low quality players find another place is surely a strategic step forward. Especially, good in case one has great reliability on their core business performance.
• Growth does not come with more population in the app. But, it comes with more paying population.

A talk by Craig Abrahams, CFO of Playtika on their strategy. Pick their IAP and Ads monetization strategy

DAPs improved by +8.8% YoY
ARPDAU improved by +36% YoY

These 2 are undeniably important metrics for business growth.
They now have more payers than last year and they are paying MORE
What’s more interesting is coming up next.

DAP/DAU improved by +21% YoY

This is one important optimization one need to take a note on. This helps in segmenting players in a better way. Playtika is very strong in their live operations and it has a strong hold on its in-house tools to drive monetization initiatives.

Improvement in this metric means >> More opportunity to Playtika.
This can give scope to improve existing metrics even more.

This drives more growth in the future.

DAU/MAU improved by +5.9% YoY

This is another important opportunistic KPI.

This means:

In 2020 March, Out of 100 unique players who played Playtika games in a month, any 31 of them played with them at any given day of a month

In 2021 March, Out of 100 unique players who played Playtika games in a month, any 33 of them played with them at any given day of a month

This is improvement in retention of players with Playtika. With extra players available to engage with them, using their existing LiveOps system, they can achieve more conversions and more ARPUs.

Part-2: Financial performance

Income Statement

A snippet from Playtika’s performance Summary

Inferences:

• Operating income has improved, but net income does not show any improvement. It is possibly
• Revenue per cost & expense indicates they are still a free cash flow machine.
  (For every $ they spend, how much more or less they make in revenue. Any number greater than 1 is good health)
• A dip in this factor compared to 2020 shows that there is increased costs for generating same amount of revenue.

Snippet from Playtika’s Income statement

Inferences:

• Improved R&D spends sounds really futuristic. They could be building new products or entering new genres or even finding optimal ways to generate more revenue. This was some of their their goals when they entered IPO this year.
• Increased G&A is bit alarming. Consider that they had to set up new offices, and recruitment and salary raises in this Quarter. If this does not go down in the Q2 results, this can be a point of concern.

Cash Flow statement

A snippet from Playtika’s cash flow statement

Inferences:

• Upside: capitalization of internal use of software costs indicates that their internal software tools could have been integrated with their recently acquired games/firms. This is a good sign for possible positive outcomes in net income.
• Upside:Short term bank deposits is an alert here. This can indicate they are having cash balances nearly ready to make an investment into potential targets.

In Summary, the overall outlook is positive with Playtika. Especially, their recent acquisitions should be ready to be contributing after post integration success.