Playtika Holding Corp. [PLTK] Filings

10-Q 1 playtika-20230930.htm 10-Q playtika-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 001-39896

PLAYTIKA HOLDING CORP.

(Exact Name of Registrant as Specified in its Charter)


Delaware						81-3634591
(State of other jurisdiction						(I.R.S. Employer
of incorporation or organization)						Identification No.)


c/o Playtika Ltd.
HaChoshlim St 8
Herzliya Pituach, Israel
972-73-316-3251

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	PLTK	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 3, 2023, the registrant had 367,227,554 shares of common stock, $0.01 par value per share, outstanding.

PLAYTIKA HOLDING CORP.

FORM 10-Q

INDEX


		Page
PART I.	FINANCIAL INFORMATION	1
ITEM 1.	FINANCIAL STATEMENTS (Unaudited)	1
	Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	1
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and 2022	2
	Consolidated Statements of Stockholders’ Deficit for the three and nine months ended September 30, 2023 and 2022	3
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	5
	Notes to the Consolidated Financial Statements	7
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
ITEM 4.	CONTROLS AND PROCEDURES	35
PART II.	OTHER INFORMATION	37
ITEM 1.	LEGAL PROCEEDINGS	37
ITEM 1A.	RISK FACTORS	37
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	38
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	38
ITEM 4.	MINE SAFETY DISCLOSURES	38
ITEM 5.	OTHER INFORMATION	38
ITEM 6.	EXHIBITS	39
SIGNATURES

CAUTIONARY NOTE ABOUT FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains or may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Exchange Act. All statements other than statements of historical facts contained in this quarterly report, including statements regarding our business strategy, plans and our objectives for future operations, are forward-looking statements. Further, statements that include words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “present,” “preserve,” “project,” “pursue,” “will,” or “would,” or the negative of these words or other words or expressions of similar meaning may identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. The achievement or success of the matters covered by such forward-looking statements involves significant risks, uncertainties and assumptions, including, but not limited to, the important factors discussed in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2023. Moreover, we operate in a very competitive and rapidly changing environment and industry. As a result, it is not possible for our management to assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated, predicted or implied in the forward-looking statements.

Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include without limitation:

•our reliance on third-party platforms, such as the iOS App Store, Facebook, and Google Play Store, to distribute our games and collect revenues, and the risk that such platforms may adversely change their policies;

•our reliance on a limited number of games to generate the majority of our revenue;

•our reliance on a small percentage of total users to generate a majority of our revenue;

•our free-to-play business model, and the value of virtual items sold in our games, is highly dependent on how we manage the game revenues and pricing models;

•our inability to make acquisitions and integrate any acquired businesses successfully could limit our growth or disrupt our plans and operations;

•we may be unable to successfully develop new games;

•our ability to compete in a highly competitive industry with low barriers to entry;

•we have significant indebtedness and are subject to the obligations and restrictive covenants under our debt instruments;

•the impact of the COVID-19 pandemic on our business and the economy as a whole;

•the impact of an economic recession or periods of increased inflation, and any reductions to household spending on the types of discretionary entertainment we offer;

•our controlled company status;

•legal or regulatory restrictions or proceedings could adversely impact our business and limit the growth of our operations;

•risks related to our international operations and ownership, including our significant operations in Israel, the Ukraine and Belarus and the fact that our controlling stockholder is a Chinese-owned company;

•geopolitical events, such as the Wars in Israel and Ukraine;

•our reliance on key personnel;

•security breaches or other disruptions could compromise our information or our players’ information and expose us to liability; and

•our inability to protect our intellectual property and proprietary information could adversely impact our business.

Additional factors that may cause future events and actual results, financial or otherwise, to differ, potentially materially, from those discussed in or implied by the forward-looking statements include the risks and uncertainties discussed in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the SEC on February 28, 2023. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur, and reported results should not be considered as an indication of future performance. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Except as required by law, we undertake no obligation to update any forward-looking statements for any reason to conform these statements to actual results or to changes in our expectations.

Part I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(In millions, except par value)


	September 30, 2023		December 31, 2022
ASSETS	(Unaudited)
Current assets
Cash and cash equivalents	$	878.2	$	768.7

Restricted cash	1.9		1.7
Accounts receivable	168.3		141.1
Prepaid expenses and other current assets	119.5		113.4
Total current assets	1,167.9		1,024.9
Property and equipment, net	109.5		125.7
Operating lease right-of-use assets	104.7		104.2
Intangible assets other than goodwill, net	303.6		354.0
Goodwill	1,005.2		811.2
Deferred tax assets, net	71.9		68.3
Investments in unconsolidated entities	54.1		52.6
Other non-current assets	160.7		156.7
Total assets	$	2,977.6	$	2,697.6

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Current maturities of long-term debt	$	16.9	$	12.4
Accounts payable	38.2		50.7
Operating lease liabilities, current	18.4		13.5
Accrued expenses and other current liabilities	327.1		385.2
Total current liabilities	400.6		461.8
Long-term debt	2,402.4		2,411.2
Contingent consideration	77.4		—
Other long-term liabilities, including employee related benefits	247.6		252.1
Operating lease liabilities, long-term	89.6		94.5
Deferred tax liabilities	41.9		46.6
Total liabilities	3,259.5		3,266.2
Commitments and contingencies (Note 10)
Stockholders' equity (deficit)
Common stock of $0.01 par value; 1,600.0 shares authorized; 367.1 and 363.6 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	4.1		4.1
Treasury stock at cost (51.8 shares at both September 30, 2023 and December 31, 2022)	(603.5)		(603.5)
Additional paid-in capital	1,237.9		1,155.8
Accumulated other comprehensive income	24.5		17.6
Accumulated deficit	(944.9)		(1,142.6)
Total stockholders' deficit	(281.9)		(568.6)
Total liabilities and stockholders’ deficit	$	2,977.6	$	2,697.6

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions, except for per share data)

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Revenues	$	630.1	$	647.8	$	1,929.1	$	1,984.3
Costs and expenses
Cost of revenue	173.9		181.8		537.9		554.8
Research and development	102.2		115.1		304.9		353.0
Sales and marketing	142.8		145.4		427.7		476.9
General and administrative	79.6		74.1		225.7		256.5
Impairment of intangible assets	41.6		—		51.3		—
Total costs and expenses	540.1		516.4		1,547.5		1,641.2
Income from operations	90.0		131.4		381.6		343.1
Interest and other, net	25.2		24.3		76.9		74.2
Income before income taxes	64.8		107.1		304.7		268.9
Provision for income taxes	26.9		38.9		107.0		81.1
Net income	37.9		68.2		197.7		187.8
Other comprehensive income (loss)
Foreign currency translation	(4.1)		(14.5)		(1.2)		(27.8)
Change in fair value of derivatives	1.1		10.5		8.1		23.3
Total other comprehensive income (loss)	(3.0)		(4.0)		6.9		(4.5)
Comprehensive income	$	34.9	$	64.2	$	204.6	$	183.3

Net income per share attributable to common stockholders, basic	$	0.10	$	0.17	$	0.54	$	0.46
Net income per share attributable to common stockholders, diluted	$	0.10	$	0.17	$	0.54	$	0.46
Weighted-average shares used in computing net income per share attributable to common stockholders, basic	366.7		412.7		365.8		412.3
Weighted-average shares used in computing net income per share attributable to common stockholders, diluted	367.6		412.7		366.3		412.6

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(In millions)

(Unaudited)


	Share capital
	Shares	Amount		Treasury stock		Additional paid-in capital		Accumulated other comprehensive income (loss)		Retained earnings (Accumulated deficit)		Total stockholders' equity (deficit)
Balances at January 1, 2023	363.6	$	4.1	$	(603.5)	$	1,155.8	$	17.6	$	(1,142.6)	$	(568.6)
Net income	—	—		—		—		—		84.1		84.1
Stock-based compensation	—	—		—		29.8		—		—		29.8
Issuance of shares upon vesting of RSUs and PSUs	2.0	*		—		(*)		—		—		—
Income tax withholding related to vesting of restricted stock units and other	—	—		—		(1.3)		—		—		(1.3)
Other comprehensive loss	—	—		—		—		(4.7)		—		(4.7)
Balances at March 31, 2023	365.6	4.1		(603.5)		1,184.3		12.9		(1,058.5)		(460.7)
Net income	—	—		—		—		—		75.7		75.7
Stock-based compensation	—	—		—		26.1		—		—		26.1
Issuance of shares upon vesting of RSUs	0.7	*		—		(*)		—		—		—
Income tax withholding related to vesting of restricted stock units and other	—	—		—		(0.6)		—		—		(0.6)
Other comprehensive loss	—	—		—		—		14.6		—		14.6
Balances at June 30, 2023	366.3	4.1		(603.5)		1,209.8		27.5		(982.8)		(344.9)
Net income	—	—		—		—		—		37.9		37.9
Stock-based compensation	—	—		—		28.8		—		—		28.8
Issuance of shares upon vesting of RSUs	0.8	*		—		(*)		—		—		—
Income tax withholding related to vesting of restricted stock units and other	—	—		—		(0.7)		—		—		(0.7)
Other comprehensive loss	—	—		—		—		(3.0)		—		(3.0)
Balances at September 30, 2023	367.1	$	4.1	$	(603.5)	$	1,237.9	$	24.5	$	(944.9)	$	(281.9)

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	Share capital
	Shares	Amount		Additional paid-in capital		Accumulated other comprehensive income		Retained earnings (Accumulated deficit)		Total stockholders' equity (deficit)
Balances at January 1, 2022	411.1	$	4.1	$	1,032.9	$	3.2	$	(1,417.9)	$	(377.7)
Net income	—	—		—		—		83.2		83.2
Stock-based compensation	—	—		40.5		—		—		40.5
Issuance of shares upon vesting of RSUs	1.1	*		(*)		—		—		—
Income tax withholding related to vesting of restricted stock units and other	—	—		(1.4)		—		—		(1.4)
Other comprehensive income	—	—		—		15.4		—		15.4
Balances at March 31, 2022	412.2	4.1		1,072.0		18.6		(1,334.7)		(240.0)
Net income	—	—		—		—		36.4		36.4
Share-based compensation	—	—		36.1		—		—		36.1
Issuance of shares upon vesting of RSUs	0.2	*		(*)		—		—		—
Income tax withholding related to vesting of restricted stock units and other	—	—		(0.7)		—		—		(0.7)
Other comprehensive income	—	—		—		(15.9)		—		(15.9)
Balances at June 30, 2022	412.4	4.1		1,107.4		2.7		(1,298.3)		(184.1)
Net income	—	—		—		—		68.2		68.2
Share-based compensation	—	—		31.9		—		—		31.9
Issuance of shares upon vesting of RSUs	0.3	*		(*)		—		—		—
Income tax withholding related to vesting of restricted stock units and other	—	—		(0.4)		—		—		(0.4)
Other comprehensive loss	—	—		—		(4.0)		—		(4.0)
Balances at September 30, 2022	412.7	$	4.1	$	1,138.9	$	(1.3)	$	(1,230.1)	$	(88.4)

_______

* Represents an amount less than 0.1 or $0.1

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Nine months ended September 30,
	2023		2022
Cash flows from operating activities
Net income	$	197.7	$	187.8
Adjustments to reconcile net income to net cash from operating activities:
Depreciation	33.2		33.4
Amortization of intangible assets	82.8		88.3
Impairment of intangible assets	51.3		—
Stock-based compensation	82.5		106.8
Amortization of loan discount	5.2		5.8
Change in contingent consideration	—		(13.1)
Change in deferred taxes, net	(11.1)		(12.3)
Loss from foreign currency	(1.3)		8.2
Non-cash lease expenses (income)	(0.6)		(8.1)

Changes in operating assets and liabilities:
Accounts receivable	(23.4)		12.0
Prepaid expenses and other current and non-current assets	4.0		(19.8)
Accounts payable	(18.1)		(5.0)
Accrued expenses and other current and non-current liabilities	(65.9)		(67.7)
Net cash provided by operating activities	336.3		316.3
Cash flows from investing activities
Purchase of property and equipment	(16.8)		(38.3)
Capitalization of internal use software costs	(27.8)		(30.6)
Purchase of software for internal use	(9.0)		(7.7)
Short-term bank deposits	—		100.1
Payments for business combination, net of cash acquired	(160.6)		(29.9)
Other investing activities	(1.1)		(9.8)
Net cash used in investing activities	(215.3)		(16.2)
Cash flows from financing activities

Repayments on bank borrowings	(9.5)		(14.2)





Net cash outflow for business acquisitions	—		(26.9)
Payment of tax withholdings on stock-based payments	(2.6)		(2.1)


Net cash used in financing activities	(12.1)		(43.2)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	0.8		(18.9)
Net change in cash, cash equivalents and restricted cash	109.7		238.0
Cash, cash equivalents and restricted cash at the beginning of the period	770.4		1,019.0
Cash, cash equivalents and restricted cash at the end of the period	$	880.1	$	1,257.0

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	Nine months ended September 30,
	2023		2022
Supplemental cash flow disclosures
Cash paid for income taxes	$	137.7	$	130.0
Cash paid for interest	$	114.7	$	80.3
Cash received for interest	$	26.7	$	8.7
Non-cash financing and investing activities
Right-of-use assets acquired under operating leases	$	14.5	$	32.6
Contingent consideration related to business acquisition	$	77.4	$	11.4
Deferred Tender Offer costs	$	—	$	2.6
Capitalization of stock-based compensation costs	$	2.2	$	1.7

The accompanying notes are an integral part of these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(In millions, unless specified otherwise)

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business and organization

Playtika Holding Corp. (“Playtika”) and its subsidiaries (together with Playtika, the “Company”) is one of the world’s leading developers of mobile games creating fun, innovative experiences that entertain and engage its users. It has built best-in-class live game operations services and a proprietary technology platform to support its portfolio of games which enable it to drive strong user engagement and monetization. The Company’s games are free-to-play, and the Company seeks to provide novel, curated in-game content and offers to its users, at optimal points in their game journeys to drive user engagement and monetization.

Basis of presentation and consolidation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and include Playtika and all subsidiaries in which the Company has a controlling financial interest. Control generally equates to ownership percentage, whereby (i) affiliates that are more than 50% owned are consolidated; (ii) investments in affiliates of 50% or less but greater than 20% are generally accounted for using the equity method where the Company has determined that it has significant influence over the entities; and (iii) investments in affiliates of 20% or less are generally accounted for using cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

The significant accounting policies referenced in the annual consolidated financial statements of the Company as of December 31, 2022 have been applied consistently in these unaudited interim consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been recorded within the accompanying financial statements, consisting of normal, recurring adjustments, and all intercompany balances and transactions have been eliminated in the consolidation. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 28, 2023.

Use of estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Concentration of credit risk and significant customers

Financial instruments, which potentially expose the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, restricted cash, accounts receivable and derivative contracts. The Company’s investment policy imposes certain maturity limits on the Company’s portfolio and restricts the permitted investments to the purchase of bank deposits and highly rated fixed income securities.

Apple, Facebook and Google are significant distribution, marketing, promotion and payment platforms for the Company's games. A significant portion of the Company’s revenues has been generated from players who accessed the Company's games through these platforms. Therefore, the Company's accounts receivable are derived mainly from sales through these

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three platforms. Accounts receivable are recorded at their transaction amounts and do not bear interest. The Company performs ongoing credit evaluations of its customers.

The following table summarizes the major accounts receivable of the Company as a percentage of the total accounts receivable as of the dates indicated:


	September 30, 2023	December 31, 2022

Apple	56%	43%
Google	26%	35%
Facebook	4%	7%

Employee related benefits

Appreciation and retention plan

In August 2019, the Company adopted the Playtika Holding Corp. Retention Plan (the “2021-2024 Retention Plan”) in order to retain key employees and reward them for contributing to the success of the Company. Under the 2021-2024 Retention Plan, eligible employees may be granted retention awards that let them receive their pro rata portion of a retention pool of $25 million per year for each of the plan years, and may also be granted appreciation units which allow the employee to receive their pro-rata portion of an appreciation pool calculated as a specified percentage of Adjusted EBITDA for each of the plan years.

The value of each unit of the 2021-2024 Retention Plan has been amortized into compensation expense using the straight-line method, which will result in the recognition of compensation costs in the same years as the underlying EBITDA used in the plan measurement is earned. See Note 13, Appreciation and Retention Plan, for additional discussion.

Derivative instruments

The Company uses interest rate swap contracts to reduce its exposure to fluctuating interest rates associated with the Company’s variable rate debt, and to effectively increase the portion of debt upon which the Company pays a fixed interest rate. The Company’s interest rate swap agreements are designated as cash flow hedges under ASC 815, Derivatives and Hedging (“ASC 815”), involving the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreement, without the exchange of the underlying notional amount. These hedges are highly effective in offsetting changes in the Company’s future expected cash flows due to the fluctuation of the Company’s variable rate debt.

The Company monitors the effectiveness of its hedges on a quarterly basis, both qualitatively and quantitatively. The Company performed a regression analysis at the inception of the hedging relationship and at period end in which it compared the change in the fair value of the swap transaction and the change in fair value of a hypothetical interest rate swap having terms that identically match the terms of the debt's interest rate payments historical swap rates. The Company believes that the hedging instruments are expected to be highly effective at offsetting changes in the hedged transactions attributable to the risk being hedged. For each future reporting period, the Company will continue performing retrospective and prospective assessments of hedge effectiveness in a single regression analysis by updating the regression analysis that was prepared at inception of the hedging relationship.

The Company uses foreign currency derivative contracts to reduce its exposure to fluctuating exchange rates between the United States dollar (as the Company’s functional currency) and certain expense lines denominated in Israeli Shekels (“ILS”), Polish Zloty (“PLN”) and Romanian Leu (“RON”). The Company’s derivative contracts are designated as cash flow hedges under ASC 815. The Company monitors the effectiveness of its hedges on a quarterly basis, both qualitatively and quantitatively, and expects these hedges to remain highly effective at offsetting fluctuations in exchange rates through their respective maturity dates. See Note 8, Derivative Instruments, for additional discussion.

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The fair value of derivative financial instruments is recognized as an asset or liability at each balance sheet date, with changes in fair value recorded in other comprehensive income on the consolidated statements of comprehensive income until the future underlying transactions occur. The fair value approximates the amount the Company would pay or receive if these contracts were settled at the respective valuation dates. The inputs used to measure the fair value of the Company’s interest rate swap agreements and foreign currency derivative contracts are categorized as Level 2 in the fair value hierarchy as established by ASC 820, Fair Value Measurement (“ASC 820”).

Impairment of long-lived assets

The Company’s long-lived assets to be held or used, including right-of-use (“ROU”) assets, and identifiable intangible assets that are subject to amortization are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, in accordance with ASC 360, Accounting for the Impairment or Disposal of Long-Lived Assets. Impairment indicators include any significant changes in the manner of the Company’s use of the assets and significant negative industry or economic trends. The Company recognizes impairment based on the difference between the fair value of the asset and its carrying value. Fair value is generally measured based on either quoted market prices, if available, or a discounted cash flow analysis.

Net income per share attributable to common stockholders

For all periods presented herein, basic net income per share is calculated by dividing net income by the weighted-average common shares outstanding. Diluted net income per share reflects the effect of all potentially dilutive common shares outstanding by dividing net income by the weighted-average of all common and potentially dilutive shares outstanding. Performance Stock Units (“PSUs”) are considered potentially dilutive as of the first day of the reporting period in which the underlying performance metric is achieved. In the event of a loss, diluted shares are not considered because of their anti-dilutive effect. The Company uses the treasury stock method on a grant-by-grant basis as the method for determining the dilutive effect of options, RSUs and PSUs. Under this method, it is assumed that the hypothetical proceeds received upon settlement are used to repurchase common shares at the average market price during the period.

Accounting standards recently adopted by the Company

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805)(“ASU 2021-08”). ASU 2021-08 requires that an acquiring entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”) and that at the acquisition date, the acquirer accounts for related revenue contracts in accordance with ASC 606 as if it had originated the contracts. The Company adopted this standard on January 1, 2023, and the adoption did not have an impact on the Company’s consolidated financial statements.

In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 484 (“ASU 2022-06”). The amendments of ASU No. 2020-06 apply only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The Company will continue to monitor the effects of rate reform, if any, on its contracts. The Company adopted this standard on January 1, 2023, and the adoption did not have an impact on the Company’s consolidated financial statements.

NOTE 2. ACQUISITION

Acquisition of Youda Games

On August 28, 2023, the Company completed the acquisition of the Youda Games (the “Youda Games”) portfolio from Azerion Group N.V. consistent with the Company’s strategy to increase its breadth of entertainment genres and leverage the Company’s technology platforms and live operations. Terms of the acquisition agreement include initial cash consideration of EUR 81.3 million plus an earnout based on the performance of the acquired business, with a maximum total consideration of EUR 150 million, subject to customary adjustments. The acquisition was accounted for as a business combination.

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Within the accompanying consolidated financial statements, management has recorded its preliminary estimate of the assets acquired and liabilities assumed in the acquisition, along with an estimate of the fair value for contingent consideration payable, based upon management’s financial models for this acquisition, and upon similar allocations from prior acquisitions. The Company has engaged a third-party valuation specialist to assist the Company with finalizing these estimates, with such finalization expected to be completed during the fourth quarter of 2023. As such, the Company expects that the initial purchase price allocation may change.

The goodwill, which is deductible for tax purposes, is generally attributable to synergies between the Company's and Youda Game's respective studio operations and games.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed (in millions):


Consideration
Total Consideration	$	89.9


Less: Acquisition date fair value of contingent consideration	(2.4)
Consideration paid as of August 28, 2023	$	87.5

Identifiable assets acquired and liabilities assumed


Intangible assets other than goodwill	$	44.9
Goodwill	45.0
Contingent consideration	(2.4)



Total identifiable assets acquired and liabilities assumed	$	87.5

The developed game assets acquired and included in the above table are being amortized on a straight-line basis over their estimated useful life of eight years, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized.

Transaction costs incurred by the Company in connection with the Youda Games acquisition, were approximately $1.6 million for the three and nine months ended September 30, 2023, and were recorded within general and administrative expenses in the consolidated statements of comprehensive income. Pro forma results of operations for this acquisition subsequent to the August 28, 2023 acquisition date have not been presented because the incremental results from Youda Games are not material to the consolidated statements of comprehensive income presented herein.

Acquisition of G.S InnPlay Labs Ltd.

On September 14, 2023, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”) pursuant to which the Company agreed to acquire all of the issued and outstanding share capital of G.S InnPlay Labs Ltd. (“InnPlay”) for an aggregate purchase price equal to (i) $80 million, subject to customary closing adjustments, and (ii) earnout payments of up to $220 million, the amounts of which will be based on certain revenue growth performance metrics of InnPlay during the two years following the closing of the transaction. The acquisition is consistent with the Company’s strategy to increase its breadth of entertainment genres and leverage the Company’s technology platforms and live operations expertise to enhance game operations. The acquisition transaction closed on September 28, 2023 and was accounted for as a business combination.

Within the accompanying consolidated financial statements, management has recorded its preliminary estimate of the assets acquired and liabilities assumed in the acquisition, along with an estimate of the fair value for contingent consideration payable, based upon management’s financial models for this acquisition, and upon similar allocations from prior acquisitions. Due to time constraints between the acquisition and quarter end, the Company accounted for the entire balance of intangible assets acquired as goodwill as of September 30, 2023. The Company has engaged a third-party valuation specialist to assist the Company with finalizing the valuation estimates and the further allocation of value among all intangible assets, with such finalization expected to be completed during the fourth quarter of 2023. As such, the Company expects that the initial purchase price allocation will change.

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The goodwill, which is non-deductible for tax purposes, is generally attributable to synergies between the Company's and InnPlay's respective studio operations and games.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed (in millions):


Consideration
Total Consideration	$	148.8
Less: Cash acquired	(0.8)
Total consideration, net of cash acquired	148.0
Less: Acquisition date fair value of contingent consideration	(75.0)
Consideration paid as of September 28, 2023	$	73.0

Identifiable assets acquired and liabilities assumed
Accounts receivable	$	4.3
Property and equipment	0.2

Goodwill	149.6
Contingent consideration	(75.0)

Liabilities assumed	(6.1)

Total identifiable assets acquired and liabilities assumed	$	73.0

Net revenues and net loss for InnPlay for the period prior to acquisition of January 1 through September 27, 2023 were approximately $17 million and $11 million, respectively.

Transaction costs incurred by the Company in connection with the InnPlay acquisition were approximately $0.7 million for the three and nine months ended September 30, 2023, and were recorded within general and administrative expenses in the consolidated statements of comprehensive income. Pro forma results of operations for this acquisition subsequent to the September 28, 2023 acquisition date have not been presented because the incremental results from InnPlay are not material to the consolidated statements of comprehensive income presented herein. Further, pro forma results of operations for the combined Youda Games and InnPlay acquisitions subsequent to their respective acquisition dates have not been presented because the incremental results from the two acquisition transactions, when combined, are not material to the consolidated statements of comprehensive income presented herein.

NOTE 3. GOODWILL

Changes in goodwill for the nine months ended September 30, 2023 were as follows (in millions):


	Nine months ended September 30, 2023
Balance at beginning of period	$	811.2
Goodwill acquired during the period	194.6
Foreign currency translation adjustments	(0.6)
Balance at end of period	$	1,005.2

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NOTE 4. INTANGIBLE ASSETS OTHER THAN GOODWILL, NET

The carrying amounts and accumulated amortization of the acquired intangible assets other than goodwill, net, including the impact of foreign currency exchange translation, at September 30, 2023 and December 31, 2022, were as follows (in millions):


	September 30, 2023
	Weighted average remaining useful life (in years)	Balance		December 31, 2022
Historical cost basis
Developed games and acquired technology	2.8	$	637.4	$	599.2
Trademarks and user base	0.0	31.0		31.0
Internal use software	2.4	156.1		126.2
		824.5		756.4
Accumulated amortization
Developed games and acquired technology		(411.2)		(315.4)
Trademarks and user base		(31.0)		(31.0)
Internal use software		(78.7)		(56.0)
		(520.9)		(402.4)
Intangible assets other than goodwill, net		$	303.6	$	354.0

During the three months ended September 30, 2023 and 2022, the Company recorded amortization expense in the amounts of $27.3 million and $28.2 million, respectively. During the nine months ended September 30, 2023 and 2022, the Company recorded amortization expense in the amounts of $82.8 million and $88.3 million, respectively.

In the second quarter of 2023, the Company recorded an intangible asset impairment of $9.7 million related to JustPlay.LOL Ltd’s game title.

During the three months ended September 30, 2023, the Company recorded an impairment charge of $41.6 million related to the Redecor game title based upon lower than expected performance of that title. The Company has recently released certain changes to the game operations and mechanics in an effort to improve the performance of this title. Given the recent nature of the game updates, it is too early to determine if such changes will have a positive impact on the game. To the extent these recent changes to the game do not boost the performance of the Redecor title, the remaining balance of the Redecor game title of approximately $44 million may be impaired in future periods.

As of September 30, 2023, the total expected future amortization related to intangible assets was as follows (in millions):


Remaining 2023	$	24.6
2024	89.2
2025	80.5
2026	64.9
2027 and thereafter	44.4
Total	$	303.6

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NOTE 5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities at September 30, 2023 and December 31, 2022 were as follows (in millions):


	September 30, 2023		December 31, 2022
Employees and related expenses	$	123.6	$	170.3
Accrued expenses	93.6		110.1
Media buy	49.4		41.3
Deferred revenues	46.9		38.6
Tax accruals	13.6		24.9


Total accrued expenses and other current liabilities	$	327.1	$	385.2

NOTE 6. DEBT


	September 30, 2023						December 31, 2022
(in millions, except interest rates)	Maturity	Interest rate	Book value		Face value		Book value

Term Loan	2028	8.180%	$	1,826.1	$	1,857.3	$	1,831.2
Senior Notes	2029	4.250%	593.2		600.0		592.4
Revolving Credit Facility	2026	n/a	—		—		—
Total debt			2,419.3		2,457.3		2,423.6
Less: Current portion of long-term debt			(16.9)		(23.8)		(12.4)
Long-term debt			$	2,402.4	$	2,433.5	$	2,411.2

Book value of debt in the table above is reported net of deferred financing costs and original issue discount of $38.0 million and $43.2 million at September 30, 2023 and December 31, 2022, respectively.

Credit Agreement

The Company has 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.

The Revolving Credit Facility includes a maximum first-priority net senior secured leverage ratio financial maintenance covenant of 6.25 to 1.0. At September 30, 2023, the Company’s first-priority net senior secured leverage ratio was 1.16 to 1.0.

The Company was in compliance with its financial and other covenants under the Credit Agreement as of September 30, 2023.

On June 19, 2023, the Company amended the Credit Agreement pursuant to a Third Amendment to Credit Agreement (the “Third Amendment”). The Third Amendment amended the Credit Agreement to bear interest or incur fees and other amounts denominated in Dollars to be based on the Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus an applicable spread adjustment, rather than the previously permitted Adjusted Eurocurrency Rate, starting in the third quarter of 2023. The amendment did not have an impact on the Company’s consolidated financial statements or the effectiveness of the Company’s interest rate swap agreements.

The other significant terms and conditions of the Credit Agreement have not changed from what was disclosed in Note 12, Debt in our Annual Report on Form 10-K filed with the SEC on February 28, 2023.

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Offering of 4.250% Senior Notes due 2029

Indenture

On March 11, 2021, the Company issued $600.0 million aggregate principal amount of its 4.250% senior notes due 2029 (the “Notes”) under an indenture, dated March 11, 2021 (the “Indenture”), among the Company, the subsidiary guarantors party thereto and Wilmington Trust, National Association, as trustee (the “Trustee”).

Maturity and Interest

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.

Other than the Third Amendment, the significant terms and conditions of the Notes have not changed from what was disclosed in Note 12, Debt in our Annual Report on Form 10-K filed with the SEC on February 28, 2023.

NOTE 7. EQUITY TRANSACTIONS AND STOCK INCENTIVE PLAN

Overview of Stock Incentive Plan

On May 26, 2020, the Board of Directors of the Company approved the Playtika Holding Corp. 2020 Incentive Award Plan (the “Plan”).

As of September 30, 2023, a total of 39,205,118 shares of the Company’s common stock had been allocated to awards granted under the Plan and 17,027,110 shares remained available for future grants.

Stock Options

The following table summarizes the Company’s stock option activity during the nine months ended September 30, 2023:


	Stock	Weighted	Weighted
	Options	Average	Average		Intrinsic
	Outstanding	Remaining	Exercise		Value
	(in millions)	Term (in years)	Price		(in millions)
Outstanding at January 1, 2023	3.4	8.2	$	19.08
Granted	0.1		$	10.29
Exercised	—
Cancelled	(1.7)		$	20.20
Expired	—		$	—
Outstanding at September 30, 2023	1.8	7.9	$	17.73	$	—
Exercisable at September 30, 2023	0.8	7.5	$	20.78	$	—

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The Company used the Black-Scholes option pricing model for determining the estimated fair value of stock-based compensation related to stock options. The table below summarizes the assumptions used for the options granted in each respective period, as well as for options repriced during the first quarter of 2022:


	Nine months ended September 30,
	2023	2022
Risk-free interest rate	3.34% - 3.79%	0.67% - 2.94%
Expected dividend yield	—	—
Expected term in years	6.1	6.1
Expected volatility	52.13% - 52.79%	40.96% - 42.52%

RSUs

The following table summarizes the Company’s RSU activity during the nine months ended September 30, 2023:


		Weighted		Total Fair
		Average		Value of
	Shares	Grant Date		Shares Vested
	(in millions)	Fair Value		(in millions)
Outstanding at January 1, 2023	14.9	$	18.69
Granted	2.1	$	10.21
Vested	(3.4)	$	18.09	$	35.9
Cancelled	(0.8)	$	18.55
Outstanding at September 30, 2023	12.8	$	17.45

PSUs

As of September 30, 2023, the Company does not expect any PSUs associated with the 2023 tranche to vest. Consistent with the Company's current forecasted performance for 2024 and 2025, a target of 50% for the PSUs associated with the 2024 and 2025 tranches is expected.

The following table summarizes the Company’s PSU activity during the nine months ended September 30, 2023:


		Weighted		Total Fair
		Average		Value of
	Shares(1)	Grant Date		Shares Vested
	(in millions)	Fair Value		(in millions)
Outstanding at January 1, 2023	3.2	$	9.72
Granted	—	$	—
Vested	(0.4)	$	9.72	$	4.2
Cancelled	(0.6)	$	9.72
Outstanding at September 30, 2023	2.2	$	9.72

________

(1) The number of PSUs outstanding represent the total number of PSUs granted to each recipient eligible to vest if the Company meets its highest specified performance goals for the applicable period.

Stock-Based Compensation

The following table summarizes stock-based compensation costs as reported by award type (in millions):

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	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Stock options	$	1.0	$	8.8	$	2.4	$	29.6
RSUs	27.1		23.9		81.1		73.6
PSUs	0.7		(0.8)		1.2		5.3
Total stock-based compensation costs	$	28.8	$	31.9	$	84.7	$	108.5

The following table summarizes stock-based compensation costs, net of amounts capitalized, as reported on the Company’s consolidated statement of comprehensive income (in millions):


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Research and development expenses	$	9.6	$	11.3	$	28.6	$	38.3
Sales and marketing expenses	2.3		2.8		7.1		8.5
General and administrative expenses	16.1		17.5		46.8		60.0
Total stock-based compensation costs, net of amounts capitalized	$	28.0	$	31.6	$	82.5	$	106.8

During the three months ended September 30, 2023 and 2022, the Company capitalized $0.8 million and $0.3 million of stock-based compensation cost, respectively. During the nine months ended September 30, 2023 and 2022, the Company capitalized $2.2 million and $1.7 million of stock-based compensation cost, respectively.

As of September 30, 2023, the Company’s total unrecognized stock-based compensation expenses related to stock options, RSUs and PSUs was approximately $6.9 million, $176.4 million and $4.6 million, respectively. The expense related to stock options, RSUs and PSUs are expected to be recognized over a weighted average period of 1.9 years, 2.0 years and 1.8 years, respectively.

NOTE 8. DERIVATIVE INSTRUMENTS

Interest Rate Swap Agreements

In March 2021, the Company entered into two interest rate swap agreements, each with a notional value of $250 million. Each of these swap agreements is with a different financial institution as the counterparty to reduce the Company’s counterparty risk. Each swap requires the Company to pay a fixed interest rate of 0.9275% in exchange for receiving one-month LIBOR. The interest rate swap agreements settle monthly commencing in April 2021 through their termination dates on April 30, 2026. The estimated fair value of the Company’s interest rate swap agreements is derived from a discounted cash flow analysis. In June 2023 these two interest rate swap agreements were amended so that effective July 31, 2023, the Company will pay a fixed interest rate of 0.85% in exchange for receiving one-month Term SOFR. The amendment did not impact the hedge effectiveness.

In January 2023, the Company entered into two interest rate swap agreements, each with a notional value of $250 million. Each of these swap agreements is with a different financial institution, and each swap requires the Company to pay a fixed interest rate of 3.435% in exchange for receiving one-month LIBOR for six months and one-month Term SOFR afterwards. The interest rate swap agreements settle monthly commencing in February 2023 through their termination dates on February 28, 2028. The estimated fair value of the Company’s interest rate swap agreements is derived from a discounted cash flow analysis.

The aggregate fair value of the Company’s interest rate swap agreements was an asset of $65.1 million as of September 30, 2023 and was recorded in prepaid expenses and other current assets and other non-current assets in the accompanying consolidated balance sheets based upon the timing of the underlying expected cash flows.

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Foreign currency hedge agreements

At September 30, 2023, the Company had outstanding derivative contracts to purchase certain foreign currencies, including ILS, RON, and PLN at future dates. The amount of future salary expenses the Company had hedged was approximately $182.7 million, and all contracts are expected to mature during the upcoming 12 months. The aggregate fair value of the Company’s derivative contracts was a net liability of $10.5 million as of September 30, 2023 and was recorded in prepaid expenses and other current assets and accrued expenses and other current liabilities in the accompanying consolidated balance sheets.

The following table summarizes the volume of derivative instrument activity (in millions):


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Derivative instruments - foreign currency derivative contracts	$	146.8	$	61.3	$	240.1	$	264.6
Derivative instruments - interest rate swaps	—		—		500.0		—
Derivative instruments - others (non-hedging)	—		45.1		1.6		50.5

NOTE 9. FAIR VALUE MEASUREMENTS

The Company accounts for fair value in accordance with ASC 820. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a three-tier hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying value of accounts receivable and payables and the Company's cash and cash equivalents and restricted cash approximates fair value due to the short time to expected payment or receipt of cash.

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The following table summarizes the fair value measurement of the Company’s long-term debt (in millions):


	September 30, 2023
	Face Value		Fair Value		Fair Value Hierarchy
Term Loan	$	1,857.3	$	1,852.7	Level 2
Senior Notes	600.0		502.5		Level 2
Total debt	$	2,457.3	$	2,355.2


	December 31, 2022
	Face Value		Fair Value		Fair Value Hierarchy
Term Loan	$	1,866.8	$	1,794.5	Level 2
Senior Notes	600.0		468.0		Level 2
Total debt	$	2,466.8	$	2,262.5

The estimated fair value of the Company’s term loan is based upon the prices at which the Company’s debt traded in the days immediately preceding the balance sheet date. As the trading volume of the Company’s debt is low relative to the overall debt balance, the Company does not believe that the associated transactions represent an active market, and therefore this indication of value represents a level 2 fair value input.

The following table sets forth the assets and liabilities measured at fair value on a recurring basis in the Company’s consolidated balance sheets at September 30, 2023 and December 31, 2022 (in millions):


	Fair Value at
	Fair Value Hierarchy	September 30, 2023		December 31, 2022
Cash and cash equivalents
Cash	Level 1	$	115.3	$	150.7
Money market funds	Level 1	423.8		294.8
Term deposits	Level 1	226.3		243.3
Commercial papers	Level 2	112.8		79.9

Prepaid expenses and other current assets
Derivative instruments - foreign currency derivative contracts	Level 2	$	0.3	$	2.2
Derivative instruments - interest rate swaps	Level 2	31.4		19.5


Other non-current assets
Derivative instruments - interest rate swaps	Level 2	$	33.7	$	29.3


Accrued expenses and other current liabilities
Derivative instruments - foreign currency derivative contracts	Level 2	$	10.9	$	7.5

The fair value of contingent consideration payable was valued using significant unobservable inputs (Level 3) and consisted of the following (in millions):


Balance as of January 1, 2023	$	—
Recorded in connection with acquisition transactions	77.4
Balance as of September 30, 2023	$	77.4

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The carrying values of the Company’s cash equivalents approximate fair value because of the short duration of these financial instruments.

The Company estimates the fair value of interest rate swap contracts by discounting the future cash flows of both the fixed rate and variable rate interest payments based on market yield curves. The inputs used to measure the fair value of the Company’s interest rate swap contracts are categorized as Level 2 in the fair value hierarchy as established by ASC 820.

The fair value of the Company’s foreign currency contracts approximates the amount the Company would pay or receive if these contracts were settled at the respective valuation dates. The inputs used to measure the fair value of the Company’s foreign currency contracts are categorized as Level 2 in the fair value hierarchy as established by ASC 820.

The Company estimated the fair value of the contingent consideration using a probability-weighted discounted cash flow model. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820.

The Company has not elected the fair value measurement option available under U.S. GAAP for any of its assets or liabilities that meet the option for these criteria.

NOTE 10. COMMITMENTS AND CONTINGENCIES

In December 2016, a copywriter lawsuit was filed against Wooga GmbH (a subsidiary of the Company) in the regional court of Berlin, Germany. The Plaintiff is suing for additional remuneration to his contributions for a storyline provided for one of Wooga's games and alleged reuse of parts of that storyline in one of Wooga’s other games. The next court hearing is scheduled for December 6, 2023. As of September 30, 2023, the Company has recorded in its financial statements a reserve based upon its best estimate outcome. It is possible that any final amounts payable in connection with this lawsuit could exceed the Company’s currently reserved best estimate. The Company has defended this case vigorously and will continue to do so.

In November 2013, the Company’s subsidiary, Playtika, Ltd., sent an initial demand letter to Enigmatus s.r.o., a game developer in the Czech Republic, which owns various U.S. trademark registrations that resemble the Company’s Sloto-formative trademark names, demanding that it cease use of the trademark Slotopoly. In response, Enigmatus s.r.o. asserted that it was the owner of the Sloto-formative trademarks and denied that its game title infringed upon the Company’s trademarks. Enigmatus s.r.o. applied to register one of the Company’s trademarks in the United Kingdom and European Union, and the Company successfully opposed its applications. In December 2016, Enigmatus s.r.o., filed a trademark infringement lawsuit, Enigmatus, s.r.o. v. Playtika LTD and Caesars Interactive Entertainment, Inc., against Playtika, Ltd. and Caesars Interactive Entertainment LLC in the Federal Court of Canada asserting that the Company’s use of the Slotomania trademarks violates its proprietary and trademark rights. The plaintiff sought injunctive relief and monetary damages. Pleadings have been exchanged and documentary discovery completed. A hearing for summary trial was conducted between June 27-29, 2023. The Company has defended this case vigorously and will continue to do so. As the case is in preliminary stages, the Company cannot estimate what impact, if any, the litigation may have on its results of operations, financial condition or cash flows.

On November 23, 2021, the Company, its directors and certain of its officers were named in a putative class action lawsuit filed in the United States District Court for the Eastern District of New York (Bar-Asher v. Playtika Holding Corp. et al.). The complaint is allegedly brought on behalf of a class of purchasers of the Company’s securities between January 15, 2021 and November 2, 2021, and alleges violations of federal securities laws arising out of alleged misstatements or omissions by the defendants during the alleged class period. On March 10, 2022, the court appointed LBMotion Ltd as lead plaintiff, and the plaintiff filed an amended complaint on May 6, 2022. The amended complaint alleges violations of Section 11 and 15 of the Securities Act of 1933 and seeks, among other things, damages and attorneys’ fees and costs on behalf of the putative class. The amended complaint also added the companies that served as underwriters for the Company’s IPO as defendants in the lawsuit. On September 15, 2022, in accordance with local rules of the Court, the Company and other defendants in the case filed a letter notifying the Court of defendants’ service upon plaintiffs of, among other things, a notice of motion to dismiss plaintiffs’ amended complaint and a memorandum of law in support of the defendants’ motion to dismiss plaintiffs’

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amended complaint. On November 30, 2022, the Company filed with the Court a motion to dismiss. As the case is in preliminary stages, the Company cannot estimate what impact, if any, the litigation may have on its results of operations, financial condition or cash flows. The Company has defended this case vigorously and will continue to do so.

On November 4, 2022, the Company and certain of its directors were named in a derivative action lawsuit filed in the United States District Court for the Eastern District of New York (Bushansky v. Antokol., et al.). The complaint was brought on behalf of the Company by a putative stockholder alleging that the named directors were negligent in their oversight of the preparation of the Company’s Proxy Statement in alleged violation of federal securities laws and that those directors breached their fiduciary duties upon related allegations. The complaint also asserts claims for contribution and indemnification, and aiding and abetting. The complaint seeks, among other things, damages, disgorgement and restitution by the director defendants, and attorneys’ fees and costs. Based upon an agreement of plaintiff, the Company, and the other defendants, on February 13, 2023, the Court stayed this action until the resolution of the motion to dismiss in the class action case of Bar-Asher v. Playtika Holding Corp. As the case is in preliminary stages, the Company cannot estimate what impact, if any, the litigation may have on its results of operations, financial condition or cash flows. The Company intends to vigorously defend this case.

On May 17, 2022, Guy David Ben Yosef filed a Motion for Approval of a class action lawsuit in district court in Tel Aviv-Jaffa Israel against Playtika Group Israel Ltd. (“PGI”), on behalf of all of PGI’s customers who made game token purchases in Israel as part of games marketed by PGI during the seven years preceding the filing of the motion and for all subsequent customers of such games who purchase tokens until the resolution of the claim. The Motion alleges that certain of the Company’s slot, poker and solitaire-themed games, including Slotomania, Caesars Slots, Solitaire Grand Harvest, House of Fun and Poker Heat, constitute illegal gambling and are prohibited under Israeli law and are misleading under Israeli consumer protection laws and alleges unjust enrichment. The Motion asserts damages of NIS 50 million. On January 12, 2023, PGI filed its response to the Motion for Approval. On March 5, 2023, the applicant submitted his reply to PGI’s response. A pre-trial hearing was held on May 4, 2023. The parties agreed to appoint a mediator to try and resolve the dispute. The first mediation meeting was held on August 16, 2023 and the second mediation meeting is scheduled for October 30, 2023. As the case is in preliminary stages, the Company cannot estimate what impact, if any, the litigation may have on its results of operations, financial condition or cash flows. If a mediated resolution will not be reached the Company will continue defending this case vigorously.

On April 10, 2023, Playtika Holding UK II Limited, the Company’s controlling shareholder, and certain officers of the Company were sued (Kormos v Playtika Holding UK II Limited, et al.) in the Delaware Chancery Court. The lawsuit alleges generally that the defendants breached fiduciary duties owed to the Company and its stockholders with respect to the controlling shareholder’s indication of an interest in selling some or all of its shares, and the resulting strategic review process and self-tender offer. On August 18, 2023, defendants filed with the Court motions to dismiss the claims. A hearing on the motions to dismiss is scheduled for November 21, 2023. As the case is in preliminary stages, the Company cannot estimate what impact, if any, the litigation may have on its results of operations, financial condition or cash flows. The Company has defended this case vigorously and will continue to do so.

On March 8, 2023, plaintiff Gayla Hamilton Mills filed a lawsuit against the Company and its subsidiary, Playtika Ltd., in the Circuit Court of Franklin County, Alabama, alleging that the Company’s casino-themed social games are unlawful gambling under Alabama law. The lawsuit seeks to recover all amounts paid by Alabama residents to the Company in connection with its games during the period beginning one year before the filing of the lawsuit until the case is resolved. After the Company removed the case to the U.S. District Court for the Northern District of Alabama, plaintiff dismissed the complaint and filed a very similar new complaint in the Circuit Court of Franklin County, Alabama on August 25, 2023. The new complaint asserted the same cause of action and bases for relief, but limited the requested recovery to the amounts paid to the Company in connection with its games only by those Alabama residents who spent less than $75,000 during the one year before the filing of the lawsuit until the case is resolved. The Company timely removed the new complaint to the same U.S. district court on September 28, 2023. On October 20, 2023, the plaintiff filed a motion to remand the case back to the Franklin County Circuit Court. The Company intends to oppose the motion to remand. As the case is in preliminary stages, the Company cannot estimate what impact, if any, the litigation may have on its results of operations, financial condition or cash flows. The Company intends to defend this case vigorously.

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On February 27, 2023, the company received a deficit notice from the Ben Gurion Airport Customs House concerning the purchase of a private aircraft. The deficit notice claims that the company's acquisition of the aircraft is an import into Israel, and, as a result, it was obliged to pay purchase tax and VAT for the acquisition. The company disputes that any tax or VAT is owed. On July 26, 2023, the Customs House's definitive response was received, with the deficit notice still intact. The current claimed amount of the deficit notice is approximately $3.6 million. The Company paid the deficit notice under protest and intends to file a claim with the district court. The Company intends to pursue this case vigorously.

The Company received seven demands for arbitration in late 2022 and early 2023 alleging that its games constitute illegal gambling under applicable state law. These demands generally attempted to recover amounts spent by third parties on the Company’s games by relying on state gambling loss recovery statutes. Of these demands, only two remain pending. In one, the arbitrator has indicated that he intends to grant the Massachusetts claimant’s request to end the arbitration and seek recourse in an appropriate court. The other arbitration (in Ohio) remains in a preliminary stage. As these matters remain in early or procedural stages, the Company cannot estimate what impact, if any, the arbitrations may have on its results of operations, financial condition or cash flows. The Company will continue to defend these matters vigorously.

NOTE 11. REVENUE FROM CONTRACTS WITH CUSTOMERS

The following table provides information about disaggregated revenue by geographic location of the Company’s players and type of platform (in millions):


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Geographic location
USA	$	433.9	$	457.2	$	1,348.1	$	1,398.4
EMEA	107.0		94.1		314.1		292.8
APAC	45.1		51.5		136.0		156.0
Other	44.1		45.0		130.9		137.1
Total	$	630.1	$	647.8	$	1,929.1	$	1,984.3

Revenues through third-party platforms and through the Company’s own direct-to-consumer platforms were as follows (in millions):


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022

Third-party platforms	$	469.1	$	497.1	$	1,451.3	$	1,527.6
Direct-to-consumer platforms	161.0		150.7		477.8		456.7
Total revenues	$	630.1	$	647.8	$	1,929.1	$	1,984.3

Contract balances

Payments from players for virtual items are collected by platform providers or payment processors and remitted to the Company (net of the platform or clearing fees) generally within 30 days after the player transaction. The Company’s right to receive the payments collected by the platform providers or payment processors is recorded as an accounts receivable as the right to receive payment is unconditional. Deferred revenues, which represent a contract liability, represent mostly unrecognized fees billed for virtual items which have not yet been consumed at the balance sheet date. Platform fees paid to platform providers or payment processors and associated with deferred revenues represent a contract asset.

-21-

Balances of the Company’s contract assets and liabilities are as follows (in millions):


	September 30, 2023		December 31, 2022
Accounts receivable	$	168.3	$	141.1
Contract assets (1)	12.8		10.8
Contract liabilities (2)	46.9		38.6

_______

(1) Contract assets are included within prepaid expenses and other current assets in the Company’s consolidated balance sheets.

(2) Contract liabilities are included within accrued expenses and other current liabilities as “deferred revenues” in the Company’s consolidated balance sheets.

During the three and nine months ended September 30, 2023, the Company recognized $5.0 million and $36.4 million, respectively, of its contract liabilities that were outstanding as of December 31, 2022.

Unsatisfied performance obligations

Substantially all of the Company’s unsatisfied performance obligations relate to contracts with an original expected length of one year or less.

NOTE 12. SEGMENT INFORMATION

The Company operates its business as one operating segment and one reportable segment.

The Company’s long-lived assets, net, by country of domicile are as follows (in millions):


	September 30, 2023		December 31, 2022

Israel	$	91.5	$	100.9
USA	59.4		62.0
Ukraine	23.5		26.1
Other	39.8		40.9
Total long-lived assets, net	$	214.2	$	229.9

NOTE 13. APPRECIATION AND RETENTION PLAN

The Company recognized compensation expenses in respect of retention bonus and appreciation unit awards under its appreciation and retention plans of $27.6 million and $27.0 million during the three months ended September 30, 2023 and 2022, respectively, and $86.5 million and $79.9 million during the nine months ended September 30, 2023 and 2022, respectively.

The Company has also granted retention awards to key individuals associated with acquired companies as an incentive to retain those individuals on a long-term basis. The Company recognized compensation expenses associated with these development-related retention payments of $0.2 million and $7.7 million during the three and nine months ended September 30, 2022, respectively. There were no such expenses in the three and nine months ended September 30, 2023.

-22-

NOTE 14. INTEREST AND OTHER, NET

Interest and other, net are as follows (in millions):


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Interest expense	$	39.5	$	31.5	$	113.3	$	81.1
Interest income	(12.0)		(5.8)		(30.1)		(9.1)
Foreign currency translation differences, net	(2.6)		(1.5)		(6.8)		0.9
Other	0.3		0.1		0.5		1.3
Total interest and other, net	$	25.2	$	24.3	$	76.9	$	74.2

NOTE 15. INCOME TAXES


	Three months ended September 30,						Nine months ended September 30,
(in millions, except tax rate)	2023			2022			2023			2022
Income before income taxes	$	64.8		$	107.1		$	304.7		$	268.9
Provision for income taxes	$	26.9		$	38.9		$	107.0		$	81.1
Effective tax rate	41.5		%	36.3		%	35.1		%	30.2		%

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 three and nine months ended September 30, 2023 was primarily due to tax positions that do not meet the more likely than not standard and the inclusion of Global Intangible Low-Taxed Income. The difference between the effective tax rate and the 21% U.S. federal statutory rate for the three and nine months ended September 30, 2022 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 nondeductible stock-based compensation.

NOTE 16. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables show a summary of changes in accumulated other comprehensive income (loss), net of tax, by component for the three and nine months ended September 30, 2023 and 2022 (in millions):

-23-


	Foreign Currency Translation		Interest Rate Swaps		Foreign Currency Derivative Contracts		Total
Balance as of January 1, 2023	$	(15.6)	$	37.7	$	(4.5)	$	17.6
Other comprehensive income (loss) before reclassifications	3.1		(4.0)		(2.0)		(2.9)
Amounts reclassified from accumulated other comprehensive income (loss)	—		(4.2)		2.4		(1.8)
Balance as of March 31, 2023	(12.5)		29.5		(4.1)		12.9
Other comprehensive income (loss) before reclassifications	(0.2)		20.5		(2.4)		17.9
Amounts reclassified from accumulated other comprehensive income	—		(5.5)		2.2		(3.3)
Balance as of June 30, 2023	(12.7)		$	44.5	$	(4.3)	$	27.5
Other comprehensive income (loss) before reclassifications	(4.1)		11.9		(6.7)		1.1
Amounts reclassified from accumulated other comprehensive income (loss)	—		(6.2)		2.1		(4.1)
Balance as of September 30, 2023	$	(16.8)	$	50.2	$	(8.9)	$	24.5


	Foreign Currency Translation		Interest Rate Swaps		Foreign Currency Derivative Contracts		Total
Balance as of January 1, 2022	$	(1.9)	$	4.2	$	0.9	$	3.2
Other comprehensive income (loss) before reclassifications	(3.3)		17.7		0.3		14.7
Amounts reclassified from accumulated other comprehensive income (loss)	—		0.8		(0.1)		0.7
Balance as of March 31, 2022	(5.2)		22.7		1.1		18.6
Other comprehensive income (loss) before reclassifications	(10.0)		5.2		(12.3)		(17.1)
Amounts reclassified from accumulated other comprehensive income	—		0.1		1.1		1.2
Balance as of June 30, 2022	(15.2)		28.0		(10.1)		2.7
Other comprehensive income (loss) before reclassifications	(14.5)		13.7		(6.0)		(6.8)
Amounts reclassified from accumulated other comprehensive income (loss)	—		(1.2)		4.0		2.8
Balance as of September 30, 2022	$	(29.7)	$	40.5	$	(12.1)	$	(1.3)

The amounts in the summary of changes in accumulated other comprehensive income (loss) tables, above, are net of tax expense/(benefits) as follows (in millions):


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Interest rate swaps	$	1.8	$	3.7	$	3.8	$	10.9
Foreign currency derivative contracts	(0.9)		(0.4)		(0.9)		(2.5)

Amounts reclassified from accumulated other comprehensive income for interest rate swaps and foreign currency derivative contracts were reclassified to interest expense and operating expenses, respectively, in the Company’s consolidated statements of comprehensive income during the three and nine months ended September 30, 2023 and 2022.

-24-

NOTE 17. NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

The following table sets forth the computation of basic and diluted net income per share attributable to common stockholders (in millions, except per share data):


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Numerator:
Net income	$	37.9	$	68.2	$	197.7	$	187.8
Denominator:
Weighted-average shares used in computing net income per share attributable to common stockholders, basic	366.7		412.7		365.8		412.3
Stock-based compensation awards	0.9		—		0.5		0.3
Weighted-average shares used in computing net income per share attributable to common stockholders, diluted	367.6		412.7		366.3		412.6
Net income per share, basic	$	0.10	$	0.17	$	0.54

Playtika Holding Corp. [PLTK] Filings
10-Q	[2023-11-08]
10-Q	[2023-08-08]
10-Q	[2023-05-04]
10-K	[2023-02-28]
10-Q	[2022-11-08]
10-Q	[2022-08-04]
10-Q	[2022-05-10]
10-K	[2022-03-02]
10-Q	[2021-11-04]
10-Q	[2021-08-06]
10-Q	[2021-05-11]
10-K	[2021-02-26]
S-1	[2020-12-18]