Playtika Halts Strategic Review, Initiates Dividend

Posted on: February 26, 2024, 11:40h. 

Last updated on: February 26, 2024, 11:46h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of mobile games developer Playtika (NASDAQ: PLTK) slid Monday after the company reported fourth-quarter earnings per share (EPS) that missed Wall Street estimates, and as the firm said it’s halting a strategic review.

Playtika
Playtika is highlighted at the Nasdaq market site in January 2021. The company is pausing a strategic review and initiating a quarterly dividend. (Image: Nasdaq)

In the final three months of 2023, Playtika earned 10 cents per share on revenue of $637.9 million. Analysts expected earnings of 17 cents per share on sales of $628.98 million. Nearly two years to the day after the company announced a strategic review, which could have included a sale, Playtika paused that effort, citing “ongoing uncertainty in Israel and Ukraine.”

Playtika is based in Israel and has operations in Ukraine. Playtika was one of the first to offer free-to-play social games on social networks and mobile devices, and has over 35 million monthly users. Its well-known games include Bingo Blitz, Caesars Slots, Slotomania, and World Series of Poker (WSOP) Social.

With the strategic review on hold, the mobile games creator is taking a different approach, telling investors it will pursue mergers and acquisitions of its own.

Playtika Capital Deployment Plans

Playtika concluded 2023 with $1.02 billion in cash and cash equivalents compared to a current market capitalization of $2.52 billion, indicating the stock may be undervalued following a 28% decline over the past year. The company’s free cash flow jumped to $436.4 million from $383.7 million in 2022, paving the way for opportunistic mergers and acquisitions and shareholder rewards.

In the past year, we’ve honed our focus on efficiency and streamlined our operations, adapting to evolving industry dynamics in mobile gaming,” said CEO Robert Antokol in a statement. “Now, with a solid foundation, 2024 marks our shift towards reinvestment — pursuing M&A opportunities with a strategic intent of capital deployment.”

Playtika said it will commence a quarterly dividend of 10 cents a share on April 5 to shareholders of record as of the close of business on March 22. The firm added it could consider a share repurchase program in the future. Based on the price of the stock at this writing, dividend yield would be 2.74%.

President and COO Craig Abrahams added the company will spend $600 million to $1.2 billion on mergers and acquisitions over the next three years.

Playtika’s 2024 Outlook

The gaming company’s tepid 2024 guidance may have also been a contributing factor in the stock sliding on Monday. Playtika said it expects 2024 sales of $2.52 billion to $2.62 billion on earnings before interest, taxes, depreciation, and amortization (EBITDA) of $730 million to $770 million.

“Capital expenditures expected to be between $110 million to $115 million, which includes $17 million in accrued capital expenditures from Q4 FY2023 that will be paid in FY2024,” according to the firm.

In the fourth quarter, average daily paying users rose 2.3% on a quarter-over-quarter basis, but declined 2.2% year over year.