What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-28 compared with 2022-03-02 · 470 added, 339 removed, 834 unchanged (49% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm

(PCAOB ID# 1281 )

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

To the Stockholders and the Board of Directors of

PLAYTIKA HOLDING CORP.

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 28, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of intangible assets acquired and contingent consideration in the acquisition of Reworks Oy.

Description of the Matter As describe in Note 2 to the consolidated financial statements, on August 31, 2021, the Company entered into a purchase agreement pursuant to which the Company (i) acquired 80% of the issued and registered share capital of Reworks Oy (the "Reworks Oy acquisition") for a cash consideration of $400 million, and (ii) will acquire the remaining 20% of the share capital for additional cash consideration in an amount to be determined based on 2022 results, up to $200.0 million.

The transaction was accounted for as a business combination in accordance with ASC 805 "Business Combinations".

The Company recognized developed game and user-based intangible assets in the amount of $143.0 million and recorded contingent consideration liability in the amount of $33.7 million.

The intangible assets and contingent consideration liability were recorded at their estimated fair values as of the date of the acquisition.

These valuations required management to make significant judgments, estimates, and assumptions.

Auditing the Company's accounting for Reworks Oy acquisition was complex due to the significant estimation required by management to determine the fair values of the developed game and user-based intangible assets and contingent consideration liability.

The significant estimations were primarily due to the complexity of the valuation models used by management to measure the fair values and the sensitivity of the respective fair values to the significant underlying assumptions such as forecasted results and discount rates.

These significant assumptions are forward looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit To test the estimated fair value of the contingent consideration liability, we performed audit procedures that included, among others, assessing the terms of the arrangement, including the conditions that must be met for the contingent consideration to become payable.

We also involved our valuation specialists to assist in testing the significant assumptions used in the model, including the completeness and accuracy of the underlying data.

For example, we compared the significant assumptions to current industry, market and economic trends and to the Company's budgets and forecasts.

To test the estimated fair value of the developed game and user base intangible assets, we performed audit procedures that included, among others, evaluating the Company's use of valuation methodologies, evaluating the prospective financial information and testing the completeness and accuracy of underlying data supporting the significant assumptions and estimates.

For example, we compared the significant assumptions to current industry, market and economic trends, historical results of the acquired business and to other relevant factors.

We involved our valuation specialists to assist in our evaluation of the significant assumptions and to assist with reconciling the prospective financial information with other prospective financial information prepared by the Company.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment Test of Reworks Asset Group

Description of the Matter As discussed in Note 1 to the consolidated financial statements, identifiable intangible assets that are subject to amortization are assessed for recoverability whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

The Company identified triggering event and performed an impairment assessment with respect to Reworks asset group.

The Company's evaluation of Reworks assets for potential impairment is measured at the asset group level by comparing the undiscounted projected future cash flows to the carrying amount of the asset group.

Auditing the Company’s impairment test for identifiable intangible assets that are subject to amortization was complex and highly judgmental due to the significant estimation in management’s assumptions to calculate the undiscounted projected future cash flows of the assets group.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's impairment assessment for Reworks asset group.

To test the Company’s impairment assessment for Reworks asset group, we performed audit procedures that included, among others, testing the significant assumptions, including the completeness and accuracy of the underlying data used by management in its analyses.

We compared the significant assumptions used by management to current industry and economic trends and historical financial results.

We involved our valuation specialists in evaluating the appropriateness of the undiscounted projected future cash flows of the assets group including evaluation of the terminal growth rate and performed sensitivity analyses related to significant assumptions.

We also evaluated the Company’s disclosures included in Note 1 to the consolidated financial statements.

/s/ KOST FORER GABBAY & KASIERER

KOST FORER GABBAY & KASIERER

A Member of Ernst & Young Global

A Member of EY Global

We have served as the Company’s auditor since 2016.

Tel-Aviv, Israel

March 1, 2022

February 28, 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

PLAYTIKA HOLDING CORP.

Opinion on Internal Control Over Financial Reporting

We have audited Playtika Holding Corp.'s internal control over financial reporting as of December 31, 2022, based on criteria established in the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Playtika Holding Corp.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 28, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on internal control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KOST FORER GABBAY & KASIERER

KOST FORER GABBAY & KASIERER

A Member of EY Global

Tel-Aviv, Israel

February 28, 2023

CONSOLIDATED BALANCE SHEETS

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Contingent consideration — 28.7

Employee related benefits and other long-term liabilities 23.7 16.1

Other long-term liabilities, including employee related benefits 252.1 23.7

Operating lease liabilities, long-term 94.5 82.3

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Common stock of US $ 0.01 par value:

1,600.0 shares authorized and 411.1 issued and outstanding at December 31, 2021;

400.0 shares authorized and 391.1 shares issued and outstanding as of December 31, 2020

1,600.0 shares authorized;

363.6 and 411.1 shares issued and outstanding at December 31, 2022 and 2021, respectively

Treasury stock at cost ( 51.8 shares at December 31, 2022)

Additional paid-in capital 1,155.8 1,032.9

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Income from operations 471.4 562.2 387.2

Interest expense and other, net 153.8 192.8 61.1

Interest and other, net 110.6 153.8 192.8

Income before income taxes 360.8 408.4 194.4

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Share Capital

Shares Amount Additional

Shares Amount Treasury stock Additional

paid-in capital Accumulated

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Net income — — — — — 92.1 92.1

Dividend distribution — — — — ( 2,365.9 ) ( 2,365.9 )

Other comprehensive loss — — — ( 3.2 ) — ( 3.2 )

Balance as of December 31, 2019 378.0 3.8 202.1 ( 2.9 ) ( 1,818.5 ) ( 1,615.5 )

Net income — — — — 92.1 92.1

Stock-based compensation — — — 276.0 — — 276.0

Issuance of shares upon vesting of RSUs 13.1 0.1 — ( 0.1 ) — — —

Shares withheld for tax withholdings — — ( 15.7 ) — — ( 15.7 )

Income tax withholding related to vesting of restricted stock units and other — — — ( 15.7 ) — — ( 15.7 )

Other comprehensive income — — — — 19.6 — 19.6

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Balance as of December 31, 2021 411.1 4.1 — 1,032.9 3.2 ( 1,417.9 ) ( 377.7 )

Net income — — — — — 275.3 275.3

Repurchase of common stock ( 51.8 ) — ( 603.5 ) — — — ( 603.5 )

Stock-based compensation — — — 125.5 — — 125.5

Issuance of shares upon vesting of RSUs 4.3 * — (*) — — —

Income tax withholding related to vesting of restricted stock units and other — — — ( 2.6 ) — — ( 2.6 )

Other comprehensive income — — — — 14.4 — 14.4

Balance as of December 31, 2022 363.6 $ 4.1 $ ( 603.5 ) $ 1,155.8 $ 17.6 $ ( 1,142.6 ) $ ( 568.6 )

* Represents an amount less than 0.1 or $ 0.1

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Stock-based compensation 123.5 100.4 276.0

Change in deferred tax, net ( 72.7 ) ( 13.1 ) 40.8

Amortization of loan discount 31.5 15.3 10.3

Change in fair value of contingent consideration ( 5.0 ) 17.4 21.4

Change in deferred taxes, net ( 46.0 ) ( 72.7 ) ( 13.1 )

Amortization and write-off of loan discount 7.4 31.5 15.3

Change in contingent consideration ( 13.1 ) ( 5.0 ) 17.4

Capital gain from sale of investment — ( 1.2 ) —

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Capitalization of internal use software costs ( 30.1 ) ( 33.1 ) ( 33.3 )

Purchase of intangible assets ( 19.1 ) ( 10.7 ) ( 19.9 )

Purchase of software for internal use ( 11.6 ) ( 19.1 ) ( 10.7 )

Payments for business combination, net of cash acquired ( 29.9 ) ( 394.1 ) —

Short-term bank deposits ( 100.0 ) — —

Purchase of long-term investments ( 17.8 ) — —

Proceeds from short-term bank deposits 100.1 — —

Investment in short-term bank deposits — ( 100.0 ) —

Investments in unconsolidated entities ( 34.8 ) ( 17.8 ) —

Other investing activities — 2.1 —

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Cash flows from financing activities

Proceeds from bank borrowings 887.7 — 4,998.6

Proceeds from bank borrowings, net — 887.7 —

Repayments on bank borrowings ( 19.0 ) ( 965.3 ) —

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Repayment of term loan and revolving credit facility — — ( 408.3 )

Payment for tender offer ( 603.5 ) — —

Payment of tax withholdings on stock-based payments ( 2.6 ) — ( 15.7 )

Net cash out flow for business acquisitions and other ( 26.9 ) — ( 4.9 )

Distribution to the stockholder — — ( 2,365.9 )

Net cash provided by (used in) financing activities ( 652.0 ) 559.7 ( 181.3 )

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Non-cash financing and investing activities

Right-of-use assets acquired under operating leases $ 41.0 $ 30.0 $ 17.7

Contingent consideration related to business acquisition $ 33.7 $ — $ 4.9

Right-of-use assets from operating leases $ 44.9 $ 41.0 $ 30.0

Capitalization of stock-based compensation costs $ 2.0 $ 2.7 $ —

Contingent consideration related to business acquisition $ 11.4 $ 33.7 $ —

Accrued offering costs $ — $ — $ 2.6

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Description of business and organization

Playtika Holding Corporation (“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.

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.

As of December 31, 2021, the Company had operations in Argentina, Australia, Austria, Belarus, Canada, Finland, Germany, India, Israel, Poland, Romania, Switzerland, Ukraine, the United Kingdom and the United States.

Playtika Holding Corp.’s initial public offering

On January 20, 2021, the Company completed its initial public offering (the “IPO”) of 79,925,000 shares of common stock at a public offering price of $ 27.00 per share, of which the Company sold 18,518,500 shares and Playtika Holding UK II Limited (“Playtika Holding UK”) sold 61,406,500 shares.

The Company’s common stock is listed on the Nasdaq Global Select Market under the symbol “PLTK”.

The net proceeds to the Company from the initial public offering were approximately $ 468.0 million, after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company, to be used for general corporate purposes, including working capital, operating expenses, capital expenditures, repayment of borrowing under its Term Loan, and potential future acquisitions.

The Company did not receive any proceeds from the sale of shares of common stock in the offering by Playtika Holding UK.

As of December 31, 2022, the Company had operations in Argentina, Australia, Austria, Belarus, Finland, Germany, India, Israel, Poland, Romania, Switzerland, Ukraine, the United Kingdom and the United States.

Basis of presentation and consolidation

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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.

Out of period correction

In connection with the Company’s review of its uncertain tax positions, the Company noted that it had improperly netted uncertain tax benefits in certain jurisdictions with uncertain tax liabilities in other jurisdictions.

The improper netting of unrecognized tax liabilities and unrecognized tax assets resulted in the Company not properly evaluating its unrecognized tax assets, particularly in instances where evaluating on a gross-balance basis would have resulted in an increase to the net unrecognized tax assets.

The Company further noted that its uncertain tax benefit calculated for one of its uncertain tax positions in the United States did not properly consider the provisions of the global intangible low-tax income (“GILTI”) rules.

The Company has recorded tax benefit of $ 1.4 million for the year ending December 31, 2022 that, had it been booked properly, would have been recorded in prior periods.

In addition, unrecognized tax assets and tax liabilities are presented on a long-term gross balance basis as of December 31, 2022.

As the balance sheet as of December 31, 2021 continues to present such balances on a current net-balance basis, such amounts are not comparable.

See Note 21, Income Taxes for further disclosures.

Management has determined that these errors were not material to any of its previously issued financial statements, individually or in the aggregate.

Investment in unconsolidated entities

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As permitted within that guidance, the Company has 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.

No change to the carrying amounts were recorded in the year ended December 31, 2021.

No change to the carrying amounts were recorded in the years ended December 31, 2022 or 2021.

Use of estimates

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Financial instruments, which potentially expose the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, short-term bank deposits, restricted cash, accounts receivable and derivative contracts.

A large percentage of the Company's cash is maintained with three financial institutions with high credit standings.

The Company performs periodic evaluations of the relative credit standing of these financial institutions.

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.

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Therefore, the Company's accounts receivable are derived mainly from sales through these 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:

Facebook 8 11

Accounts receivable are non-interest bearing and are initially recorded at cost.

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

Accounts receivable are recorded at their transaction amounts and do not bear interest.

The Company bases its allowance for doubtful accounts on management's best estimate of the amount of probable credit losses in the Company's existing accounts receivable based on historical collection experience and current and expected future economic and market conditions.

Cash and cash equivalents

Cash and cash equivalents and Short-term bank deposits

The Company classifies its debt securities as available-for-sale (“AFS”).

AFS debt securities are carried at fair value, with unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss) in stockholders’ equity.

Realized gains and losses on sale of investments are included in Interest and other, net on the statements of comprehensive income and are derived using the specific identification method for determining the cost of securities sold.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity.

Such amortization together with interest on securities is included in Interest and other, net.

Cash and cash equivalents consist of cash and highly liquid investments with maturities of three months or less from the date of purchase and are stated at the lower of cost or market value.

Cash equivalents include investments in money market funds that can be redeemed immediately at the current net asset value.

Cash equivalents include investments in term deposits, commercial papers and money market funds that can be redeemed immediately at the current net asset value.

Investments with maturities of more than three months but less than one year are included in short-term bank deposits.

Such short-term bank deposits are stated at cost which approximates fair market value.

Restricted cash

Restricted cash primarily consists of deposits to secure obligations under the Company's operating lease agreements and to secure company-issued credit cards .

Short-term bank deposits

Bank deposits with maturities of more than three months but less than one year are included in short-term bank deposits.

Such short-term bank deposits are stated at cost which approximates fair market value.

Property and equipment, net

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The Company computes depreciation using the straight-line method over the estimated useful lives of the respective assets or, in the case of leasehold improvements, the lease term of the respective assets, whichever is shorter.

The Company examines fully depreciated assets annually and writes off those no longer in use.

The depreciation periods for the Company's property and equipment are as follows:

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Software development costs

The Company reviews internal use software development cost associated with infrastructure and new games or updates to existing games to determine if the costs qualify for capitalizing.

The Company reviews internal use software development cost associated with infrastructure and new games or significant updates to existing games to determine if the costs qualify for capitalizing.

The development costs incurred during the application development stage that are related to infrastructure are capitalized.

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The Company applies the provisions of ASC 805, Business Combination and allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values.

The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is

recorded as goodwill.

The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets.

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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 as of October 1st of each year, or 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.

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.

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Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company’s real estate lease agreements do not contain any material residual value guarantees, restrictions or covenants.

The Company’s real estate lease agreements and data center leases do not contain any material residual value guarantees, restrictions or covenants.

The Company’s lease agreements with lease and non-lease components are accounted for separately.

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The Company has determined through a review of game play behavior that players generally do not purchase additional virtual currency until their existing virtual currency balances have been substantially consumed.

This review, performed on a game-by-game basis, includes an analysis of game players’ historical play behavior, purchase behavior, and the amount of virtual currency outstanding.

This review, performed on a game-by-game basis, includes an analysis of game players’ historical play behavior, purchase behavior, and the amount of virtual

currency outstanding.

Based upon this analysis, the Company has estimated the rate at which virtual currency is consumed during game play.

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Durable virtual items represent items that are accessible to the player over an extended period of time.

The Company recognizes revenue from the sale of durable virtual items ratably over the estimated average life of the paying player, which is estimated on a game-by-game basis and generally ranges from three months up to one year.

The Company recognizes revenue from the sale of durable virtual items ratably over the estimated average life of the paying player, which is estimated on a individual game basis and generally ranges from eleven to thirteen months .

The Company estimates the average life of the paying player based on historical paying player patterns and playing behaviors within each of the specific games that offer durable virtual items.

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Stock-based compensation expense

The Company has a stock-based compensation program which provides for equity awards including time-based stock options and restricted stock units (“RSUs”).

Stock-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period for the award.

The Company has a stock-based compensation program which provides for equity awards including time-based stock options, restricted stock units (“RSUs”) and performance stock units (“PSUs”).

Stock-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period for options and RSUs and on an accelerated basis for PSUs.

The Company records forfeitures as a reduction of stock-based compensation expense as those forfeitures occur.

The Company used the Black-Scholes option pricing model to estimate the fair value and compensation cost associated with stock options.

As it does not have a long history of market prices for its common stock because the stock was not publicly traded prior to January 2021, the Company used observable data for a group of peer companies that grant options with substantially similar terms to assist in developing its volatility assumption.

The expected volatility of the stock was determined using weighted average measures of the implied volatility and the historical volatility for the Company’s peer group of companies for a period equal to the expected life of the option.

The weighted-average risk-free interest rate was based on the interest rate for U.S.

The weighted-average risk-free interest rates were based on the interest rates for U.S.

Treasury bonds.

The expected term assumption was derived using the simplified method, which is based on an average between each vesting date and the expiration date of an option.

The expected term assumptions were derived using the simplified method, which is based on an average between each vesting date and the expiration date of an option.

This method was chosen because there was no historical option exercise experience due to the Company being privately held.

The Company does not anticipate paying cash dividends on its shares of common stock in the future.

does not anticipate paying cash dividends on its shares of common stock in the future.

The stock options have a contractual term of 10 years.

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If there are any modifications or cancellations of the underlying unvested equity awards, the Company may be required to accelerate any remaining unearned stock-based compensation cost or incur incremental cost.

The Company uses the estimated fair value of equity and associated per-share value at the time of grant to determine the compensation cost to be recognized associated with RSUs granted.

The Company uses the associated per-share value at the time of grant to determine the compensation cost to be recognized associated with RSUs and PSUs granted.

The Company reviews the estimates of performance against the defined criteria to assess the expected payout of each outstanding PSU grant quarterly, or more frequently if events or changes in circumstances indicate there may be a change, and adjusts the stock compensation expense accordingly.

For RSUs, shares are issued on the vesting dates net of the applicable statutory income tax withholding to be paid by the Company on behalf of its employees.

As a result, fewer shares are generally issued than the number of RSUs outstanding, and the income tax withholding is recorded as a reduction to additional paid-in capital.

The Company’s stock-based compensation expense is recorded in the financial statement line item relevant to each of the award recipients.

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Significant factors, assumptions, and methodologies used in estimating fair value of equity prior to the IPO

Prior to its initial public offering of equity in January 2021, the Company, with the assistance of third-party valuation experts, used a combination of the income approach (the discounted cash flow method) and the market approach (a combination of the guideline public company method and the guideline transaction method) to estimate its equity value in connection with its stock-based compensation program discussed below.

The income approach involves applying an appropriate risk-adjusted discount rate to projected cash flows based on forecasted revenue and costs.

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The Company accounts for income taxes using the asset and liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences will reverse.

The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized.

The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to the amount that is more likely than not

to be realized.

Deferred tax assets and deferred tax liabilities are presented under long-term assets and long-term liabilities, respectively.

We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized.

Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the more likely than not realization threshold.

This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with operating loss and tax credit carryforwards expiring unused and tax planning alternatives.

The Company implements a two-step approach to recognize and measure uncertain tax positions.

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The second step is to measure the tax benefit as the largest amount that is more than 50 % (cumulative basis) likely to be realized upon ultimate settlement.

The Tax Cuts and Jobs Act (“TCJA”) subjects a U.S.

shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries.

We can make an accounting policy election to either treat taxes due on the GILTI inclusion as a current period expense or factor such amounts into the measurement of deferred taxes.

We elected to account for the income tax effects of GILTI as a “period cost,” or an income tax expense in the year the tax is incurred.

The Company classifies interest and penalties on income taxes (which includes uncertain tax positions) as taxes on income.

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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 as described further in Note 15, Appreciation and Retention Plans .

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.

In September 2016, the Company adopted the Playtika Holding Corp.

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These units provided the right to receive cash payments for each of the years 2017 through 2020 as a percentage (between 1.5 % - 2 %) of the Company's estimated appreciation in value in excess of $ 4.4 billion.

The value of each appreciation unit was calculated based on the Company's adjusted EBITDA (as agreed in the 2017-2020 Plan) multiplied by an agreed multiplier.

The value of each appreciation unit was calculated based on the Company's Retention Plan Adjusted EBITDA (as agreed in the 2017-2020 Plan) multiplied by an agreed multiplier.

In addition, an annual retention bonus for each of the four years in the 2017-2020 Plan, in the amount of $ 25 million was distributed to selected eligible employees of the 2017-2020 Plan.

The value of each unit of the 2017-2020 Plan was amortized into compensation expense using the graded-vesting method, which resulted in the recognition of compensation costs over the requisite service period for each separately vesting tranche of the units as though the units were, in substance, multiple units awards.

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 units 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 Retention Plan Adjusted EBITDA for each of the plan years as described further in Note 19, Appreciation and Retention Plans .

The value of each unit of the 2021-2024 Retention Plan is being 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.

Severance pay

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Section 14 states that Company's contributions for severance pay shall be in lieu of severance compensation.

Upon deposit of the related obligation for the employee under Section 14, no additional obligations shall be conducted between the parties regarding the matter of severance pay and no additional payments shall be made by the Company to the employee.

Expense resulting from contributions in accordance with Section 14 for the years ended December 31, 2022, 2021 and 2020 was $ 8.5 million, $ 7.1 million and $ 5.7 million, respectively.

Net income per share attributable to common stockholders

For all periods, 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.

In the event of a loss, diluted shares would not be considered because of their anti-dilutive effect .

Exit or disposal activities

The Company accounts for exit or disposal cost obligations, including restructuring activities, under ASC 420-10, Exit or Disposal Cost Obligations , which requires that companies only record liabilities for such activities when such liabilities have been incurred.

During the second quarter of 2022, the Company announced the closure of its Montreal, Los Angeles, Helsinki and London studios, along with limited other cost reduction activities.

Severance payments associated with these closures are being recorded as liabilities and recognized as expense over the period such payments are earned.

During the fourth quarter of 2022, the Company reduced its workforce by approximately ten percent.

Severance liabilities associated with this reduction in force were recorded as the reduction in force was completed.

Total severance expense for the year ended December 31, 2022, for both the site closures and the reduction in force totaled approximately $ 16.4 million, included within operating expenses on the consolidated statements of comprehensive income, of which $ 10.1 million is accrued in accrued expenses and other current liabilities at December 31, 2022.

The Company concluded that certain announced activities, including the above, were triggering events for potential impairment under ASC 360, Property, Plant, and Equipment , and therefore assessed the associated asset groups for impairment.

Based upon this assessment, the Company determined that no impairment was required.

The recoverable amount for the Seriously Holding Corp.

assets was significantly above the carrying value of the associated assets, while the recoverable amount for the Reworks Oy (“Reworks”) assets exceed the book value by a relatively small margin.

Thus, to the extent the financial results at Reworks deteriorate further in the near future, discount rates increase significantly, or the Company does not meet its projected performance, the Company could have impairments to record in the next twelve months, and such impairments could be material.

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 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 one-month LIBOR rate associated with its variable rate debt.

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 USD benchmark rate associated with its 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 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 based on 30 observations that are based on historical swap rates.

The Company performed a regression analysis at inception of the hedging relationship and at period end in which it compared the change in the fair value of the swap transactions 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 based on at least 30 observations that are based on historical swap rates.

Based on the regression results, the Company believes that, at inception and at period end, the hedging instrument is 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 revenue or expense lines denominated in Israeli Shekels (“ILS”), Polish Zloty (“PLN”) and Romanian Leu (“RON”).

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 14, Derivative Instruments, for additional discussion.

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 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 are categorized as Level 2 in the fair value hierarchy as established by ASC 820.

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 are categorized as Level 2 in the fair value hierarchy as established by ASC 820, Fair Value Measurement (“ASC 820”).

The inputs used to measure the fair value of the Company’s foreign currency derivative contracts are categorized as Level 2 in the fair value hierarchy as established by ASC 820.

Fair value of financial instruments

The Company accounts for fair value in accordance with ASC 820, Fair Value Measurements and Disclosures ("ASC 820").

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.

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

Accounting standards recently adopted by the Company

In December 2019, the FASB issued ASU 2019-12, S implifying the Accounting for Income Taxes .

ASU 2019-12 eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an

interim period and the recognition of deferred tax liabilities for outside basis differences.

It also clarifies and simplifies other aspects of the accounting for income taxes.

This guidance is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

The Company adopted this standard as of January 1, 2021.

The adoption of this standard did not have a significant impact on the Company’s consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) .

As it applies to the Company, ASU 2020-01 requires entities to remeasure their equity securities in accordance with the measurement alternative in Topic 321 upon the occurrence of an observable transaction.

The Company adopted this standard as of January 1, 2021 on a prospective basis.

The adoption of this standard did not have a significant impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform , which provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of LIBOR or by another reference rate expected to be discontinued.

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

During the year ended December 31, 2021, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

The Company continues to evaluate the potential impacts of ASU 2020-04 and may apply other elections as applicable as additional changes in the market occur.

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.

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.

The performance metrics for the PSUs related to 2022 performance metrics were considered fulfilled as of December 31, 2022.

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.

Recently issued accounting standards not yet adopted by the Company

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805).

ASU 2021-21 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.

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.

This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

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The Company does not expect the adoption of this standard to have a material impact on its 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 does not anticipate the amendments in 2022-06 to be material to its consolidated financial statements upon adoption.

BUSINESS COMBINATIONS

Acquisition of Supertreat GmbH

On January 16, 2019, the Company completed the acquisition of all of the issued and outstanding shares of Supertreat GmbH ("Supertreat"), an Austrian company which owns and operates a Solitaire game, Solitaire Grand Harvest.

The aggregate purchase price consisted of a fixed upfront payment of $ 90 million and an earnout consideration based on the performance in the twelve month-period after the Transition Period ( four months after the closing date) or earlier, at the Company's sole discretion.

The earnout consideration has been capped so that the aggregate purchase price shall not exceed $ 200 million in the aggregate.

Upon acquisition, Supertreat became a wholly-owned subsidiary of the Company.

The acquisition was accounted for as a business combination.

The assets acquired and liabilities assumed are recognized at their fair values at the acquisition date.

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

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

Consideration

Total consideration $ 151.2

Cash acquired ( 1.9 )

Total consideration, net of cash acquired 149.3

Acquisition date fair value of contingent consideration ( 3.6 )

Consideration paid as of December 31, 2019 $ 145.7

Identifiable assets acquired and liabilities assumed

Accounts receivable $ 2.4

Other current assets 0.1

Property and equipment 0.1

Intangible assets other than goodwill 109.9

Goodwill 66.1

Deferred tax liabilities ( 27.5 )

Contingent consideration ( 3.6 )

Liabilities assumed ( 1.8 )

Total identifiable assets acquired and liabilities assumed $ 145.7

Acquired intangible assets 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 Supertreat acquisition were approximately $ 1.0 million for the year ended December 31, 2019 and were recorded within general and administrative expenses in the consolidated statements of comprehensive income.

For the years ended December 31, 2020 and 2019, the Company recorded expenses of $ 3.7 million and $ 21.4 million, respectively, with respect to the adjustment of the contingent consideration to estimated fair value.

This expense is included within general and administrative expenses in the accompanying consolidated statements of comprehensive income.

Acquisition of Seriously Holding Corp

On July 30, 2019, the Company completed the acquisition of all the outstanding shares of Seriously Holding Corp.

("Seriously"), a social games company.

The upfront consideration is $ 281.2 million, with the potential for the former stockholders to receive up to an additional $ 70 million based upon the results of Seriously during 2020.

Upon acquisition, Seriously became a wholly-owned subsidiary of the Company.

The acquisition was accounted for as a business combination.

The assets acquired and liabilities assumed are recognized at their fair values at the acquisition date.

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

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

Consideration

Total consideration $ 281.2

Cash acquired ( 12.2 )

Total consideration, net of cash acquired 269.0

Acquisition date fair value of contingent consideration ( 1.3 )

Consideration paid as of December 31, 2019 $ 267.7

Identifiable assets acquired and liabilities assumed

Accounts receivable $ 8.0

Other current assets 2.6

Property and equipment 0.3

Intangible assets other than goodwill 111.3

Goodwill 189.4

Deferred tax assets 3.4

Deferred tax liabilities ( 22.3 )

Contingent consideration ( 1.3 )

Liabilities assumed ( 23.7 )

Total identifiable assets acquired and liabilities assumed $ 267.7

Acquired intangible asset 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.

The determination of the fair value of the acquired assets and assumed liabilities was completed in March 2020 and there were no measurement adjustments.

Transaction costs incurred by the Company in connection with Seriously acquisition, were approximately $ 1.5 million for the year ended December 31, 2020 and were recorded within general and administrative expenses in the consolidated statements of comprehensive income.

For the year ended December 31, 2020, the Company recorded expenses of $ 13.7 million with respect to the adjustment of the contingent consideration to estimated fair value.

There were no expenses recorded in the year ended December 31, 2019.

This expense is included within general and administrative expenses in the accompanying consolidated statements of comprehensive income.

Acquisition of Reworks OY

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The acquisition was accounted for as a business combination with the Company consolidating Reworks subsequent to the August 31, 2021 closing date.

The assets acquired and liabilities assumed have been recognized at their estimated fair values at the acquisition date, the determination of which was completed in the fourth quarter of 2021 and there were no material

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

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As the SPA includes certain forfeiture provisions for selling employee shareholders, the earnout obligation payable to these employee will be recorded as compensation expense over the period that such payment is earned.

As of December 31, 2021, approximately $ 11 million has been recorded as compensation expense and is classified as an employee-related current liability on the Company’s consolidated balance sheet.

The earnout obligation payable to the third-party sellers had an acquisition date fair value of $ 33.7 million.

As this represents an unconditional obligation of the Company to purchase the remaining Share Capital of Reworks at an agreed upon future date, this portion of the total Earnout Payment has been classified as a liability on the Company’s consolidated balance sheet rather than non-controlling interest.

As of December 31, 2021, the fair value of the earnout obligation payable to third-party sellers was $ 28.7 million and has been recorded as contingent consideration on the Company’s consolidated balance sheet.

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

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The developed game and user base intangible assets acquired and included in the above table are being amortized on a straight-line basis over their estimated useful life of six years and one year , respectively, 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 Reworks acquisition, were approximately $ 1.0 million for the year ended December 31, 2021, and were recorded within general and administrative expenses in the consolidated statements of comprehensive income.

Transaction costs incurred by the Company in connection with the Reworks acquisition, were approximately $ 1.0 million for the year ended December 31, 2021, 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 31, 2021 acquisition date have not been presented because the incremental results from Reworks are not material to the consolidated statements of comprehensive income presented herein.

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The net amount is comprised of a favorable fair value adjustment of $ 6.5 million, partially offset by $ 1.5 million of interest expense included within general and administrative expenses and interest expense, respectively, in the accompanying consolidated statement of comprehensive income.

This adjustment is a result of the Company revising its projections for Reworks 2022 performance based upon the Company’s 2022 annual budget.

As of December 31, 2021, approximately $ 11 million had been recorded as compensation expense and was classified as an employee-related current liability on the Company’s consolidated balance sheet.

As of December 31, 2021, the fair value of the earnout obligation payable to third-party sellers was $ 28.7 million and was recorded as contingent consideration on the Company’s consolidated balance sheet.

In the first half of 2022, the Company recognized $ 25 million of income and $ 30 of expense in connection with adjusting the Earnout Payment to estimated fair value.

On August 1, 2022, the Company entered into an Omnibus Agreement to acquire the title to the remaining shares and options of Reworks in exchange for a $ 45 million cash payment to the sellers in lieu of the Earnout Payment.

The cash payment was made in the third quarter of 2022.

As of December 31, 2022, the Company has no remaining liability reflected in the financial statements herein.

Acquisition of JustPlay.LOL Ltd

On March 21, 2022, the Company acquired all of the issued and outstanding shares of JustPlay.LOL Ltd.

(“JustPlay”) consistent with the Company’s strategy to increase its breadth of entertainment genres and leverage the Company’s Boost platform to enhance game-operations.

The acquisition was accounted for as a business combination.

Within the accompanying consolidated financial statements, management has recorded its final 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 and such valuations were finalized during the third quarter of 2022.

The goodwill, which is non-deductible for tax purposes, is generally attributable to synergies between the Company's and JustPlay'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 $ 42.0

Cash acquired ( 0.7 )

Total consideration, net of cash acquired 41.3

Acquisition date fair value of contingent consideration ( 11.4 )

Consideration paid as of March 23, 2022 $ 29.9

Identifiable assets acquired and liabilities assumed

Accounts receivable $ 1.0

Property and equipment 0.1

Intangible assets other than goodwill 12.3

Goodwill 29.7

Contingent consideration ( 11.4 )

Deferred tax liability ( 1.5 )

Liabilities assumed ( 0.3 )

Total identifiable assets acquired and liabilities assumed $ 29.9

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 six 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 JustPlay acquisition, were approximately $ 0.5 million for the year ended December 31, 2022, 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 March 23, 2022 acquisition date have not been presented because the incremental results from JustPlay are not material to the consolidated statements of comprehensive income presented herein.

Subsequent to the acquisition, the Company reduced the amount of contingent consideration expected to be paid.

As of December 31, 2022, the Company has no remaining liability reflected in the financial statements herein.

Other development transactions

During 2019, the Company acquired certain technology assets and assembled workforces to expand the Company’s game portfolio and in-house expertise.

These acquisitions were not individually or in the aggregate significant.

Each of these transactions did not meet the definition of business combinations and were therefore accounted for under other appropriate accounting guidance.

For the acquired workforce transactions, the Company recorded an aggregate of approximately $ 32.6 million in recruiting expense during the year ended December 31, 2019.

These recruiting expenses are included in general and administrative expenses in the consolidated statements of comprehensive income.

For the acquisition of the technology assets, the asset purchase agreement was entered into in October 2019.

Consideration paid or payable under the asset purchase agreement includes an upfront payment of $ 5.0 million.

In February 2020, the Company acquired an assembled workforce to expand the Company’s game portfolio and in-house expertise for approximately $ 12.1 million.

This acquisition was recorded as expense during the quarter ended March 31, 2020.

During 2021 and 2022, the Company has made a small number of minority investments in early-stage high-growth potential game developers, all of which are accounted for as investments in unconsolidated affiliates.

CASH EQUIVALENTS AND SHORT-TERM BANK DEPOSITS

Cash equivalents and bank deposits at December 31, 2022 and 2021 are as follow (in millions):

December 31, 2022

Amortized cost Allowance for credit losses Unrealized gains

Unrealized losses

Cash equivalents

Money market funds $ 294.8 $ — $ — $ —

Term deposits 243.3 — — —

Commercial papers 79.9 — — —

Total cash equivalents $ 618.0 $ — $ — $ —

December 31, 2021

Amortized cost Allowance for credit losses Unrealized gains

Unrealized losses

Cash equivalents

Money market funds $ 310.2 $ — $ — $ —

Short-term bank deposits $ 100.1 $ — $ — $ —

PREPAID EXPENSES AND OTHER CURRENT ASSETS

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Intangible assets other than goodwill, net $ 354.0 $ 417.3

Acquisition-related intangibles included in the above table are finite-lived and are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are realized.

Acquisition-related intangible assets included in the above table are finite-lived and are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are realized.

The Company has included amortization of acquired intangible assets directly attributable to revenue-generating activities in cost of revenue.

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As of December 31, 2022, the total expected future amortization related to intangible assets was as follows (in millions):

2026 and thereafter 82.2

Thereafter 25.6

Total $ 354.0

OTHER NON-CURRENT ASSETS

Other non-current assets at December 31, 2022 and 2021 are as follows (in millions):

Long-term tax assets $ 123.5 $ —

Unrecognized gain on interest rate swaps 29.3 7.9

Deposits 3.2 5.5

Prepaid expenses 0.7 —

Total other non-current assets $ 156.7 $ 13.4

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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Employees and related expenses $ 170.3 $ 167.8

Tax accruals 162.5 130.5

Accrued expenses 110.1 95.6

Media buy 41.3 37.1

Deferred revenues 38.6 31.6

Accrued litigation settlement — 37.6

Tax accruals 24.9 162.5

Total accrued expenses and other current liabilities $ 385.2 $ 494.6

The Company's leases include office real estate and data center leases for its facilities worldwide, which are all classified as operating leases, and which expire on various dates, the latest of which is April 2031.

OTHER LONG-TERM LIABILITIES, INCLUDING EMPLOYEE RELATED BENEFITS

Other long-term liabilities, including employee related benefits at December 31, 2022 and 2021 are as follows (in millions):

Long-term tax reserves $ 248.6 $ —

Employee related benefits — 21.3

Other 3.5 2.4

Total other long-term liabilities, including employee related benefits $ 252.1 $ 23.7

Certain lease agreements include rental payments that are adjusted periodically for the consumer price index ("CPI").

The ROU asset and lease liability were calculated using the initial CPI and will not be subsequently adjusted.

The Company’s ROU assets and lease liabilities were calculated using the initial CPI and will not be subsequently adjusted.

Certain leases include renewal options that are reasonably certain to be exercised.

Supplemental balance sheet information related to leases is as follows (in millions):

December 31, 2021

Operating lease right-of-use assets, gross $ 133.9

Accumulated amortization ( 44.5 )

Operating lease right-of-use assets, net $ 89.4

The following is a summary of weighted average remaining lease terms and discount rates for all of the Company's operating leases:

December 31, 2021

December 31, 2022 December 31, 2021

Weighted average remaining lease term (years) 7.8 6.1

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Maturities of lease liabilities are as follows (in millions):

2026 and thereafter 32.3

Thereafter 44.4

Total undiscounted cash flows 127.4

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Present value of lease liabilities $ 108.0

The table above excludes approximately $ 25 million in lease obligations associated with leases that are currently under negotiation or that start after January 1, 2022.

December 31, 2022 December 31, 2021

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Proceeds borrowed under the Credit Facilities on the closing date were used to pay off the outstanding balance on the Company’s prior debt facility.

On June 15, 2020, the Company increased the capacity of the Revolving Credit Facility to $ 350 million.

On June 15, 2020, the Company increased the capacity of the Revolving Credit

Facility to $ 350 million.

On January 15, 2021, the Company increased the borrowing capacity of the Revolving Credit Facility from $ 350 million to $ 550 million.

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Such applicable margin is (x) with respect to the New Term Loan, 2.75 % per annum in the case of any LIBOR loan or 1.75 % per annum in the case of any base rate loan, subject to one 0.25 % step-down based on the Company’s credit ratings and (y) in the case of the Revolving Credit Facility, a range from 2.25 % to 3.00 % per annum in the case of any LIBOR loan and a range from 1.25 % to 2.00 % per annum in the case of any base rate loan, based on the Company’s net senior secured leverage ratio.

Beginning in July 2023, LIBOR will be replaced by SOFR and interest will be calculated based upon term SOFR plus an applicable margin.

In addition, on a quarterly basis, the Company is required to pay each lender under the Revolving Credit Facility a commitment fee in respect of any unused commitments under the Revolving Credit Facility in the amount of 0.50 % of the principal amount of the daily unused commitments of such lender, subject to step-downs to 0.375 % and 0.25 % based upon the Company's senior secured leverage ratio.

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The Credit Agreement permits voluntary prepayments and requires mandatory prepayments in certain events including among others, 50 % (subject to step-downs to 25 % and 0 % based upon the Company’s net total secured leverage ratio) of the Company’s excess cash flow to the extent such amount exceeds $ 10 million, certain net cash proceeds from non-ordinary asset sale transactions (subject to reinvestment rights), and 100 % of net proceeds of any issuance of debt (except for debt permitted to be incurred by the Credit Agreement).

If the Company’s total secured leverage ratio remains below 2.0 to 1.0 , consistent with the ratio for the year ended December 31, 2021, the Company’s required excess cash flow percentage for 2022 will step down to 0%.

The Company is not required to make an excess cash flow payment based upon its secured leverage ratio for 2022.

Collateral and Guarantors

The borrowings under the Credit Agreement are guaranteed by certain material, wholly-owned restricted subsidiaries of the Company, and are secured by a pledge of substantially all of the existing and future property and assets of the Company and the guarantors (subject to exceptions), including a pledge of the capital stock of the domestic subsidiaries held by the Company and the domestic guarantors and 65 % (or 100 % in the case of certain of the guarantors) of the capital stock of the first-tier foreign subsidiaries held by the Company and the domestic guarantors, in each case subject to exceptions.

The Credit Agreement requires that the Company and the guarantors (a) generate at least 80.0 % of the EBITDA of the Company and its restricted subsidiaries for the four fiscal quarters most recently ended prior to the end of each fiscal quarter and (b) own all “Material Intellectual Property” (defined as any intellectual property rights consisting of registered trademarks or copyrights subsisting in the name or logo of any game that generates more than 5 % of the EBITDA of the Company and its restricted subsidiaries for the then most recently ended four fiscal quarters) on the last day of the four fiscal

quarters most recently ended prior to the end of each fiscal quarter.

If the Company and the guarantors do not satisfy such requirement, then the Company must cause sufficient additional subsidiaries (which, subject to certain limitations, may include guarantors located in jurisdictions other than the United States, England and Wales and the State of Israel) to become guarantors in order to satisfy such requirement.

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Restrictive Covenants

The Revolving Credit Facility includes a maximum first-priority net senior secured leverage ratio financial maintenance covenant of 6.25 to 1.00.

At December 31, 2021, the Company’s first-priority net senior secured leverage ratio was 0.91 to 1.00.

The Revolving Credit Facility includes a maximum first-priority net senior secured leverage ratio financial maintenance covenant of 6.25 to 1.00, calculated as total first lien senior secured net debt divided by Credit Adjusted EBITDA.

At December 31, 2022, the Company’s first-priority net senior secured leverage ratio was 1.36 to 1.00 based upon Credit Adjusted EBITDA of $ 805.1 million and net debt (as defined in the Credit Agreement) of $ 1,098.3 million.

In addition, the Credit Agreement includes negative covenants, subject to certain exceptions, restricting or limiting the Company's ability and the ability of its restricted subsidiaries to, among other things:

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Under the Credit Agreement, the Company may be required to meet specified leverage ratios or fixed charge coverage ratios in order to take certain actions, such as incurring certain debt or liens or making certain investments.

The Company was in compliance with its financial and other covenants under the Credit Agreement as of December 31, 2022.

Expenses Related to Modification of Debt

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In addition, at any time prior to March 15, 2024, the Company may redeem up to 40 % of the original aggregate principal amount of all Notes issued with the net cash proceeds from certain equity offerings at a redemption price of 104.250 % of the principal amount redeemed plus accrued and unpaid interest, if any, to, but excluding, the redemption date, so long as at least 50 % of the aggregate principal amount of the Notes remains outstanding immediately after the occurrence of such redemption, and the redemption date is within 90 days of the consummation of any such equity offering.

The Indenture contains customary covenants that limit the Company’s ability and, in certain instances, the ability of the Company’s subsidiaries, to borrow money, create liens on assets, make distributions and pay dividends on or redeem or repurchase stock, make certain types of investments, sell stock in certain subsidiaries, enter into agreements that restrict dividends or other payments from subsidiaries, enter into transactions with affiliates, issue guarantees of indebtedness, and sell assets or merge with other companies.

sell assets or merge with other companies.

These limitations are subject to a number of important exceptions and qualifications set forth in the Indenture.

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In the case of an event of default arising from certain events of bankruptcy or insolvency with respect to the Company or certain of its subsidiaries, all Notes then outstanding will become due and payable immediately without further action or notice.

other event of default occurs with respect to the Notes, the Trustee or holders of at least 25% in aggregate principal amount of the Notes may declare all Notes then outstanding to be due and payable immediately.

If any other event of default occurs with respect to the Notes, the Trustee or holders of at least 25 % in aggregate principal amount of the Notes may declare all Notes then outstanding to be due and payable immediately.

Scheduled principal payments of long-term debt

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Preemptive or similar rights – None of the Company’s common shares is entitled to preemptive rights or subject to redemption.

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”).

The Plan authorizes the issuance of stock options, restricted stock, RSUs, dividend equivalents, stock appreciation rights, performance bonus awards and other incentive awards.

The Plan authorizes the grant of awards to employees, non-employee directors and consultants of the Company.

The maximum number of shares of the Company’s common stock for which grants may be made under the Plan was 56,232,228 shares as of December 31, 2022.

As of December 31, 2022, a total of 15,874,201 shares of the Company’s common stock remained available for grants of awards under the Plan.

Equity transactions

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On January 5, 2021, the Company’s Board of Directors approved an amended and restated certificate of incorporation of the Company effecting a 400 -for-1 stock split of the Company’s issued and outstanding shares of common stock and an increase to the authorized shares of our common stock and preferred stock to 1,600 million shares and 100 million shares, respectively.

The split and the increase in authorized shares of the Company’s common stock was effected on January 6, 2021 and without any change in the par value per shares.

The split and the increase in authorized shares of the Company’s common stock was effected on January 6, 2021 and without any change in the par values per share.

All information herein related to the Company’s common stock and stock awards has been retroactively adjusted to give effect to both the May 26, 2020 stock split and the January 5, 2021 stock split.

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2020 Incentive Award Plan (the “Plan”) increased by 14,335,499 shares of common stock, which represented 3.5 % of the total number of shares outstanding immediately after the consummation of the IPO.

The number of shares available for grant will increase on January 1st of each year through January 2030 by an amount equal to the lesser of

(i) 3.5 % of the total shares of the Company’s outstanding common stock or (ii) such number of shares determined by the Board of Directors.

On January 1, 2022, the number of shares available for issuance under the Plan increased by 14,041,929 .

The number of shares available for grant will increase on January 1st of each year through January 2030 by an amount equal to the lesser of (i) 3.5 % of the total shares of the Company’s outstanding common stock or (ii) such number of shares determined by the Board of Directors.

On January 1, 2022, the number of shares of issuance under the Plan increased by 14.0 million.

On January 1, 2023, there was no increase to the number of shares available for issuance under the Plan.

In connection with its January 15, 2021 IPO, the Company granted 7,985,297 stock options and 4,299,077 RSUs to certain of its employees.

The stock options and RSUs generally vest 25 % on the first anniversary of the grant date, and the remaining 75 % of the options and RSUs vest in equal quarterly installments during the three years following the first anniversary of the grant date.

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”).

The Plan authorizes the issuance of stock options, restricted stock, RSUs, dividend equivalents, stock appreciation rights, performance bonus awards and other incentive awards.

The Plan authorizes the grant of awards to employees, non-employee directors and consultants of the Company.

The maximum number of shares of the Company’s common stock for which grants may be made under the Plan was 42,190,299 shares as of December 31, 2021.

As of December 31, 2021, a total of 386,104 shares of the Company’s common stock remained available for grants of awards under the Plan.

Option Repricing

On February 7, 2022, the Compensation Committee of the Board of Directors of the Company approved an amendment to 5,303,242 options granted in 2021 that were scheduled to vest after the first anniversary of the grant date (the “Adjusted Portion”).

The Adjusted Portion was amended to reduce the per share exercise prices of such Adjusted Portion to $ 18.71 .

The Company accounted for the repricing as a modification and is recording incremental compensation expense of approximately $ 8.8 million from the time of the repricing through the remaining vesting period.

There were no awards to any named executive officers or other Section 16 executives included in this repricing.

On August 29, 2022, the Company announced a tender offer for the purchase of up to 51,813,472 shares of its issued and outstanding common stock, par value $ 0.01 per share (each, a “Share” and collectively, “Shares”) or such lesser number of

Shares as are properly tendered and not properly withdrawn, at a price of $ 11.58 per Share (the "Tender Offer").

On October 10, 2022, the Company announced that it accepted for purchase 51,813,472 Shares for an aggregate cost of $ 600 million, excluding fees and expense related to the Tender Offer.

The number of shares that the Company has accepted for purchase in the Tender Offer represented approximately 12.6 % of the total number of shares that were outstanding as of September 30, 2022.

The Company’s shares outstanding and treasury stock are presented, and both basic and diluted earnings per share have been calculated, as if the entire 51,813,472 shares accepted in the Tender Offer were purchased on the closing date of the Tender Offer.

The actual settlement by the Administrative agent for Shares may be delayed due to administrative requirements, whereby the Shares are repurchased as those requirements are fulfilled.

Option Exchange

On November 14, 2022, the Company commenced a voluntary, one-time stock option exchange program (the “Option Exchange”) pursuant to which eligible service providers (including eligible employees) were able to exchange outstanding stock options for a lesser amount of new RSUs to be issued under the Plan.

No members of the Board held outstanding stock options and therefore did not participate in the Option Exchange.

Service providers who elected to participate in the Option Exchange received one RSU for every 2.5 shares of Playtika common stock underlying the eligible options surrendered.

This “exchange ratio” ( 2.5 -for-1) was applied on a grant-by-grant basis.

On December 15, 2022, 10,886,748 options were exchanged for 4,353,438 RSUs.

The Company accounted for the Option Exchange as a modification and is recording incremental compensation expense of approximately $ 10.1 million from the time of the Option Exchange through the remaining vesting period.

Stock options

The following table summarizes the Company’s stock option activity:

Weighted Weighted

Stock Average Average Intrinsic

Options Remaining Exercise Value

Outstanding Term (in years) Price (in millions)

Stock Weighted Weighted

Options Average Average Intrinsic

Outstanding Remaining Exercise Value

(in millions) Term (in years) Price (in millions)

Outstanding at January 1, 2022 15.8 8.8 $ 22.70

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Cancelled (1)

( 14.7 ) $ 19.28

Expired ( 0.5 ) $ —

Outstanding at December 31, 2022 3.4 8.2 $ 19.08 $ —

Exercisable at December 31, 2022 1.6 7.8 $ 21.74 $ —

(1) The number of stock options cancelled includes those exchanged in the Option Exchange.

There were no stock options exercised during the years ended December 31, 2022, 2021 or 2020.

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Any changes in these assumptions may materially affect the estimated fair value of the stock-based award.

– Fair value of common stock - Prior to the Company’s initial public offering of equity in January 2021, as the Company’s common stock was not publicly traded, the fair value of common stock was estimated by valuation reports prepared by third-party valuation specialists using multiple methods, as more fully discussed in Note 1, O rganization and Summary of Significant Accounting Policies .

reports prepared by third-party valuation specialists using multiple methods, as more fully discussed in Note 1, O rganization and Summary of Significant Accounting Policies .

Subsequent to the Company’s initial public offering, the Company uses the public trading price of its common stock on the Nasdaq stock market to determine the fair value of its common stock.

– Expected volatility – Prior to the Company’s initial public offering of equity in January 2021, as the Company was a private company at the time of valuation, the Company estimated volatility based on the volatilities exhibited by comparable public companies and the Company’s capital structure and utilized the observable data for a group of peer companies that grant options with substantially similar terms to assist in developing its volatility assumption.

Subsequent to the Company’s initial public offering, the Company continues to estimate volatility in the same manner as it has not yet established sufficient history to estimate volatility of its own.

Expected volatility used in the valuation of options granted in 2021 and 2020 ranged from 38.2 % to 48.0 %.

– Risk-free interest rate - The risk-free interest rate was estimated based on the U.S.

Treasury yield curve in effect at the time of grant and with maturities consistent with the expected term of the respective equity option award.

The risk-free interest rate used in the valuation of options granted in 2021 and 2020 ranged from 0.42 % and 0.98 %.

– Expected term - The Company estimated the expected term based on the average time between the vesting date and expiration date, ten years after the grant date, of the respective equity option award.

– Expected dividend yield - The Company does not anticipate paying cash dividends on its shares of common stock;

therefore, the expected dividend yield was assumed to be zero .

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:

Year ended December 31,

Risk-free interest rate 0.67 % - 3.88 %

0.67 % - 0.98 %

Expected dividend yield — —

Expected term in years 6.1 6.1

Expected volatility 40.96 % - 52.82 %

38.19 % - 38.56 %

The options granted during 2020 vest over four years , with 25 % vesting on each of the four anniversaries of the grant date.

For options granted during 2021, 25 % of the options generally vest on the first anniversary of the grant date, and the remaining 75 % of the options vest in equal quarterly installments during the three years following the first anniversary of the grant date.

For options granted during 2021 and 2022, 25 % of the options generally vest on the first anniversary of the grant date, and the remaining 75 % of the options vest in equal quarterly installments during the three years following the first anniversary of the grant date.

The stock options have a contractual term of ten years .

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The RSUs vest over four years , with 25 % of the RSUs vesting on each of December 31, 2021, 2022, 2023 and 2024, subject to continued service on the applicable vesting date.

For RSUs granted during 2021, 25 % of the RSUs generally vest on the first anniversary of the grant date, and the remaining 75 % of the RSUs vest in equal quarterly installments during the three years following the first anniversary of the grant date.

Except as provided in an award agreement between the Company and the employee, if an employee is terminated (voluntarily or involuntarily), any unvested awards as of the date of termination will be forfeited.

For RSUs granted during 2021 and 2022, 25 % of the RSUs generally vest on the first anniversary of the grant date, and the remaining 75 % of the RSUs vest in equal quarterly installments during the three years following the first anniversary of the grant date.

RSUs granted in 2022 as a result of the Option Exchange generally vest in equal quarterly installments over three years .

Except as provided in an award agreement between the Company and the employee, if an employee is terminated

(voluntarily or involuntarily), any unvested awards as of the date of termination will be forfeited.

RSUs settle for outstanding shares of the Company’s common stock upon vesting.

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Average Value of

Grant Date Shares Vested

Shares Fair Value (in millions)

Shares Grant Date Shares Vested

(in millions) Fair Value (in millions)

Outstanding at January 1, 2020 — $ —

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Vested ( 13.9 ) $ 18.71 $ 260.1

Cancelled — $ —

Outstanding at December 31, 2020 5.9 $ 21.04

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Outstanding at December 31, 2021 11.4 $ 25.29

There was no RSU activity in 2019.

Vested ( 4.5 ) $ 24.92 $ 55.1

Cancelled ( 3.0 ) $ 22.30

Outstanding at December 31, 2022 14.9 $ 18.69

(1) The number of RSUs granted includes those resulting from the Option Exchange.

On February 7, 2022, the Compensation Committee of the Board of Directors of the Company approved the grant of PSUs to certain employees pursuant to the Plan.

For each annual performance period consisting of calendar years 2022 through 2025, up to 25 % of the PSUs will be eligible to vest based on the Company’s annual revenue growth rate during the applicable performance period relative to threshold, target and maximum achievement levels.

If the Company’s annual revenue growth rate for a performance period is between two achievement levels, the achievement percentage will be determined by linear interpolation between the applicable achievement levels.

Notwithstanding the foregoing, in no event shall less than 25 PSUs vest during each performance period for Israeli participants.

The following table summarizes the Company’s PSU activity:

Weighted Total Fair

Average Value of

Grant Date Shares Vested

(in millions) Fair Value (in millions)

Outstanding at January 1, 2022 — $ —

Granted 3.5 $ 9.72

Vested — $ — $ —

Cancelled ( 0.3 ) $ 9.72

Outstanding at December 31, 2022 3.2 $ 9.72

(1) The number of shares for the PSUs listed as granted 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.

On November 10, 2022, the Compensation Committee of the Board of Directors of the Company approved an amendment to the performance stock unit agreement resulting in a modification of the PSU awards and stock-based compensation expense.

As of December 31, 2022, the Company believed it probable that the 2022 and 2023 performance targets, as outlined in the amended award agreements, would achieve 50 % revenue growth achievement, as defined.

Therefore, fifty percent of the potential expense associated with these tranches was recognized or will be recognized over the remaining performance period of the respective tranche.

On February 9, 2023, the Board of Directors of the Company ratified the Company’s annual revenue growth rate during 2022 and approved the vesting of 50.9 % of the PSU awards eligible to vest for the 2022 performance period.

Stock-based compensation

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Year ended December 31,

2022 2021 2020

Stock options $ 24.2 $ 35.2 $ 8.9

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Year ended December 31,

2022 2021 2020

Research and development expenses $ 43.4 $ 27.7 $ 0.5

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Total stock-based compensation costs, net of amounts capitalized $ 123.5 $ 100.4 $ 276.0

During the year ended December 31, 2021, the Company capitalized $ 2.7 million of stock-based compensation cost.

There were no stock-based compensation costs in 2019.

As of December 31, 2021, the Company’s unrecognized stock-based compensation expenses related to stock options was approximately $ 104.3 million, which are expected to be recognized over a period of 2.9 years.

As of December 31, 2021, the Company’s unrecognized stock-based compensation expenses related to unvested restricted stock units was approximately $ 244.8 million, which are expected to be recognized over a period of 2.9 years.

During the years ended December 31, 2022 and 2021, the Company capitalized $ 2.0 million and $ 2.7 million of stock-based compensation cost, respectively.

There was no stock-based compensation cost capitalized in the 2020.

As of December 31, 2022, the Company’s unrecognized stock-based compensation expenses related to stock options, RSUs and PSUs was approximately $ 14.1 million, $ 250.4 million and $ 18.1 million, respectively.

The expense related to stock options, RSUs and PSUs are expected to be recognized over a weighted average period of 2.4 years, 2.5 years and 2.2 years, respectively.

DERIVATIVE INSTRUMENTS

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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.

Upon the update of the index to SOFR, we expect that the fixed rate will change from this current rate.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.

The aggregate fair value of the Company’s interest rate swap agreements was an asset of $ 5.5 million as of December 31, 2021 and was recorded between accrued expenses and other current liabilities and other non-current assets in the accompanying consolidated balance sheets based upon the timing of the underlying expected cash flows.

The aggregate fair value of the Company’s interest rate swap agreements was an asset of $ 48.8 million as of December 31, 2022 and was recorded between 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.

The aggregate fair value of the

Company’s interest rate swap agreements was an asset of $ 5.5 million as of December 31, 2021 and was recorded between accrued expenses and other current liabilities and other non-current assets in the accompanying consolidated balance sheets based upon the timing of the underlying expected cash flows.

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.

Foreign currency hedge agreements

The Company has also entered into multiple derivative contracts for the future purchase of ILS, RON and PLN.

At December 31, 2021, we had entered into derivative contracts to purchase certain foreign currencies, including ILS, RON and PLN, at future dates.

The approximate amount of hedges was equal to $71.2 million, and all contracts are expected to mature during the upcoming 12 months..

The aggregate fair value of the Company’s derivative contracts was $ 1.3 million as of December 31, 2021 and was recorded in prepaid expenses and other current assets in the accompanying consolidated balance sheets.

At December 31, 2022, 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 $ 187.4 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 $ 5.3 million as of December 31, 2022 and was recorded in prepaid expenses and other current assets and accrued expenses and other current liabilities in the accompanying consolidated balance sheets.

The aggregate fair value of the Company’s derivative contracts was an asset of $ 1.3 million as of December 31, 2021 and was recorded in prepaid expenses and other current assets in the accompanying consolidated balance sheets.

In the second quarter of 2022, in conjunction with the announced closing of its Canadian operations, the Company terminated its derivative contract to purchase Canadian dollars resulting in an immaterial gain.

FAIR VALUE MEASUREMENTS

Our assessment of goodwill and other intangible assets for impairment includes an assessment using various Level 2 (discount rate) and Level 3 (forecasted cash flows) inputs.

See Note 5, Goodwill and Note 6, Intangible Assets Other Than Goodwill, for more information on the assessment for impairment of goodwill and of intangible assets other than goodwill, respectively.

See Note 1, Organization and Summary of Significant Accounting Policies, for more information on the assessment for impairment of goodwill and of intangible assets other than goodwill, respectively.

The following table summarizes the fair value measurement of the Company’s long-term debt at December 31, 2022 (in millions):

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Total debt $ 2,466.8 $ 2,262.5

December 31, 2021

Face Value Fair Value Fair Value Hierarchy

Term Loan $ 1,885.8 $ 1,876.4 Level 2

Senior Notes 600.0 585.0 Level 2

Total debt $ 2,485.8 $ 2,461.4

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 (in millions):

The following table sets forth the assets and liabilities measured at fair value on a recurring basis in the Company’s consolidated balance sheet (in millions):

Fair Value at

Category December 31, 2021

Cash and cash equivalents

Category December 31, 2022 December 31, 2021

Cash equivalents

Money market funds Level 1 $ 294.8 $ 310.2

Term deposits Level 1 243.3 —

Commercial papers Level 2 79.9 —

Short-term bank deposits Level 1 $ — $ 100.1

Prepaid expenses and other current assets

Derivative instruments - interest rate swaps Level 2 $ 19.5 $ —

Derivative instruments - foreign currency derivative contracts Level 2 2.2 1.3

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Accrued expenses and other current liabilities:

Derivative instruments - interest rate swaps Level 2 $ 2.4

Derivative instruments - foreign currency derivative contracts Level 2 $ 7.5 $ —

Derivative instruments - interest rate swaps Level 2 — 2.4

The carrying values of the Company’s cash equivalents and short-term bank deposits 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.

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The change in fair value of contingent consideration payable was valued using significant unobservable inputs (Level 3), was included in the general and administrative expenses in the Company’s consolidated statements of comprehensive income and consisted of the following (in millions):

Balance as of January 1, 2020 $ 26.3

Fair value adjustment 17.4

Payments ( 43.7 )

Balance as of December 31, 2020 $ —

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Balance as of December 31, 2021 28.7

Recorded in connection with acquisition transaction 11.4

Adjustment based on subsequent settlement agreement (1)

Fair value adjustments based upon post-acquisition performance ( 11.4 )

Balance as of December 31, 2022 $ —

(1) See Note 2, Business Combinations, for additional discussion.

In April 2020, the Company reached an agreement with the former stockholders of Seriously on the early determination of value and settlement of the contingent consideration payable following the Company’s acquisition of Seriously in July 2019.

The impact of this agreement has been recorded within the fair value adjustments for the year ended December 31, 2020.

The Company estimated the fair value of the contingent consideration recorded in connection with the acquisition of Reworks 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 had no financial assets or liabilities measured at fair value as of December 31, 2020.

The Company estimated the fair value of its contingent consideration liabilities using probability-weighted discounted cash flow analyses.

These fair value measurements are based on significant inputs not observable in the market and thus represent Level 3 measurements as defined in ASC 820.

The extent to which the actual results differ from assumptions made within the probability-weighted analyses will result in adjustments to this liability in future periods.

The Company had no financial assets or liabilities measured at fair value as of December 31, 2022 and 2020.

The Company has not elected the fair value measurement option available under U.S.

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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.

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Pleadings have been exchanged and the lawsuit is in the discovery stage.

No trial date has been scheduled.

A hearing date for summary trial has been scheduled for 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 October 26, 2020, a patent infringement claim was filed against Playtika Holding Corp., Playtika Ltd.

and Caesars Interactive Entertainment LLC in U.S.

District Court, District of Nevada.

The Plaintiff alleged that the defendants are infringing certain patents in the field of communication and the transferring of images between the gaming server and the end device on certain of its social casino games.

The Plaintiff is seeking monetary damages.

On April 7, 2021, following the Company’s preliminary motions for dismissal and stay, the Company’s motion for stay was approved by the court pending ruling on motions to dismiss.

On July 7, 2021, the Court issued an order finding each of the Plaintiff’s asserted patents invalid as failing to comply with certain legal requirements and dismissing the lawsuit as to all parties.

On July 19, 2021, the Plaintiff filed an appeal.

Playtika Holding Corp.

and Playtika Ltd.

intend to defend the case vigorously.

On November 23, 2021, we and our directors and certain of our 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.

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.

The complaint is allegedly brought on behalf of a class of purchasers of our 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.

The complaint seeks, among other things, damages and attorneys’ fees and costs on behalf of the putative class.

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 memorandum of law in support of the defendants’ motion to dismiss plaintiffs’ amended complaint, and on November 30, 2022, the Company filed with the Court the 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 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.

In January 2023, PGI filed its response to the plantiff’s motion, and a pre-trial hearing is set for March 19, 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 will defend this case vigorously.

The Company has received a number of demand letters pursuant to Section 220 of the Delaware General Corporation Law (“DGCL”), seeking disclosure of certain of the Company’s books and records.

The Company has responded to those demands, stating its belief that the demand letters fail to fully comply with the requirements of Section 220 of the DGCL.

However, in the interest of resolution and while preserving all rights, the Company has engaged in negotiations with certain of the shareholders and has produced materials in relation to the demands.

The Company received seven demands for arbitration in late 2022 and early 2023 alleging that its games constitute illegal gambling under applicable state law.

As the arbitrations are 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 will defend this case vigorously.

REVENUE FROM CONTRACTS WITH CUSTOMERS

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

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):

Israel $ 100.9 $ 73.9

USA 62.0 51.4

Ukraine 26.1 32.5

Other 40.9 34.9

Total long-lived assets, net $ 229.9 $ 192.7

APPRECIATION AND RETENTION PLANS

In August 2019, the Board approved the 2021-2024 Retention Plan.

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 in each of the plan years, determined as follows:

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 Retention Plan Adjusted EBITDA in each of the plan years, determined as follows:

For 2021, (A) 14 % of the 2021-2024 Retention Plan Adjusted EBITDA for such calendar year, less (B) $ 25,000,000 .

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Initial awards were granted under the 2021-2024 Retention Plan in August 2019, with subsequent awards to employees or consultants hired or retained after such date granted at the discretion of the administrator.

Complete disclosure surrounding this plan and executive compensation can be found in the Company’s proxy statement.

For certain participants, in the event of the participant’s termination without cause or resignation for good reason, or termination by reason of death or disability, he or she will be eligible to receive a lump sum cash payment equal to his or her proportionate share (based on the number of retention units outstanding and eligible for payment as of such date) of the unpaid portion of the total retention pool for the remaining term of the 2021-2024 Retention Plan as of the date of termination, which amount shall be paid in cash within 60 days following the date of termination.

In the event of such a termination, such participant will also remain eligible to receive payments in respect of his or her appreciation units for all vesting dates that have not yet occurred prior to the date of such termination, which payments will be made as and when such payments are made to other appreciation unit holders.

of retention units outstanding and eligible for payment as of such date) of the unpaid portion of the total retention pool for the remaining term of the 2021-2024 Retention Plan as of the date of termination, pro-rated for the portion of the period between January 1, 2021 and December 31, 2024 that has elapsed prior to termination, payable within 60 days following termination.

For all other participants, in the event of termination due to death or disability on or after January 1, 2021, but prior to December 31, 2024, the participant will receive a payment in respect of his or her proportionate share (based on the number of retention units outstanding and eligible for payment as of such date) of the unpaid portion of the total retention pool for the remaining term of the 2021-2024 Retention Plan as of the date of termination, pro-rated for the portion of the period between January 1, 2021 and December 31, 2024 that has elapsed prior to termination, payable within 60 days following termination.

In addition, the participant will retain the right to receive payments for a pro-rated portion of his or her appreciation units for all vesting dates that have not yet occurred prior to the date of such termination, which payments will be made as and when such payments are made to other appreciation unit holders.

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Pursuant to an amendment to the 2021-2024 Retention Plan adopted in October 2020, these cancelled appreciation units are considered “retired units” for purposes of the plan, and will be deemed to be outstanding and eligible for payment solely for purposes of determining the per unit value to be paid to participants, but no amounts will be paid with respect to such retired units.

The Company recognized compensation expenses in respect of retention bonus and appreciation unit awards under the 2021-2024 Plan of $ 112.7 million during the year ended December 31, 2021, and under the 2017-2020 Plan of $ 67.6 million and $ 72.7 million during the years ended December 31, 2020 and 2019, respectively.

Retention Plan Adjusted EBITDA represents Credit Adjusted EBITDA further adjusted to reflect certain elements of cash-based compensation including retention unit awards and appreciation unit awards under the 2021-2024 Plan and retention awards to key individuals with acquired companies.

The Company recognized compensation expenses in respect of retention bonus and appreciation unit awards under the 2021-2024 Plan of $ 106.2 million and $ 112.7 million during the years ended December 31, 2022 and 2021, respectively, and under the 2017-2020 Plan of $ 67.6 million during the year ended December 31, 2020.

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.

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INTEREST EXPENSE AND OTHER, NET

I nterest expense and other, net for the years ended December 31, 2021 , 2020 and 2019, are as follows (in millions):

Interest expense and other, net for the years ended December 31, 2022, 2021 and 2020, are as follows (in millions):

Year ended December 31,

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Total interest expense and other, net $ 110.6 $ 153.8 $ 192.8

Israeli taxation

The Company believes that certain of its Israeli subsidiaries qualify as a Preferred Technology Enterprises, entitled to a special tax track, under the Israeli Investment Law, 5719-1959 (the “Investment Law”) and accordingly are eligible for a reduced corporate tax rate of 12 % on their preferred technology income, as defined in the Investment Law, beginning from tax year 2017 and onwards.

A Preferred Technology Enterprise becomes a Special Preferred Technology Enterprise and is entitled to a reduced corporate tax rate of 6 % on their preferred technology income when the worldwide revenues reach ILS 10 billion annually.

The Company expects that the Israeli subsidiaries qualifying as Preferred Technology Enterprises in the current year will continue to qualify as Preferred Technology Enterprises or become Special Preferred Technology Enterprises in subsequent tax years.

Income not eligible for Preferred Technology Enterprise benefits is taxed at the regular corporate tax rate at 23 % since 2018 and after.

Other foreign subsidiaries

Non-Israeli subsidiaries are taxed according to the tax laws in their respective countries of residence.

Net operating loss carry-forwards

The Company has net operating loss carryforwards in certain jurisdictions, including Israel, Germany and Finland of $ 78.7 million, $ 5.6 million, and $ 3.4 million, respectively.

The net operating losses in Israel and Germany are carried forward indefinitely.

The net operating losses in the Finland expire from 2029 through 2031.

The Company’s income tax return is subject to examination by federal, state and non-U.S.

tax authorities.

The 2018-2020 U.S.

federal income tax filings are currently open tax years available for examination by the IRS.

state tax jurisdictions have statutes of limitation generally ranging from three to five years, with the earliest open tax year for the Company being 2016.

Years still open to examination by tax authorities in Israel, which is the main jurisdiction other than the U.S.

are 2017-2020.

The Israeli tax authorities are currently examining tax years 2017-2019.

Deferred tax assets and liabilities

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Intangible assets ( 54.6 ) ( 67.2 )

Undistributed earnings of subsidiaries — ( 46.2 )

Debt issuance costs ( 6.1 ) ( 7.1 )

Property and equipment ( 9.0 ) ( 10.3 )

Derivative instruments ( 11.3 ) ( 1.3 )

Operating lease right-of-use assets ( 20.6 ) ( 15.3 )

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The Company regularly reviews the deferred tax assets for recoverability based on all of the available positive and negative evidence, with a focus on historical taxable income, projected future taxable income, the expected timing of the reversals of existing taxable temporary differences and tax planning strategies by jurisdiction.

The Company previously considered the earnings of certain of its non-U.S.

subsidiaries to not be indefinitely reinvested since the cash generated from some of the foreign subsidiaries would be used to service the long-term debt in the U.S.

As a result of this assertion, the impact of a repatriation of the undistributed earnings resulted in recording a deferred tax liability consisting of potential withholding and distribution taxes of $ 41.7 million as of December 31, 2019.

Prior to the second quarter of 2019, the Company considered the earnings in all its non-U.S.

subsidiaries to be indefinitely reinvested and accordingly, recorded no deferred income taxes associated with such earnings.

During the second quarter of 2019, the Company reevaluated its historic assertion and no longer considered the earnings of certain of its non-U.S.

subsidiaries to be indefinitely reinvested since the cash generated from some of the foreign subsidiaries will be used to

service debt in the United States.

As a result of the change in assertion, the impact of a repatriation of the undistributed earnings resulted in recording a deferred tax liability consisting of potential withholding and distribution taxes of $ 41.7 million as of December 31, 2019.

For the year ended December 31, 2020, the Company accrued an additional $ 4.5 million of deferred tax liability.

Such deferred taxes were recognized as tax expense.

As a result of the changes to the Credit Agreement, primarily a reduction in the interest rate, in addition to other considerations, the Company has reevaluated its assertion and now considers the earnings of all its non-U.S.

As a result of the amendment to the Credit Agreement in 2021, primarily a reduction in the interest rate, in addition to other considerations, the Company had reevaluated its assertion and considered the earnings of all its non-U.S.

subsidiaries to be indefinitely reinvested.

For the year ended December 31, 2021, the Company reversed the previously accrued deferred tax liability and recognized $ 46.2 million of tax benefit.

As of December 31, 2021, the Company asserts that the undistributed earnings of its non-U.S.

subsidiaries will be indefinitely reinvested, and determination of the amount of any deferred income or withholding tax liability on these earnings is not practicable because of the complexities of the hypothetical calculation.

As of December 31, 2022, the Company continues to assert that the undistributed earnings of its non-U.S.

subsidiaries will be indefinitely reinvested.

The determination of the amount of any deferred income or withholding tax liability on these earnings is not practicable because of the complexities of the hypothetical calculation.

Net operating loss carry-forwards

The Company has net operating loss carryforwards in certain jurisdictions, including Israel, Finland, and the U.S.

of $ 121.7 million, $ 27.7 million, and $ 10.8 million, respectively.

The net operating losses in Israel and the U.S.

are carried forward indefinitely.

The net operating losses in the Finland expire from 2031 through 2032.

The Company’s income tax return is subject to examination by federal, state and non-U.S.

tax authorities.

The 2019 through 2021 U.S.

federal income tax filings are currently open tax years available for examination by the IRS.

state tax jurisdictions have statutes of limitation generally ranging from three to five years , with the earliest open tax year for the Company being 2017.

Years still open to examination by tax authorities in Israel, which is the main jurisdiction other than the U.S.

are 2017 through 2021.

The Israeli tax authorities are currently examining tax years 2017 through 2020.

Income before income taxes is comprised as follows (in millions):

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Change in valuation allowance ( 4.0 ) % 0.9 % 1.3 %

Withholding taxes 1.3 % 0.1 % 0.1 %

State taxes, net of federal benefit 1.4 % 0.3 % 0.6 %

Change in uncertain tax positions 0.6 % 5.8 % 18.5 %

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Effective tax rate 23.7 % 24.5 % 52.6 %

The Company believes that certain of its Israeli subsidiaries qualify as Preferred Technology Enterprises, entitled to a special tax track, under the Israeli Investment Law, 5719-1959 (the “Investment Law”) and accordingly are eligible for a reduced corporate tax rate of 12% on their preferred technology income, as defined in the Investment Law, beginning from tax year 2017 and onwards.

A Preferred Technology Enterprise becomes a Special Preferred Technology Enterprise and is entitled to a reduced corporate tax rate of 6% on their preferred technology income when the worldwide revenues reach ILS 10 billion annually.

Income not eligible for Preferred Technology Enterprise benefits is taxed at the regular corporate tax rate at 23% beginning in 2018.

Non-Israeli subsidiaries are taxed according to the tax laws in their respective countries of residence.

During the fourth quarter of 2022, the Company received an assessment from the Israel Tax Authority asserting that a smaller proportion of the Company’s 2017 earnings qualified for reduced tax rates under the Preferred Technology Enterprise regime than what the Company had asserted on its tax return.

Applying this same assertion to all open tax years 2017 through 2022, the assessment results in an aggregate exposure of approximately $ 120 million more income tax than what the Company has included on its prior tax returns for 2017 through 2021, or expects to include on its upcoming 2022 tax return.

The Company intends to appeal this assessment and believes that its associated reserves are adequate.

However, it is possible that any final amounts payable in connection with this tax assessment could exceed the Company’s current reserves.

The provision for income taxes is comprised as follows (in millions):

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Increases in respect of tax positions related to prior years 87.0 9.1

Increases in respect of exchange rate fluctuations 3.9 4.3

Increases in respect to exchange rate fluctuations — 3.9

Reductions in respect of settlements with authorities ( 1.2 ) ( 12.7 )

Reductions in respect of expirations of statute of limitations — ( 0.9 )

Reductions in respect of tax positions related to prior years ( 9.4 ) —

Reductions in respect of exchange rate fluctuations ( 3.7 ) —

Balance as of December 31 $ 231.4 $ 114.2

The balance of total unrecognized tax benefits at December 31, 2021 is $ 104.9 million which, if recognized, would affect the effective tax rate in the Company's consolidated statements of comprehensive income.

Included in the balance of total unrecognized tax benefits at December 31, 2022 is $ 100.5 million of tax benefits that if recognized, would affect the Company’s effective tax rate.

The balance of the accrual relating to interest and penalties as of December 31, 2022 is $ 13.4 million.

The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits could change significantly within 12 months of the reporting date as a result of the open examination in Israel for the tax years ended 2017 through 2020.

The nature of this uncertainty primarily relates to qualification of certain income as qualified income under the Preferred Technology Enterprise tax regimes.

The nature of this uncertainty primarily relates to the qualification of certain income under the Preferred Technology Enterprise tax regime in Israel.

However, a reasonable estimate of the range of possible changes cannot be made at this time.

As of December 31, 2022, the Company has a gross unrecognized tax benefit liability in Israel of $ 140.2 million associated with potential transfer pricing adjustments.

The Company estimates this liability will be reduced by $ 123.5 million from offsetting unrecognized tax benefits in the U.S., the United Kingdom, and Austria associated with correlative effects of potential transfer pricing adjustments.

The Company netted these amounts in previous financial statements as discussed in Note 1, Organization and Summary of Significant Accounting Policies .

The applicable guidance prohibits offsetting with regards to the unrecognized tax benefit reconciliation above.

ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table shows a summary of changes in accumulated other comprehensive income (loss), net of tax, by component for the year ended December 31, 2021 (in millions):

The following table shows a summary of changes in accumulated other comprehensive income (loss), net of tax, for the respective periods (in millions):

Foreign Currency Translation Interest Rate Swaps Foreign Currency Derivative Contracts Total

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Balance as of December 31, 2021 ( 1.9 ) 4.2 0.9 3.2

Other comprehensive income (loss) before reclassifications ( 13.7 ) 36.4 ( 13.0 ) 9.7

Amounts reclassified from accumulated other comprehensive income (loss) — ( 2.9 ) 7.6 4.7

Balance as of December 31, 2022 $ ( 15.6 ) $ 37.7 $ ( 4.5 ) $ 17.6

For the year ended December 31, 2022, interest rate swaps and foreign currency derivative contracts were net of $ 10.0 million of tax expense and $ 1.0 million of tax benefit, respectively.

For the year ended December 31, 2021, interest rate swaps were net of $ 1.3 million of tax expense.

NET INCOME ATTRIBUTABLE TO ORDINARY STOCKHOLDERS

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Net income per share, diluted $ 0.69 $ 0.75 $ 0.24

The following outstanding employee equity awards were excluded from the calculation of diluted net income per share because their effect would have been anti-dilutive for the periods presented:

The following outstanding employee equity awards were excluded from the calculation of diluted net income per share because their effect would have been anti-dilutive for the periods presented (in millions):

Year ended December 31,

2022 2021 2020

Stock options 15.8 7.8 8.0

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Total 28.8 12.3 8.0

As the Company only had one class of common shares outstanding prior to June 2020 and had no awards granted under any equity plan, there were no equity awards excluded from the computation of earnings per share for the year ended December 31, 2019.

TRANSACTIONS AND BALANCES WITH RELATED PARTIES

Name and relationship of related parties

Name Relationship

Playtika Holding UK Immediate parent company

Alpha Ultimate parent company

Giant HK Stockholder who has significant influence over the ultimate parent company

Transactions with related parties

The following transactions occurred with related companies (in millions):

Year ended December 31,

Loan due to Alpha offset with loan receivable ( 68.0 )

Loan due from Giant HK offset with loan payable 68.0

There were no transactions with related companies in the years ended December 31, 2021 and 2020.

The Company borrowed $ 92 million from Alpha during 2017 and repaid $ 24 million during 2018.

The loan bore interest rate of 4 % per annum.

The loan was to be repaid up to two years from the agreement date and could be extended upon written agreement.

The Company recognized interest expense of $ 1.8 million during the year ended December 31, 2019, related to this loan.

Also, the Company lent $ 92 million to Giant HK during 2017, and received $ 24 million during 2018.

The loan bore interest rate of 4 % per annum.

The loan was to be repaid up to two years from the agreement date and could be extended upon written agreement.

The Company recognized interest income of $ 1.8 million during the year ended December 31, 2019, related to this loan.

On August 20, 2019, Alpha and Giant HK agreed on the assignment of the agreement described above and accordingly the amount was off-set and the receivable loan balance considered as fully repaid.

Also in August 2019, the Company issued a $ 2.4 billion cash dividend to Playtika Holding UK.

Option awards that were deemed to be anti-dilutive and were modified in the Option Exchange are included in table above for the period they were outstanding in 2022 prior to the Option Exchange.

In addition, 2.4 million PSUs were excluded from the

calculation of diluted net income per share for the year ended December 31, 2022 because the minimum performance measures have not yet been met.

SUBSEQUENT EVENTS

On February 7, 2022, the Company’s Compensation Committee approved the grant of performance stock units (“PSUs”) to certain of our executive officers, including our named executive officers, pursuant to the Company’s 2020 Incentive Award Plan, as amended.

Should all of the performance targets be met and all outstanding PSUs vest, the Company expects to recognize approximately $ 54 million in expense over the next four years .

The Company’s Compensation Committee also approved the grant of RSUs and options to certain employees other than our executive officers for which the Company expects to recognize approximately $ 106 million in expense over the next four years .

In February 2022, Russia launched a military invasion into Ukraine.

The Company has a significant research and development center in Ukraine.

At this time, the Company is unable to estimate any specific impact to its business, financial condition or results of operations.

The Company’s management evaluates subsequent events through the date of issuance of the consolidated financial statements.

There have been no subsequent events that occurred during such period that would require adjustment to or disclosure in the consolidated financial statements as of and for the year ended December 31, 2022.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data