playtika-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2021


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

For the transition period from _____ to _____

Commission File Number: 001-39896

PLAYTIKA HOLDING CORP.

(Exact Name of Registrant as Specified in its Charter)


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


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

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

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


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

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

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

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of May 7, 2021, the registrant had 409,604,218 shares of common stock, $0.01 par value per share, outstanding.

PLAYTIKA HOLDING CORP.

FORM 10-Q

INDEX


		Page
PART I.	FINANCIAL INFORMATION	1
ITEM 1.	FINANCIAL STATEMENTS (Unaudited)	1
	Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	2
	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020	2
	Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2021 and 2020	3
	Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	4-5
	Notes to the Consolidated Financial Statements	6 -24
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
ITEM 4.	CONTROLS AND PROCEDURES	3 5
PART II.	OTHER INFORMATION	36
ITEM 1.	LEGAL PROCEEDINGS	36
ITEM 1A.	RISK FACTORS	36
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	37
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	37
ITEM 4.	MINE SAFETY DISCLOSURES	37
ITEM 5.	OTHER INFORMATION	37
ITEM 6.	EXHIBITS	38
SIGNATURES

CAUTIONARY NOTE ABOUT FORWARD LOOKING STATEMENTS

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

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. The achievement or success of the matters covered by such forward-looking statements involves significant risks, uncertainties and assumptions, including, but not limited to, the important factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2021. Moreover, we operate in a very competitive and rapidly changing environment and industry. As a result, it is not possible for our management to assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated, predicted or implied in the forward-looking statements.

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

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

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

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

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

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

•we may be unable to successfully develop new games;

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

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

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

•our controlled company status;

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

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

•our reliance on key personnel;

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

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

Additional factors that may cause future events and actual results, financial or otherwise, to differ, potentially materially, from those discussed in or implied by the forward-looking statements include the risks and uncertainties discussed in the

sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q and our Annual Report of Form 10-K filed with the SEC on February 26, 2021. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur, and reported results should not be considered as an indication of future performance. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

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

Part I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

-1-

CONSOLIDATED BALANCE SHEETS

(In millions, except for per share data)


	March 31, 2021		December 31, 2020
ASSETS	(Unaudited)
Current assets
Cash and cash equivalents	$	963.8	$	520.1
Short-term bank deposits	50.0		—
Restricted cash	2.6		3.5
Accounts receivable	182.4		129.3
Prepaid expenses and other current assets	97.2		101.6
Total current assets	1,296.0		754.5
Property and equipment, net	96.0		98.5
Operating lease right-of-use assets	81.8		73.4
Intangible assets other than goodwill, net	317.4		327.7
Goodwill	479.4		484.8
Deferred tax assets, net	26.2		28.5
Other non-current assets	7.6		8.8
Total assets	$	2,304.4	$	1,776.2

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Current maturities of long-term debt	$	12.5	$	104.6
Accounts payable	28.4		34.6
Operating lease liabilities, current	17.2		16.4
Accrued expenses and other current liabilities	364.4		484.8
Total current liabilities	422.5		640.4
Long-term debt	2,433.0		2,209.8
Employee related benefits	18.5		16.1
Operating lease liabilities, long-term	72.5		67.0
Deferred tax liabilities	83.7		86.4
Total liabilities	3,030.2		3,019.7
Commitments and contingencies (Note 10)
Stockholders' equity (deficit)
Common stock of US $0.01 par value; 1,600.0 shares authorized and 409.6 issued and outstanding at March 31, 2021; 400.0 shares authorized and 391.1 shares issued and outstanding at December 31, 2020(1)	4.1		3.9
Additional paid-in capital	954.1		462.3
Accumulated other comprehensive income	6.7		16.7
Accumulated deficit	(1,690.7)		(1,726.4)
Total stockholders' deficit	(725.8)		(1,243.5)
Total liabilities and stockholders’ deficit	$	2,304.4	$	1,776.2

_________

(1) Prior period results have been adjusted to reflect the 400-for-1 stock split effected in January 2021. See Note 7, Equity Transactions and Stock Incentive Plan for details.

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

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions, except for per share data)


	Three months ended March 31,
		2021		2020
		(Unaudited)
Revenues		$	638.9	$	534.2
Costs and expenses
Cost of revenue		183.0		165.9
Research and development		85.2		60.8
Sales and marketing		140.1		125.3
General and administrative		100.3		69.0
Total costs and expenses		508.6		421.0
Income from operations		130.3		113.2
Interest expense and other, net		75.7		58.3
Income before income taxes		54.6		54.9
Provision for income taxes		18.9		19.1
Net income		35.7		35.8
Other comprehensive loss
Foreign currency translation		(9.9)		(2.3)
Change in fair value of derivatives		(0.1)		—
Total other comprehensive loss		(10.0)		(2.3)
Comprehensive income		$	25.7	$	33.5

Net income per share attributable to common stockholders, basic		$	0.09	$	0.09
Net income per share attributable to common stockholders, diluted		$	0.09	$	0.09
Weighted-average shares used in computing net income per share attributable to common stockholders, basic		406.5		378.0
Weighted-average shares used in computing net income per share attributable to common stockholders, diluted		409.5		378.0

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

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CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

(In millions)

(Unaudited)


	Share capital(1)
	Shares	Amount		Additional paid-in capital		Accumulated other comprehensive loss		Retained earnings (Accumulated deficit)		Total stockholders' equity (deficit)
Balances at January 1, 2020	378.0	$	3.8	$	202.1	$	(2.9)	$	(1,818.5)	$	(1,615.5)
Net income	—	—		—		—		35.8		35.8

Other comprehensive loss	—	—		—		(2.3)		—		(2.3)
Balances at March 31, 2020	378.0	$	3.8	$	202.1	$	(5.2)	$	(1,782.7)	$	(1,582.0)


	Share capital
	Shares	Amount		Additional paid-in capital		Accumulated other comprehensive income (loss)		Retained earnings (Accumulated deficit)		Total stockholders' equity (deficit)
Balances at January 1, 2021	391.1	$	3.9	$	462.3	$	16.7	$	(1,726.4)	$	(1,243.5)
Net income	—	—		—		—		35.7		35.7
Issuance of common stock in the IPO, net of underwriting commission and offering costs	18.5	0.2		467.5		—		—		467.7
Stock-based compensation	—	—		24.3		—		—		24.3


Other comprehensive loss	—	—		—		(10.0)		—		(10.0)
Balances at March 31, 2021	409.6	$	4.1	$	954.1	$	6.7	$	(1,690.7)	$	(725.8)

_________

(1) Prior period results have been adjusted to reflect the 400-for-1 stock split effected in January 2021. See Note 7, Equity Transactions and Stock Incentive Plan for details.

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

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CONSOLIDATED STATEMENT OF CASH FLOWS

(In millions)

(Unaudited)


	Three months ended March 31,
	2021		2020
Cash flows from operating activities
Net income	$	35.7	$	35.8
Adjustments to reconcile net income to net cash from operating activities:
Depreciation	9.9		8.2
Amortization of intangible assets	23.3		19.0
Stock-based compensation	24.3		—
Amortization of loan discount	26.1		3.7
Change in deferred tax, net	0.3		5.1
Loss (gain) from foreign currency	3.3		(1.0)
Non-cash lease expenses	(2.1)		(1.5)
Capital gain from sale of investment	(1.2)		—
Changes in operating assets and liabilities:
Accounts receivable	(54.4)		(16.2)
Prepaid expenses and other current assets and interest receivable from related parties	6.6		(46.7)
Accounts payable	(7.5)		(37.3)
Accrued expenses and other current liabilities and accrued interest to related party	(120.7)		(17.1)
Net cash used in operating activities	(56.4)		(48.0)
Cash flows from investing activities
Purchase of property and equipment	(7.5)		(13.9)
Capitalization of internal use software costs	(13.3)		(7.1)
Purchase of intangible assets	(3.3)		(2.3)
Short-term bank deposits	(50.0)		—

Other investing activities	2.2		—
Net cash used in investing activities	(71.9)		(23.3)
Cash flows from financing activities
Proceeds from bank borrowings, net	880.7		—
Repayments on bank borrowings	(951.0)		(64.6)
Proceeds from issuance of unsecured notes, net	176.9		—


Proceeds from issuance of common stock, net	470.4		—




Net cash provided by (used in) financing activities	577.0		(64.6)
Effect of exchange rate changes on cash and cash equivalents	(5.9)		1.2
Net change in cash, cash equivalents and restricted cash	442.8		(134.7)
Cash, cash equivalents and restricted cash at the beginning of the period	523.6		271.9
Cash, cash equivalents and restricted cash at the end of the period	$	966.4	$	137.2

-5-


	Three months ended March 31,
	2021		2020
Supplemental cash flow disclosures
Cash paid for income taxes	$	21.4	$	25.7
Cash paid for interest	$	35.6	$	48.9

Non-cash financing and investing activities
Lease asset additions	$	11.2	$	13.6
Deferred unpaid offering costs	$	0.3	$	—

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

-6-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(In millions, unless specified otherwise)

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business and organization

Playtika Holding 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. It has built best-in-class live game operations services and a proprietary technology platform to support its portfolio of games which enable it to drive strong user engagement and monetization. The Company’s games are free-to-play, and the Company seeks to provide novel, curated in-game content and offers to its users, at optimal points in their game journeys to drive user engagement and monetization.

Basis of presentation and consolidation

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

The significant accounting policies referenced in the annual consolidated financial statements of the Company as of December 31, 2020 have been applied consistently in these unaudited interim consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been recorded within the accompanying financial statements, consisting of normal, recurring adjustments, and all intercompany balances and transactions have been eliminated in the consolidation. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company's financial statements for the year ended December 31, 2020.

Use of estimates

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

Significant factors, assumptions, and methodologies used in estimating fair value of equity

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. The guideline public company method estimates the value of a company by applying market multiples of publicly traded companies in the same or similar lines of business to the results and projected results of the company being valued. The guideline transaction method estimates the value of a company by applying valuation multiples paid in actual transactions for comparable public and private companies.

-7-

The valuation of the Company’s equity considers a number of objective and subjective factors that it believes market participants would consider, including (a) the Company’s business, financial condition, and results of operations, including related industry trends affecting its operations; (b) its forecasted operating performance and projected future cash flows; (c) the liquid or illiquid nature of its common stock; (d) the rights and privileges of its common stock; (e) market multiples of its most comparable public peers; and (f) market conditions affecting its industry.

As of the valuation date, financial forecasts were prepared and used in the computation of the estimated fair value of the Company’s equity using both the market and income approaches. The financial forecasts were based on assumed revenue growth rates and operating margin levels that considered past experience and future expectations. The assumed risks associated with achieving these forecasts were assessed in selecting the appropriate cost of capital rates.

The values derived under the market and income approaches were used to determine an initial estimated fair market value of the Company’s equity. The initial estimated value was then subjected to a discount for the lack of marketability based on the impediments to liquidity as a result of the Company’s previous status as a private company, including the lack of publicly available information and the lack of a trading market.

Subsequent to the Company’s initial public offering of equity in January 2021, the Company uses the public trading price of its common stock on the Nasdaq stock exchange as the basis for determining the fair market value for its common stock for purposes of its stock based compensation expense.

There is inherent uncertainty in the Company’s forecasts and projections, and if different assumptions and estimates had been made than those described previously, the amount of the equity valuation and stock-based compensation expense could have been materially different.

Concentration of credit risk and significant customers

Financial instruments, which potentially expose the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, short-term bank deposits, restricted cash, accounts receivable and derivative contracts. Substantially all of the Company’s cash and cash equivalents are maintained with three financial institutions with high credit standings. The Company performs periodic evaluations of the relative credit standing of these institutions.

Apple, Facebook and Google are significant distribution, marketing, promotion and payment platforms for the Company's games. A significant portion of the Company’s revenues has been generated from players who accessed the Company's games through these platforms. Therefore, the Company's accounts receivable are derived mainly from sales through these three platforms. Accounts receivable are recorded at their transaction amounts and do not bear interest. The Company performs ongoing credit evaluations of its customers.

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


	March 31, 2021	December 31, 2020

Apple	52%	38%
Google	30%	35%
Facebook	8%	11%

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 market value.

-8-

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 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 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 pre-IPO 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 expected term assumption was derived using the simplified method, which is based on an average between the 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 weighted-average risk-free interest rate was based on the interest rate for U.S. Treasury bonds. The Company 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. Except as provided in an option 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.

If factors change and the Company employs different assumptions, stock-based compensation cost on future awards may differ significantly from what the Company has recorded in the past. Higher volatility and longer expected terms result in an increase to stock-based compensation determined at the date of grant. Future stock-based compensation cost and unrecognized stock-based compensation will increase to the extent that the Company grants additional equity awards to employees or assumes unvested equity awards in connection with acquisitions. If there are any modifications or cancellations of the underlying unvested securities, the Company may be required to accelerate any remaining unearned stock-based compensation cost or incur incremental cost.

The Company’s stock-based compensation expense is recorded in the financial statement line item relevant to each of the award recipients. See Note 7, “Equity Transactions and Stock Incentive Plan” for additional discussion.

Employee related benefits

Appreciation and retention plan

In August 2019, the Company adopted the Playtika Holding Corp. Retention Plan (the “2021-2024 Retention Plan”) in order to retain key employees and reward them for contributing to the success of the Company. Under the 2021-2024 Retention Plan, eligible employees may be granted retention awards that let them receive their pro rata portion of a retention pool of $25 million per year for each of the plan years, and may also be granted appreciation units which allow the employee to receive their pro-rata portion of an appreciation pool calculated as a specified percentage of Adjusted EBITDA as described further in Note 12.

The value of each unit 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.

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 amount 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. These hedges are highly effective in offsetting changes in the Company’s future expected cash flows due to the fluctuation on the one-month LIBOR rate associated with its variable rate debt. Interest rate swap is designated as a cash flow hedge involving the receipt

-9-

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.

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 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. Based on the regression results, the Company believes that, at inception, 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 perform 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 forward contracts to reduce its exposure to fluctuating exchange rates between the United States dollar (as the Company’s functional currency) and the Company’s local payroll expense incurred in Israel and denominated in Israeli Shekels (“ILS”). The Company’s forward contracts are designated as cash flow hedges under ASC 815. As a result of substantially matching the critical terms between its forward contracts and the fluctuating exchange rates the Company expects these hedges to remain highly effective at offsetting fluctuations in exchange rates through their respective maturity dates.

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

Net income per share

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 in profitable periods 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 are not considered because of their anti-dilutive effect.

Accounting standards recently adopted by the Company

In December 2019, the FASB issued ASU 2019-12, Simplifying 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 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 quarter ended March 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.

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NOTE 2. GOODWILL

Changes in goodwill for the three months ended March 31, 2021 were as follows (in millions):


	Three Months Ended March 31, 2021
Balance at beginning of period	$	484.8
Goodwill acquired during the year	—
Foreign currency translation adjustments	(5.4)
Balance at end of period	$	479.4

NOTE 3. INTANGIBLE ASSETS OTHER THAN GOODWILL, NET

The carrying amounts and accumulated amortization expenses of the acquired intangible assets other than goodwill, net, including the impact of foreign currency exchange translation, at March 31, 2021 and December 31, 2020, were as follows (in millions):


	March 31, 2021
	Weighted average remaining useful life (in years)	Balance		December 31, 2020
Historical cost basis
Developed games and acquired technology	5.4	$	481.3	$	481.5
Trademarks and user base	—	19.1		19.1
Internal use software	2.8	74.7		61.5
		575.1		562.1
Accumulated amortization
Developed games and acquired technology		(224.5)		(206.2)
Trademarks and user base		(19.0)		(19.0)
Internal use software

SEC Form 10-Q filed by Playtika Holding Corp.