PLAYSTUDIOS, Inc.

Thank you for standing by. Welcome to the Play Studios fourth quarter and year end 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note that this conference call is being recorded today, February 24, 2022. I will now turn the call over to Joel Achena, Corporate Security and General Counsel.

Thank you, Operator, and hello, everyone. By now, everyone should have access to our fourth quarter and year-end 2021 earnings release, which is available on the Play Studios website at www.playstudios.com in the Investor section. Some of management's comments today will be forward-looking statements about future events, expectations, and projections. Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. You should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact future operating results and financial conditions. During the call, management will discuss non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our fourth quarter and year-end 2021 earnings release on the www.playstudios.com website and on our Form 8-K filed with the SEC today. Hosting the call today, we have Andrew Paschal, Play Studios' Chief Executive Officer, and Scott Peterson, Chief Financial Officer of the company. They will provide some opening remarks, and then we will open the call to questions. With that, I'll turn the call over to Andrew.

Thank you, Joel. And good afternoon, everyone. Welcome to the Play Studios fourth quarter and year-end earnings call. Given that it's a new year, we're going to spend some time reaffirming our priorities, reviewing our recent results, along with providing our outlook and guidance for the current year. Let's start with some highlights from the past year. 2021 was incredibly eventful for our company, a year in which we positioned ourselves to advance our business and more fully capitalize on our unique model. More specifically, we went public and raised $250 million of primary capital. We expanded our game portfolio, adding MyVegas Bingo, MGM Slots Live, and Tetris to our existing collection of franchise products. We rebuilt our player network to pre-COVID levels, ending the fourth quarter with over 4.8 million monthly active users. We added nine loyalty partners and enriched the collection of real-world rewards, expanding the value of available benefits from nearly $300 million to $500 million. We advanced our Play Awards platform, tools, and capabilities, moving us closer to our ultimate goal of providing our program as a service for all game makers. We attracted some amazing new talent into the company, enhancing our product design, technology, and strategic capabilities. And we generated 287 million of revenue and 40 million of adjusted EBITDA. But turning to 2022, we're more convinced than ever that our focus and strategic approach are ideal for the times. Traditional leisure and retail businesses are becoming ever more dependent on digital platforms to attract their target audience. Most do it with conventional advertising, paying to display ads that promote a product or a discounted price. And there are those that invest in deeper digital presence, extending their brands into these channels in a way that's more experiential, engaging, and brand enhancing. As I shared on prior calls, this is where we've positioned our company. We use games to amass players, loyalty mechanics to intensify engagement, and rewards to convert them to real-world consumers. The result is a thriving marketplace where everyone benefits. Players get more entertainment and leisure value, game makers generate greater returns on their investments, and real-world brands acquire and engage more qualified consumers. This is what we've built. a virtuous marketplace that's tended to by incredibly skilled content creators and loyalty marketing specialists. And in doing so, we pioneered a unique model that's enabled hundreds of traditional businesses to cross the digital divide. It is our vision to fully exploit this model, and as we do, establish our company as the leading platform for rewarded play. With that as context, let's touch on our recent financial performance and other key operating metrics. We ended the year with a solid fourth quarter, posting revenues of $72 million, of 12.4% year-over-year, and adjusted EBITDA of $12 million, up 24% sequentially. When considering the social casino genre, our top-line results continue to outpace the broader market. According to the research firm Eilers and Trichic, the overall social casino market in the fourth quarter was down 1.1% sequentially compared to our 2% sequential growth and up 5.2% year-over-year compared to our 12.4% increase. In spite of the COVID headwinds, revenue for the full year was $287.4 million, an increase of 6.5% as we continue to grow profitably and generate cash flow. For the year, adjusted EBITDA was just under $40 million at the top end of our guidance range. Scott will be sharing and qualifying some of the more specific financial metrics later in the call, but I'd like to first offer some perspective on the overall state of our market. The overall market for games is approaching $200 billion, with mobile games accounting for nearly half the revenues. This is being driven by continued improvements in access, device quality, and game variety. And while these dynamics are driving growth, increases in competition and the recent disruption in UA practices have intensified the challenges of scaling new products as well as sustaining old ones. More specifically, the deprecation of IDFA, which has since resulted in most of the platforms revisiting and limiting their consumer targeting capabilities, has resulted in higher acquisition costs. This in turn has compressed the returns on ad spend, making it far more expensive to amass an audience. I believe these trends play to our strengths and unique capabilities. The industry is all consumed with how best to attract new players. However, by comparison, there's little innovation being applied to holding on to existing ones. Understandably, most game makers rely on the inherent entertainment value of a game, as well as ongoing feature and content releases to retain their audience. And while we also support all of our products with a dense lineup of fresh content, we leverage loyalty mechanics and real world rewards to deepen the connection with our players. We know this works for us and we expect it to work for others too. In short, the unique challenges of today's market are intensifying the problem that our model solves. For this reason, we remain so optimistic about our opportunity and so committed to our strategy. On the topic of strategy, ours consists of three key pillars. The first is developing and acquiring new games and new genres so that we can demonstrate our loyalty lift across a broader collection of products. As we've shared, we plan to do this through a variety of approaches, including joint development, publishing, and strategic M&A. The second is focused on developing the technologies, features, and tools needed to evolve our Play Awards program into a platform and suite of services that we can provide to the broader games industry. Making this transition will enable the company to accelerate its growth, minimize creative risk, improve margins, and ultimately drive substantial value. The third is diversifying our commercial model. Today, nearly all of our revenues are from in-app purchases. Going forward, we intend to leverage advertising, direct commerce with our players, and the emerging blockchain models to diversify our revenues and expand our business. Given this focus, it's worth touching on some of our primary initiatives. So let's start with games. As I highlight at the top of the call, we expanded our portfolio from four to seven games. Each one is uniquely positioned and ties directly to our strategic priorities. In the category of joint development, there's My Vegas Bingo, which marks our foray into the popular and growing casual bingo category. It leverages our marquee brand and our extensive library of unique game IP to deliver a fresh and innovative take on an old favorite. We launched the game back in late March and quickly scaled over 100,000 DAUs. As I share in our last call, a number of technical issues were revealed as we grew our audience. In response, we elected to moderate our UA investments and afford our development partners at Boss Fight Entertainment the time they needed to stabilize the product. We recently decided to take the game back from Boss Fight, a process that was completed just a few weeks ago, allowing us to lead and manage its ongoing development and operations more directly. We continue to believe in the potential of this game and look forward to stepping up the pace of new content employing more refined and proven monetization practices, and ramping up our investments in user acquisition. In the category of publishing, there's Kingdom Boss, a role-playing game that we distribute on behalf of Boss Fight Entertainment. As we've highlighted in the past, Boss Fight is a long history and a series of notable successes in the RPG genre. Unlike Bingo, Kingdom Boss was conceived of and based entirely on their own intellectual property. Our contributions to this franchise have been to underwrite its development, manage the UA activities, support the Play Awards integration, and generally provide insights gleaned from play testing. As I've shared, the game has struggled to achieve all the criteria that were established for a full-scale launch, even after making the game available in North America late in the fourth quarter. And while Boss Fight has consistently assured us that, based on their experience, the product is on a constructive path, currently we've elected to suspend development and reevaluate our options. As for strategic M&A, we recently acquired the rights to Tetris, one of the most widely played and beloved franchises in the history of consumer gaming. It's our belief that the Tetris game format has the potential to be its own casual game category, alongside Match 3, Solitaire, and Bingo. Each of these categories demonstrates the unique power of a universally appealing game format when complemented with progression mechanics, richer features, and more sophisticated live operations. Our plan is to optimize the existing games we've inherited while we craft an altogether new Tetris app that employs the playbook proven by Candy Crush, Tri-Peak Solitaire, and Bingo Blitz, among others. It's also worth highlighting that the existing game currently generates millions of organic installs, which we intend to introduce to our Play Awards program, and in doing so, look to improve retention, engagement, and network-wide value. Lastly, it's worth highlighting that we recently introduced a new slot app, MGM Slots Live. The game was conceived as a UA initiative, whereby we combine one of the most iconic brands in gambling with the best of our Pop Slots features to more efficiently acquire new players. By utilizing the Pop systems, tech, tools, and themes, we're able to efficiently leverage our resources and enter the market with a fresh and novel game. While we're still early in the cycle of qualifying the results, the strategy appears to be sound. The blended CPIs for MGM are below Pops, and the early returns are stronger as well. Assuming all goes well, we could utilize other brands in our portfolio, such as Bellagio, Mirage, Luxor, and Excalibur in a similar way. Turning to the second of our strategic pillars, we've made great strides with advancing our Play Awards platform. We've continued to generalize the systems, tools, and practices that will allow us to offer the service to third parties. And we've extended our Play Link SDK and feature set, enriching the framework to include a more expansive collection of digital real-world tie-ins. In addition, the team has been active in qualifying and onboarding reward partners. Over the past 90 days, we've added nine new outlets, including an expanded relationship with Intercontinental Hotels, along with a number of new local and affordable options. Lastly, the Play Awards team is excited to be working with a more diverse portfolio of games, as each provides a unique set of demands that will stress our teams and better prepare them for the longer-term business-to-business opportunities. Before moving on to some operational updates, I'd like to touch on the emerging market for blockchain-enabled gaming opportunities. NFTs and cryptocurrencies are dominating the narrative across many markets, but few have been as quick to embrace and exploit these opportunities as the games industry. Enabling players to verifiably own, trade, and sell their in-game characters, collectibles, and other content while having a voice in the overall application of these assets is adding an entirely new dimension of value. More than ever, players can now turn their in-game progress into real value allowing them to earn while they play. We understand the unique dynamics of play to earn as we've been doing it with our Play Awards program for nearly 10 years. Needless to say, we too are advancing our own plans for enhancing our model with the added dimension of blockchain-enabled features and capabilities, and we look forward to sharing our plans and progress in the coming quarters. On our last call, I highlighted some of the complexities and challenges of scaling our operations and executing in a post-COVID environment. If you recall, I spoke to the escalating costs in each of our primary tech hubs and our need to grow our teams in alternative markets. I'm pleased to share that we've made great strides in our Vietnam, Singapore, and Belgrade studios. All in, these studios now have 148 playmakers, accounting for 29% of our total development capacity. We'll continue to aggressively scale in these markets, understanding that it takes time to onboard, train, and integrate new team members. As such, we don't expect to see any meaningful benefits such as increased development output or improved margins until later this year. Before passing the mic to Scott, I want to briefly touch on our capital allocation. As mentioned during our last call, as a management team, we make decisions that we feel reinforce the enduring qualities of our business model and drive mid- and long-term growth. Notwithstanding the continued dislocation of our equity value today, we maintain our belief that the best use of our capital is to deploy it into strategic growth opportunities as opposed to purchasing our own stock. We have a rigorous approach to finding, qualifying, and pursuing strategic acquisitions and are actively engaged in a number of opportunities of varying scale. So as to not impair our ability to act on these opportunities, we elected not to purchase any stock during the fourth quarter under our previously authorized $50 million stock repurchase plan. We regularly assess the benefits of purchasing our own equity compared to external opportunities and remain poised to execute a buyback program should we deem it appropriate. I also want to reaffirm the conviction and optimism that's shared among our leadership team. As you may have seen, I've been actively purchasing stock to attend B5.1 plan and other non-reporting members of management have made purchases as well. We firmly believe in our strategy and with our buying shares in the open market, want to back up our position that our current price in no way reflects what we believe to be our fair value. I'll now turn the call over to Scott to provide more specifics on the financials. Thank you, Andrew. As Andrew mentioned, we reported $71.9 million of revenue during the fourth quarter of 2021, up 12.4% from the same quarter last year. As has been the case all year, when evaluating the year-over-year quarterly comparisons, consider the COVID restrictions that were in place during the same periods of 2020. For the full year ending December 31, 2021, revenue was $287.4 million versus $269.9 million in the prior year. We continue to strengthen the platform and invest in our game portfolio so that we can deliver engaged and loyal players to our brand partners. Yet we remain disciplined as we grow and grow profitably by generating tangible cash earnings. For the fourth quarter, we generated 12 million of adjusted EBITDA. For the full year, we recorded 39.5 million of adjusted EBITDA, which is down from 58 million during the prior year. The decrease reflects the ongoing investments in product development live operations, and user acquisitions we made during the year, which supported our bingo launch, plus the carrying costs associated with the Kingdom Boss effort. Looking at the fourth quarter's key operating metrics for our Play Awards platform, we saw an increase in activity as reward purchases returned to pre-COVID levels with 482,000 purchases in the quarter versus 269,000 for the same period last year, a 79% lift. This translated to a total retail value of $28.8 million, 137% increase over the $12.1 million for the same period last year. We also enjoyed a healthy expansion in the composition and amount of rewards inventory, which increased 58% over the prior year to 542 unique rewards, with a retail value of over $149 million, an increase of 140%. Additionally, fourth quarter DAU was $1.3 million, and MAU was $4.8 million, up 0.5% and 24.8% respectively year-over-year and up 10.1% and 35.4% sequentially. ARPDAU was $0.61, up 13% year-over-year and down 7.1% sequentially. Finally, daily payer conversion was 2.6%, up approximately 20 basis points year-over-year and down approximately 20 basis points sequentially. Turning to the balance sheet, we ended the quarter with approximately $214 million of cash and no debt. We have not drawn against our revolver, and thus we still maintain $75 million of additional liquidity. The revolver also provides an option to increase the credit facility for up to an additional $75 million. All in, this translates to nearly $365 million of liquidity. As of December 31st, we have 126.2 million shares of common stock outstanding. Given our strong balance sheet, we believe we are very well positioned to execute our multi-year plan of diversifying our game portfolio, advancing our loyalty platform model. We also maintain the share repurchase authorization to be able to execute a stock repurchase should we deem it appropriate. Next, we are initiating guidance for the full year 2022. We expect 2022 full year revenue to range between 305 and 325 million, representing year over year growth of roughly 9.6% at the midpoint. We expect 2022 full-year adjusted EBITDA to range between 40 and 50 million, representing a 14.3% margin at the midpoint, an improvement of 50 basis points compared to 2021. Regarding the underlying assumptions in revenue, some of the increases include a low single-digit growth rate in the core portfolio and continued progress in the MyVegasBingo, MGM Slots Live, and Tetris. On the adjusted EBITDA line, we will continue to invest in MyVegasBingo, but with a lower rate than compared to 2021, and we will be investing more in MGM slots. The level of investment in these two games will be partially offset by the suspension of the Kingdom Boss effort and related carrying costs. We have also added a profitable Tetris to the mix, but please understand we will invest additional resources as we enhance and roll out the game later this year. With that, I will pass it back to Andrew for some closing remarks. Thanks, Scott. Before we close our prepared remarks and open the call for questions, I'd like to reinforce some key points. Our revenue growth has generally outpaced the market. We're expanding our product portfolio with well-established and relevant franchise brands. We have an exciting opportunity to create a new category within the massive puzzle genre by leveraging the core Tetris mechanic. We're bringing our bingo product in-house and spending our investments in the RPG category. We're scaling our teams and expanding our global development capacity. We're advancing our Play Awards platform and preparing for future B2B opportunities. And the 10B51 plan that I alluded to earlier to purchase shares in the open market has been implemented. Lastly, I want to thank our dedicated teams across the globe for their continued commitment and contributions. Thank you all for joining us today, and we're happy to answer any questions. Operator, please open the line.