PLAYSTUDIOS, Inc.

Good afternoon, everyone, and welcome to the Play Studios first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session and instructions will be given at that time. As a reminder, this conference is being recorded. I would now like to turn the call over to Samir Jain, Head of Investor Relations and Treasury. Mr. Jain, you may begin.

Thank you, Operator. Good afternoon and thank you for joining us for Play Studio's first quarter 2024 earnings call. Joining me on the call today are our Chairman and CEO, Andrew Paschal, and our CFO, Scott Peterson. Before we begin, let me remind you that during the course of this call, we will make forward-looking statements. These statements are based on our current expectations and beliefs and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for discussion of the risks and uncertainties that may affect our future results. I would like to remind everyone that we will discuss certain non-GAAP financial measures during this call. These measures should not be considered as a substitute for financial results prepared in accordance with GAAP. Our results are prepared in accordance with GAAP and a reconciliation to comparable GAAP measures will be provided in our first quarter earnings release and in our SEC filings. With that, I'll pass the call to Andrew.

Thank you, Samir, and welcome, everyone, to our first quarter 2024 earnings call. As always, our commentary today is in addition to the financial disclosures we made in our press release. I encourage you to take a look at the release for a summary of our more recent performance. I'll begin with a few thoughts on the quarter and the company's outlook, after which Scott will follow up a discussion of our financials, and then we'll open the call up for your questions. Revenues and adjusted EBITDA on the quarter were ahead of consensus expectations in our own internal plans. On a year-over-year basis, and as expected, both metrics were down from year-ago levels. As I alluded to during our last call, many of our products are undergoing meaningful changes, which we expected to temper this quarter's operating performance. This was by design as we focused on building the infrastructure needed to revitalize these gains and position them for growth. As a quick recap, initiatives in 2024 include a portfolio-wide adoption of our updated MyVIP loyalty program, restoration of MyVegas and MyEconomy, the generalization of play awards, the launch of at least one new Tetris title, and an expansion of monetization within the Brainium portfolio. We're making notable progress on all these fronts, and I believe we're on our way to exiting the year at an improved run rate. Let's delve a bit more deeply into our Play Games business division. Overall, the results in Play Games continue to benefit from momentum in our growth portfolio. Tetris was, again, the standout as its revenue and DAU were well ahead of year-ago figures. High levels of organic traffic were amplified by the recent fascination with Willis Gibson, the 13-year-old Tetris player who became the first person to defeat the game. The global reaction that ensued reaffirmed our belief in this beloved franchise and our plans for tapping its unrealized potential on mobile platforms. With this in mind, our Tetris Prime team has been working hard on refreshing the look and feel of the existing game, elevating its creative execution to the standards that are more consistent with the rest of our portfolio. Our goal is to have this new version ready for Tetris' 40th anniversary in June. We also plan to complement this core Tetris title with at least one new casual variant later this year, likely in the third quarter. With the mobile license in place for the foreseeable future, our long-term ambition is to establish Tetris as a premier mobile gaming brand. It's also worth noting that we continue to enjoy solid momentum from our Braemium portfolio, which helped this quarter's results. We've been introducing new ad units and optimizing fill rates, which has driven an uptick in monetization. We're expecting further improvements as we introduce rewarded video and complete the integration of a MyVIP program. A unified and consistent execution of our loyalty solution across all of our primary titles is a top priority for us and something we're committed to accomplishing in the coming months. Our core portfolio is generally trending in line with the broader social casino industry, which continues to be challenged. We expect this to be the case throughout 2024, so we don't anticipate the industry's rebounding this year. As a result, our focus remains on refining our technology tools and operating capabilities, which should position us well when the market dynamics improve. With that said, our top priority is to better leverage our learnings across our collection of social casino titles. In support of this, we transitioned our MyVegas and MyEconomy games to Tel Aviv and are deep into the process of updating the games and improving our operations. This has been an ambitious undertaking, which was further complicated by the conflict in Israel. But we're making good progress, which is reflected in the more recent pickup in daily conversion rates. We're also working on increasing our direct-to-consumer business, which is largely nascent today. The primary focus is to more effectively leverage our MyVAP.co player portals with our active monetizers. The use of our loyalty program as a primary driver of direct business presents us with a differentiated strategy. Over time, I believe this will allow us to grow our direct sales and further improve our margins. Turning to Play Awards, we continue to focus on two key themes. One, fortifying our industry-leading platform by advancing its technologies and adding new players and rewards partners. And two, generalizing the platform for external use. Third-party game publishers remain interested in our unique offering, and we continue to qualify our best to structure a partnership. We expect these conversations to continue throughout the coming quarters with the goal of formalizing a pilot relationship before the end of the year. As these partnerships mature, we believe we can evolve Play Awards from a cost center to a revenue-generating, loyalty-as-a-service business. Before turning the call to Scott, I want to discuss our capital position and plans for investing our available cash. We restarted our share repurchase program in the first quarter and have bought an additional 4 million of stocks to date. We view our share prices deeply discounted and believe buying back our own stock rates value for all shareholders. At the same time, we remain committed to identifying and completing transformative M&A transactions. We continue to actively search for compelling opportunities that are in keeping with our overall strategy and expansion plans. Our goal remains to use our capital to enhance our strategic position, drive incremental growth, and increase the value of our company. I'll now turn the call over to Scott to provide some additional comments. Scott? Thanks, Andrew. Good afternoon, everyone. In addition to today's press release, our Form 10-Q will be filed shortly. Please look to those filings for a comprehensive summary of our first quarter results. We started the year strong with quarterly net revenues and consolidated adjusted EBITDA ahead of consensus expectations. First quarter consolidated adjusted EBITDA of $15.3 million was 14% lower than a year ago, while net revenues of $77.8 million were 3% lower. As a reminder, the first half of 2023 results include the benefit of a licensing agreement that ended later in the year. Adjusting for the impact of this agreement, first quarter consolidated adjusted EBITDA and net revenues would have been roughly flat with last year's amounts. As mentioned on our last call, we are anticipating building strength throughout the year. This is due to the numerous initiatives underway that will layer into our results sequentially. DAU was 3.5 million and MAU was 14.8 million, down 2% and up 13% respectively from last year. MAU increased due to the Tetris activity related to the Willis-Gibson exposure of beating the game. However, Tetris DAU increased over the quarter at a more modest rate. DAU declined in total, primarily through the core portfolio of our social casino games, partially offset by the Tetris increase. Barped out for the quarter was 24 cents, flat with year-ago results. Noble here were the double-digit gains in MyVegas, MyKanami, and Branium. Turning to Play Awards, we continue to make progress expanding the functionality and scope of the platform. We closed the quarter with 521 available rewards and 113 reward partners. Over 500,000 rewards were purchased in the quarter, a 14% increase from a year ago. We remain focused on a full integration of Play Awards and MyVIP into our games and continue to seek out opportunities to externalize the platform. We ended the quarter with approximately $127 million in cash, no borrowings, and full availability of our $81 million revolver. As Andrew mentioned, we resumed repurchasing our shares during the quarter and have bought an additional $4 million of stock through today. As such, we have $46 million remaining on our share repurchase authorization and continue to view share buybacks as an accretive and compelling use of our capital. In addition to repurchases, our broader capital allocation goals remain the same. investing in our games, building and scaling play awards, and the pursuit of strategic and accretive M&A. Our 2024 financial guidance remains the same, revenues in the range of $315 and $325 million, and consolidated adjusted EBITDA between $65 and $70 million. I'll now turn the call back to Andrew for some closing remarks. Thanks, Scott. Before we end our prepared remarks and open the call for questions, I'd like to touch on a few highlights. We had a strong quarter with revenue and adjusted EBITDA above our end street expectations. We remain on track to meet our full year earnings guidance, which calls for positive sales earnings growth this year. Changes at MyDegas and MyEconomy are in process and we're encouraged with the progress. We believe both games have the potential to meaningfully improve monetization this year. We remain on track to a full integration of our updated loyalty solution into all of our games by year end. In addition to better game metrics, we expect the integration of MyDAP.co to drive higher direct sales. Cranium's results are showing sequential strength on the back of expanded advertising efforts. We look for continued momentum through the year. Tetris continues to grow materially and is positioned for a strong 2024. Two new Tetris games are in development with the goal of launching one later this year. We continue to explore ways to open play awards to external platforms. Conversations with third parties continue and remain confident the Play Awards can evolve into a profitable standalone business. Finally, we restarted our share repurchase program this quarter, and we continue to believe our stock is trading well below fair value and represents tremendous value. With that, I'll turn it over to the operator. Operator, please open the line for questions.