PLAYSTUDIOS, Inc.

Good afternoon, everyone, and welcome to the PlayStudio second quarter 2025 earnings call. At this time, all participants are in a listen only mode. Later, we will conduct 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 Jason Hahn, PlayStudio's chief strategy officer and head of invest relations. Mr. Hahn, you may begin.

Thank you, operator. Good afternoon, and thank you for joining us for PlayStudio's Q2 2025 earnings call. Joining me on the call today are chairman and CEO, Andrew Paschal and our CFO, Scott Peterson. Before we begin, please note that during this call, we may make forward looking statements. These statements are based on our current expectations and are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to our SEC filings for a more detailed discussion of these risks. We will also discuss certain non-GAP financial measures. These should not be considered a substitute for measures prepared in accordance with GAP. Reconciliation to comparable GAP measures can be found in our earnings release and SEC filings. With that, I'll turn it over to Andrew.

Thanks, Jason. Good afternoon, everyone. The dominant theme in Q2 and across the broader market continues to be the rapid rise of social casinos leveraging sweepstakes mechanics. This structural shift is reshaping player behavior and monetization across the category with more players gravitating towards social casino products powered by sweepstakes. This trend is pressuring traditional offerings, including our core social casino portfolio. That said, these dynamics were anticipated and they're exactly why we launched our reinvention program last year. We entered Q2 knowing the headwinds would persist and we remain focused on advancing the new initiatives that will define our next chapter. While our core business continued to soften this quarter, we're encouraged by the early signals we're seeing in areas like sweepstakes, direct to consumer purchases, and new game development. These signals validate our strategic direction and give us confidence in the path ahead. Let me walk you through some of the key updates. Let's start with our sweepstakes initiative. After just nine months since formalizing this effort, we're now live in open beta across seven states and the early signals are promising. Player retention, engagement, and monetization are all trending in the right direction. We're seeing clear evidence that our proposition resonates with players. We're taking a measured and rigorous approach to scaling focused on ensuring that when we open the product to all eligible states, the experience is fully optimized and delivers on our high standards, player expectations, and return on ad spend thresholds. We expect to be live across the full footprint of qualified US states later this year. I wanna remind everyone on the call that our strategy consists of a phased approach. We're beginning with a standalone web-based platform allowing us to build operating excellence and refine our core sweepstakes mechanics. Over time, this will evolve into a fully integrated promotional engine that drives chip sales across our social casino portfolio. In parallel, we continue to actively explore complementing our own effort with strategic acquisitions that could accelerate our momentum and position us for market leadership in the category. Let's turn to our other growth opportunity, Tetris Block Party. Development progressed steadily throughout Q2 with meaningful product improvements and early marketing tests that offer valuable insights into player engagement and acquisition efficiency. As with any new title, we're in a phase of continuous iteration, refining the gameplay, tuning the economy, and sharpening the funnel. We're currently in the mid stages of that cycle, and while there's still work to do, we're increasingly confident in the game's potential. We remain on track to develop and interact for a Q4 launch. I'd like to provide a bit more color on our overall Play Games publishing business. As I already highlighted, the casino portfolio continues to be impacted by the broader market shift towards sweepstakes products. We're seeing ongoing softness in core titles with DAU declines across the board as the primary driver. This was partially offset by stronger unit-level monetization, particularly in my economy, which was a bright spot in the quarter. We also continue to scale our -to-consumer business, which remains a standout. In Q2, -to-consumer generated 6.7 million of in-app purchase revenue, up 107% year over year and 34% sequentially, and represented .9% of total in-app purchase revenue. This momentum is driven by increased adoption and deeper engagement with our MyBIP -to-consumer offerings. And with Apple's recent policy changes giving us more flexibility to promote the channel, we see even greater opportunity to build on this momentum. Let's talk casual. Our casual portfolio also remains under pressure due to challenging market and competitive dynamics. During the quarter, we focused on product updates aimed at improving engagement and retention. We believe these enhancements will better position us to deploy user acquisition more profitably in future quarters. In the meantime, we've deliberately scaled back marketing spend to prioritize margin contribution from this portfolio, and we'll continue to evaluate our approach going forward. On the Play Awards front, Play Awards remains still our core differentiator, and we continue to invest in the platform to deepen engagement and drive long-term loyalty. In Q2, players purchased nearly 200,000 rewards with a retail value of $13 million. While rewards purchases were down compared to Q1, we're seeing encouraging signs as we focus on higher value partners and more curated strategic offerings that align with player preferences and our broader engagement goals. We also ran several promotions for the upcoming MyVIP World Tournament of Slots across our games, which were very well received by our players. We're excited about the momentum building around this high-impact franchise activation, and we believe it'll play a meaningful role in re-energizing our community in the coming quarters ahead. Lastly, I'd like to briefly touch on our balance sheet and capital allocation. Our balance sheet remains rock solid. We ended the quarter with approximately $112.9 million in cash, up from $107 million in Q1, even after deploying over $2 million to repurchase shares during the quarter. We remain debt-free with full access to our $81 million credit facility, providing us with strategic latitude to deploy capital to high-returning initiatives in quarters ahead. So with that, I'll turn the call over to Scott for some more financial highlights.

Thanks, Andrew. Good afternoon, everyone. Second quarter revenue was $59 million, down approximately .3% year over year and .4% sequentially. This reflects continued softness in our quarter casino and casual games, which as Andrew mentioned, was driven by market disruption and DAU declines across most titles. Adjusted EBITDA for the quarter was 10.7 million, down 24% year over year and .2% sequentially, reflecting limited flow through given revenue softness. Adjusted EBITDA margin was .1% compared to .5% in the second quarter of 24 and .9% in the first quarter of 25. DAU was 2.3 million, down from 2.6 million in the first quarter and 3.2 million in the second quarter of 24. MAU was 10 million, also down from 11.4 million in the first quarter. ARPDOT was 28 cents, up slightly from 26 cents last quarter and 25 cents a year ago, reflecting stronger monetization. -to-consumer revenue for the second quarter was 6.7 million, representing .9% of total in-app purchase revenue. This was up from 5 million in the first quarter and 3.2 million in the second quarter of 24. For the first half of the year, -to-consumer revenue totaled 11.7 million, up .8% year over year. We ended the quarter with approximately 112.9 million in cash, no debt and an outstanding share account of 125.2 million. While we're currently pacing below our full year revenue and adjusted EBITDA guidance, as revenue softness has more than offset cost savings, we are not changing guidance at this time. We will continue to evaluate how the investments we've made in recent quarters translate and see how this very dynamic market continues to evolve as we approach the back half of the year. With that, I'll turn the call back to Andrew.

Thanks, Scott. To close, we're clear-eyed about the challenges in our core business, but also confident that we're taking the right steps to adapt and evolve. Our focus remains firmly on executing our core strategic priorities, those being developing our sweepstakes capabilities, expanding our -to-consumer sales, unlocking the potential of Tetris, and modernizing our core games. And we're encouraged by the early traction we're seeing across these initiatives. The investments we're making today are building a stronger, more diversified foundation that we believe will drive renewed momentum in the quarters ahead. We appreciate your continued support as we move forward with purpose in this dynamic market. Operator, let's open it up for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that the line is in the question queue. You may press star to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the hand tip before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Ryan Sigdal with Craig Hallam Capital Group. Please proceed with your question.

Hey, good afternoon, Andrew, Scott. I want to start with the DAU, MAU, both down high 20% year over year. I get the challenges with everything going on in the environment, but can you split that out between social casino, casual games? I guess, was it similar between the two, one better, one worse, and then anything within the game construct of either of those categories?

Yeah, look, the DAU and MAU declines were pretty substantial in both cases. I think, obviously, a lot of that's a result of our having pulled back pretty materially on user acquisition investments as well. And so I would say that it's a bit more dramatic in the casual space than the social casino space, but meaningful in both portfolios.

Gotcha. Then just sweepstakes, I appreciate kind of the player engagement monetization encouraging commentary, but anything you can comment from, whether it's a quantitative KPI or anything you're willing to share, number of users, how ARPDEL compares, just anything kind of from that early launch. And then, I guess, given the challenges that don't seem to be abating anytime soon, why not accelerate kind of the full launch of sweepstakes?

Yeah, so today we're in seven different jurisdictions live with our service, and we started this whole effort about nine months ago, and so we're at a point where we completed our platform in about seven months, initiated our initial trials in the first two jurisdictions, and relied upon the data, what we're seeing from those cohorts to refine the platform in the way that we're operating the service. And as we build confidence, we've opened up more jurisdictions. I can tell you that we continue to see positive improvement across all the key metrics. So retention continues to improve, conversion rates are improving, the yields we're seeing per monetizer are improving, and we're feeling really optimistic about the evolution and the progress that we're making. And as we sit here today, nine and a half, 10 months into a cycle, I think we're in a pretty good place. We're feeling like in the coming months, we're gonna continue to open up more jurisdictions, and we're at a place where we can start allocating more marketing capital and achieve the kind of return targets that are gonna allow us to scale. So it's really a function of just continuing to optimize our marketing and getting comfortable with the funnel and all of its conversion metrics and seeing the retention, engagement, and resulting monetization that's gonna allow us to get the returns so that we can then deploy meaningful capital and scaling growing that business. And I think that we're on plan. So we're feeling encouraged by what we're seeing as we continue to evolve the platform, the content and the features, and just build the competency in running this business.

As someone that lives in one of those two initial states, I was a positive contributor for you guys in the quarter. And I do have to say that the experiences, albeit early and evolving, was impressive and I guess comparable to many of the other sweepstakes out there, and that's on short. Thanks, Ryan. Last question for me, it's probably for Scott, but just any guide posting and put around Q3, I guess is a starting point. I think Q3 typically from a seasonality standpoint is pretty similar to Q2. I guess, would you agree with that? And any guide posting you give around next quarter expectations would be helpful.

Yeah, I mean, I can weigh in and Scott, you can offer us color too, but as you highlighted, no meaningful differences that we see in Q3 relative to Q2. Our primary focus is on executing on all of these things that we think are gonna restore the momentum in our business. And so, there's a lot that's changing and a lot that's happening within the portfolio of initiatives that we're actively investing in. We're always reluctant to kind of provide guidance that's based upon all of these new initiatives until we have a clear line of sight as to their predictability, both in terms of timing when they'll be in the market and their capacity to scale and contribute to our operating performance. So for that reason, we're just gonna kind of hold to where we are and I think Q3 won't look that different from what we've seen in Q2.

Thanks, Andrew. Good luck, guys. Turn it over to the others.

Great, thanks, Ryan.

Thank you. Our next question comes from the line of Aaron Lee with Macquarie. Please proceed with your question.

Hey guys, good afternoon. Thanks for taking the question. I want to stay on sweepstakes for a little bit more. Just wanna make sure I have this right, but as it relates to the sweepstakes launch, are there any more technical aspects that you still need to hammer out for the platform or is it really just about optimizing and refining how you operate at this point?

Yeah, all the core functionality that's needed to actually launch the service has been in place for the last few months. So we're just continuing to refine the features, the content that we offer, and all the core practices around ensuring that all the fraud detection and just the overall integrity of the service is in place. And then obviously a big part of this is also testing and stressing all the different marketing approaches and channels and campaigns so that we can see the right unit economics that allow us to deploy meaningful capital in scaling that business. So we're advancing along all of these different fronts and it's meaningful and it's complicated. Where the people were and the companies were competing with, they've been in the market mostly for a couple of years. They've got all the core capabilities and competency and around operating their platforms well in place and evolved and we're doing all these things at the same time. So we just wanna make sure that we feel really good about the integrity of our system and our operating practices and our capacity to deploy capital in scaling and growing it. And that's why you've seen us in a measured way, go from two jurisdictions to four jurisdictions to now seven jurisdictions. So I'd expect it in the coming months, we'll start to open it up and hopefully by the end of the year, as I alluded to earlier, just be in all of the qualified jurisdictions. So it's just being measured in qualifying and making sure we're ready to go.

Understood, yeah, I think that's the right approach. And then for my follow-up, once again, you've obviously been building out the platform organically. You mentioned you're exploring strategic acquisitions. Any color on what those acquisitions could look like? Would it be targeting tech, talent, a database? Any color you could provide there would be helpful. Thank you.

Jason, do you wanna take that one?

Yeah, sure. So look, I think our goal around this category, we're obviously big fans of what's happening with the switch takes being kind of a change in the social casino space as a catalyst for growth. Our goal is to be a market leader in this category. And there's obviously a lot of players in this category that we admire that have reached super scale, that have large businesses that are highly profitable with really interesting capital efficiency. And so obviously we're going down the route of the organic approach and we have conviction in what we're doing there, but that doesn't mean that we wouldn't necessarily for the right opportunities, do some meaningful M&A to kind of bolster our efforts and be in the top three of this category as well. So that's how we kind of think about it. So it wouldn't necessarily be to solve capability gaps, it would be to kind of get market share gains quicker and accelerate our kind of path to a leadership position in the category.

Gotcha, perfect, that's helpful. Thank you very much.

Thanks

a lot,

Aaron. Thank you. Our next question comes from the line of Martin Yang with Oppenheimer and Company. Please proceed with your question. And Martin, are you on mute?

This is Brian Overall. Hey, can you hear me?

We can hear you now, Martin, but we didn't hear you. So if you could repeat the question, that would be great.

Sure, my question is on the casual portfolio. Aside from NewPROC launches, what's the medium or long-term goal or expectation for the segment? Do you expect the rest of the portfolio to continue gradual decline or do you expect a turnaround at a certain point regarding the symptom macro impact?

Well, thanks, that's a great question. So there's two aspects to our casual strategy. There's the existing portfolio, which consists of a collection of pretty mature products. And as I alluded to earlier, we've been focused on margin contribution and it pulled back pretty materially on the investments we're making in user acquisition in support of that portfolio. While we invest in upgrading the products with more current tech that allows us to be faster and more dynamic with the features and content that we're introducing that should drive better retention and engagement, which in that advertising model is what drives revenue. So we've been working pretty hard over the last six to eight months on making those requirements and adjustments. As I've alluded to, we pulled back pretty materially in the UA investments across the casual portfolio, the legacy portfolio, and we'll continue to monitor our progress there until we get to a place where we can start to reinvest in new cohorts of players that ultimately command more revenue in terms of the sale of our ad products and units. I don't expect that we're gonna see any meaningful growth out of the legacy casual portfolio. There's another dimension to the casual strategy, which as we talked about, relates to the Tetris strategy and franchise. And so we have an existing Tetris product that we continue to work on refining and evolving, but we've put a lot of energy in most of our resources behind a new flavor of Tetris, our Tetris Block Party product, which has been in development for close to two years and we're encouraged by the metrics we're seeing from that product. They're strong and they continue to improve. And the state of the market is you look to bring a new AAA quality casual game into the market. The table stakes are just very high in terms of the feature richness and the amount of content and your capacity to really run a product with a lot of dynamism and a lot of new content constantly coming into the product. And so we're not only refining the product to get to the core metrics that we need, but we're also investing in our capabilities to deliver the volume of content that's gonna be required once we start investing and scaling and launching it. And so if we're gonna achieve the kind of scale that we've imagined for that product, we need to make sure that we're ready for it. And so that's what's ongoing right now. So we'll continue to work to stabilize the core legacy casual portfolio. And once we find that it is investable, then we'll readdress the amount of UA investments we're making there. And we're gonna continue to advance and get ourselves ready to launch and scale up our Tetris Block Party product.

Thank you, Andrew. My other question relates to Tetris Block Party and overall your D2C strategy. With a new game, do you think can do something unique into the game launch for Tetris Block Party so that it's D2C share can be different or can have another boost relative to your platform average?

Yeah, and that's certainly what we hope for. We have a lot more latitude today in terms of merchandising within the app, the alternative methods of more direct purchasing from our players. And so I think to your point, absolutely. We're gonna do everything we can to make sure that our players are aware of the alternative and the benefits of purchasing with us directly. With that said, we don't wanna introduce any friction that might limit or restrict the player from converting and starting to spend money with us. So we're gonna actively look at optimize how we do that. And I can tell you today that the monetization within the Tetris Block Party product is really solid. It's quite encouraging and it's gonna support and allow us to go into the market, a very competitive market and buy cohorts of players at and around where they're priced today given how intense the competition is. So to your point, the more direct to consumer purchasing, we can motivate the more flow through a margin that we have to then look at ultimately piling back and investing in scaling up and growing our audience until we achieve that critical mass and then start maturing the product and focusing on improving its margins and harvesting the value.

Thank you. Our next question comes from the line of Mike Hickey with Benchmark. Please proceed with your question.

Hey, Scott, Andrew, Jason, thanks for taking our questions, guys. Again, Andrew, just on the regulatory pressure here that we're seeing from states to ban sleep stakes, just kind of curious your view on how that should trend moving forward and how you get comfortable launching and investing the product in states comfortable that the regulatory piece won't change and go against you in terms of a ban?

Look, it's the big question, right? And our approach is probably not all that different from most everybody else in the space, which is that we look at the market overall on a state by state basis and we go deep into really qualifying what are the regulatory legal risks within each of those different markets and what are the ongoing or active efforts both in support and opposition of the sweepstakes model within those markets. And then we allow that to inform where it is that we're ultimately gonna be deploying our capital and how aggressively we get in and across these different markets. To the extent a market that we think is relatively reliable ends up becoming a higher risk, then of course we immediately start to moderate our spend in that market. And so it's dynamic and it'll be actively managed. And what I would also say is that we intend to be very active in trying to help bring more credibility and legitimacy to this opportunity. So the way that we're approaching sweepstakes and how it's employed, we have a multi-phase strategy. The first, we're gonna stand up a service that we think is incredibly well executed and we'll compete with everything else that's in the market. But our ultimate strategy and plan is to more deeply integrate sweepstakes mechanics and opportunities within our existing native apps and do it in a way that's focused on stimulating and driving the incremental sale of virtual chips that we've always sold. So I think that there's a position that we can take as we come into the market, which is that we're employing sweepstakes mechanics as a promotional tool the way that they are intended. So I think that there's a lot that we intend to do to try and legitimize just this opportunity overall and make the case for how and why it should be embraced and supported as opposed to opposed.

Yeah, thanks, Andrew. The market, obviously sweepstakes market, I think you've characterized as very competitive with a bunch of sort of aggressive incumbents that have established share. So when you look to launch your app in your respective markets, how significant is the UA spend? How's that gonna impact your sort of near term EVDA creation? Are you, I guess, most important confident that with that spend that the quality of your app relative to your competition, but in fact you'll achieve the retention you need to justify that?

Yeah, I mean, that's the model, right? As you establish and set a certain return horizon and as long as you're achieving and meeting that horizon, then you should be able to confidently deploy more capital. And so, the industry generally is working towards a four to six month return horizon on their ad spend. I think that's a reflection of some of the regulatory uncertainty you alluded to a moment ago. The four to six month horizon, return horizon on ad spend for sweepstakes products compares to what has been traditionally typical for the social casino industry, the more traditional social casino industry of anywhere from 12 to 24 months. So, wildly different. To, I think your question, like to what extent do we think our investing and growing our sweepstakes business might adversely impact EBITDA? Well, it will during its growth cycle, but that's a good thing because we're seeing the opportunity to go grab customers and market share and to scale up our service so that it ultimately can get to a place where we then start to focus on flow through and improve margin and harvest the benefits. That's how we see it playing out. The other thing I would, if I could Mike, the other thing that I would highlight with this, while I've alluded to the market is very competitive, there's no question about it. And a lot of the players in the market have integrated a lot of the core platform and its capabilities and all the content that they offer. And so, the amount of differentiation in and across these products is pretty limited. One of the things that we're investing in, is leveraging our vast library of proprietary game content that we have, as well as leveraging a lot of the social mechanics and features that we know add, progression and kind of a feature richness that drives deeper engagement and makes for a more compelling experience. And so, we think that as we come into the market and we start to introduce more of our own proprietary content, we're gonna further differentiate ourselves from our peers and make the case for how and why people should spend more of their time and money with our sweepstakes alternatives, as opposed to what else is out there in the market. So, that's what we hope to prove out over time.

Thanks, Andrew. Last question, I understand you kept the guidance the same. Obviously, your core business is facing a pretty significant pressure. And of course, you're also on the cusp of transitioning to the sweepstakes, which clearly is exciting, but we'll also take some investment. I'm just curious if you're comfortable here that you have enough cash on the balance sheet to sort of manage through this transition.

For sure. I mean, our cash position is very strong, as I alluded to earlier. We have all the capital we need to be very aggressive in the way that we approach investing in and getting into this space. And in fact, have enough capital to support both of our growth initiatives, should they continue to show positive signs, and we look to deploy tens of millions of capital into scaling and growing, both Tetris, Block, Party, and our sweeps business, we're in a position where we can do that.

Good. All right, guys,

thank you

for your

answers. Good luck. Great, thanks, Mike, appreciate it.

Thank you. And we have reached the end of the question and answer session. And also, this does conclude today's conference, and you may disconnect your lines at this time. We thank you for your participation.