PLAYSTUDIOS, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Restructuring Plan: Launched in October, involving a >30% workforce reduction, suspension of select sub-scale games, consolidation of key functions, and a new technology strategy for R&D productivity. Expected normalized annual cost savings of ~$25M to $30M.
• playGAMES Initiatives:
  • Stabilize social casino portfolio and return to positive sales growth.
  • Scale and expand growth portfolio including Tetris and Branium.
  • Expand offering through acquisitions and new categories.
• playAWARDS Progress: myVIP loyalty program integrating into primary titles by year-end, with 133 partners and nearly $2.3M in retail rewards per day.
• Capital Position: Restarted share repurchase program, repurchased nearly 10% of total issued stock this year. $105M in cash, no borrowings, and full availability of $81M revolver.
• Pixode Integration: Progressing smoothly, with plans to combine Pixode’s block puzzle game with the Tetris brand.
• Sweepstakes Initiative: Formally constituted a team to develop capabilities for leveraging sweepstakes to reinvigorate social casino portfolio and drive engagement.

Segment Performance

• playGAMES Division:
  • Social casino portfolio: Working on stabilizing and returning to positive sales growth. myVEGAS and myKONAMI have seen year-over-year increases in ARPDAU and revenue per paying user. Pop! Slots showed sequential revenue and ARPDAU increases. Direct-to-consumer revenue was 7.2% of total revenues in the quarter, up from 4.5% last quarter, with a goal to reach over 20%.
  • Growth games: Branium had a strong quarter with year-over-year revenue and ARPDAU growth, driven by new advertising formats. Tetris franchise had mixed results; the 40th anniversary had a muted effect. Acquisition of Pixode is progressing, with plans to combine Pixode’s block puzzle game with Tetris.
• playAWARDS:
  • myVIP loyalty program is being integrated into primary titles by year-end. At quarter end, there were 133 partners offering nearly $2.3 million in retail rewards per day.

Guidance

• 2024 revenues are expected to be in the range of $285 million to $295 million, and consolidated adjusted EBITDA is between $55 million and $65 million, unchanged from prior guidance.
• Restructuring is expected to result in normalized annual cost savings of approximately $25 million to $30 million.

Risks

• Uncertainty in the immediate revenue impact from workforce reduction and restructuring efforts.
• Industry pressures affecting the social casino category, which contributed to the 6% year-over-year revenue decline.
• Difficulty in predicting the exact adverse impact of restructuring on revenue performance in the short term.

Question and Answer

• Q: Double-digit ARPDAU increases in myVEGAS and Branium, drivers and sustainability? A: In Branium, increases driven by new add units; in social casino, by conversion PPU and improved spending. Expect sustainability with more opportunities in the portfolio.
• Q: Sweepstakes initiatives for myVIP loyalty program? A: Building own systems and tools to leverage sweepstakes for engagement, with a formal team advancing underlying technology.
• Q: Pop! Slots performance in Q4? A: Stabilizing, with reinvention efforts focusing on improving its performance.
• Q: Monetizing playAWARDS as a service? A: Pausing investments midterm to focus on core franchises, but playAWARDS remains a long-term driver.
• Q: Impact of restructuring on 2025 revenue growth and existing games? A: Hard to predict immediately, but changes aim to enable better performance and future growth; guidance remains unchanged.
• Q: Tetris slowdown, changes? A: Decline due to normalized audience from the Willis effect; Tetris Prime has a rich roadmap with new features to drive engagement.
• Q: Sweepstakes timeline and build vs buy? A: Build chosen for economics; expect Q1 2025 testing, Q2 2025 promotion.
• Q: Sweepstakes coexistence with playAWARDS? A: Existing playAWARDS has sweepstakes alternatives; new will integrate with existing apps for deeper engagement.
• Q: Cost savings implementation and realization? A: Workforce reduction completed in next week to 10 days; other cost savings by end of year; charges in Q4 for severance and software impairment.
• Q: New Tetris title timeframe? A: Early 2025, but exact timing uncertain.
• Q: Games impacted by restructuring? A: All segments assessed; social casino core titles refactored; some games suspended/canceled; casual portfolio Tetris initiatives adjusted; Branium portfolio technologies updated.