PLAYSTUDIOS, Inc. Q4 FY2024 earnings call

• 2024 was eventful; achieved full year guidance and made progress on strategic initiatives. Sharply reduced cost structure, reoriented operations for profitability/cash flow. - Restructured business: over 30% workforce reduction, suspended sub-scale games, consolidated functions, outsourced R&D. - New initiatives: sweepstakes effort to reinvigorate social casino growth, Pixode integrated with new Tetris casual game in development, playAWARDS grew with more players, myVIP integration, and World Tournament of Slots. - Purchased $31.2M in stock, including 9% of shares from Microsoft, with $109M cash at year-end. - Capital allocation: aggressive stock buybacks in 2024, will evaluate buybacks in 2025, pursue accretive M&A.

In the fourth quarter, revenues declined by $9.3 million or 12% versus the prior year. Both social casino and casual games were down, with larger dollar declines in social casino and larger percentage declines in casual. Social casino weaknesses reflected category softness and DAU declines, but monetization progress was seen in Pop! Slots. Casual portfolio lower revenues were largely due to Tetris, where DAU decline drove lower advertising revenues. Fourth quarter adjusted EBITDA was $12.5 million, 15% lower than the prior year. Adjusted EBITDA margin was 18.4%, a 70 basis point decline. DAU was $2.7 million and MAU was $11.5 million in Q4, down 19% and 14% y-o-y respectively. ARPDAU for the quarter was $0.27, up 8% from year ago, driven by the social casino portfolio.

• 2025 revenue range: $250 million to $270 million. - Consolidated adjusted EBITDA range: $45 million to $55 million. - Sweeps and Tetris initiatives not included in top line guidance as their contribution is not yet visible. - Restructuring expected to yield annual operating cost savings of $25M-$30M, but some savings redeployed to new initiatives. - Expect to continue generating positive cash flows and adding to cash balance.

• Regulatory risks associated with sweepstakes initiatives, as some states have issued cease and desists, and uncertainty around compliance and oversight. - Market softness impacting revenues in social casino and casual games. - DAU declines across portfolio, particularly in Tetris and Brainium. - Challenges in integrating new initiatives and achieving expected growth from them.

Q: Regarding sweepstakes initiatives, when can we expect them to launch and be integrated into core games? Also, will they be separate or integrated initially?

A: Initial sweepstakes offering will launch in coming months, will start separate and then integrate. Not including top line contribution in 2025 guidance yet as visibility on scaling is unclear.

Q: Why was there a 38% year-over-year decline in playAWARDS retail value of purchases in Q4?

A: Revisited and cleaned up rewards, many past redemptions were for digital or sweepstakes-style rewards, so resetting rewards led to decline initially, but expected to ramp back up.

Q: Has the parameters for M&A changed with the new company structure?

A: M&A remains a core pillar, criteria haven't changed, but market pressures make it challenging to win opportunities, still active with disciplined approach.

Q: Considered using M&A to enter sweepstakes category quicker?

A: Considered but realized building internally with existing capabilities would have higher return on invested capital; still open to attractive M&A for sweeps if right asset at right time.

Q: Longer term view on interaction between sweepstakes and casino games; is it a structural shift?

A: Sweeps is a new dimension of value for free to play social casino experience, 90% of surveyed players aware of sweeps, nearly half changing behavior, so it's a structural shift in terms of new value dimension capturing same consumers.

Q: Concerns about economic situation impacting consumer spend and how it's factored into guidance?

A: Macro economic softness may contribute to market dynamics, guidance assumes core business trajectory continues while investing in growth opportunities not yet included in top line due to visibility needs.

Q: Balancing resources into sweepstakes market with regulatory barriers?

A: Approach is deliberate, initial standalone offering to build competency, will integrate thoughtfully considering regulatory scrutiny, aiming for responsible and credible operation to be gold standard, expecting some added oversight as market matures.

Q: Loyalty program not driving expected engagement; thoughts?

A: Loyalty program does add value, retention/engagement rates are top in genre, recent reset of loyalty program benefits is essential, contraction in industry is structural due to sweeps impact on core content, once sweeps integrated with loyalty program, will give advantage.