PLAYSTUDIOS, Inc. (NASDAQ:MYPS) Q1 2024 Earnings Call Transcript May 6, 2024
PLAYSTUDIOS, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good afternoon, everyone, and welcome to the PLAYSTUDIOS 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.
Samir Jain: Thank you, operator. Good afternoon, and thank you for joining us for PLAYSTUDIOS first quarter 2024 earnings call. Joining me on the call today are our Chairman and CEO, Andrew Pascal; 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 a discussion of the risks and uncertainties that may affect our future results. I would like to remind everyone that we’ll 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.
Andrew Pascal: 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 the 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 myKONAMI, the generalization of playAWARDS, the launch of at least one new Tetris title, and an expansion of monetization within the Brainium portfolio. We’re making notable progress in 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 playGAMES business division. Overall, the results in playGAMES 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, a 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 looking 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 Brainium 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 industries we bound in this year. As a result, our focus remains on refining our technology tools and operating capabilities, which should position as well when the market dynamics improve. With that said, our top priorities to better leverage our earnings, cross our collection of social casino titles. In support of this, we’ve transitioned our myVEGAS and myKONAMI 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 to more effectively leverage our myVIP.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 playAWARDS, 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 the pilot relationship before the end of the year.
A close-up view of hands holding a modern gaming device, highlighting the company's mobile games.
As these partnerships mature, we believe we can evolve playAWARDS 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 stock for today. We view our share price as deeply discounted and believe buying back our own stock rates value for all shareholders. At the same time, we remain committed to identifying, completing transformative M&A transactions. We continue to actively search for compelling opportunities and 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?
Scott Peterson: 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 here 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 in 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. ARPDAU for the quarter was $0.24 flat with year ago results. No will hear were the double-digit gains in myVEGAS, myKONAMI, and Brainium. Turning to playAWARDS, 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 playAWARDS 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 gains, building and scaling playAWARDS, and the pursuit of strategic and accretive M&A.
Our 2024 financial guidance remains the same, revenues in the range of $315 million and $325 million, and consolidated adjusted EBITDA between $65 million and $70 million. I’ll now turn the call back to Andrew for some closing remarks.
Andrew Pascal: 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 [ph] Street expectations. We remain on track to meet our full year earnings guidance, which calls for positive sales earnings growth this year. Changes in myVEGAS and myKONAMI are in process, and we’re encouraged with the progress. We believe both gains 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 gains by year-end. In addition to better game metrics, we expect the integration of myVIP.co to drive higher direct sales.
Brainium’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 in its position 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 playAWARDS to external platforms. Conversations with third parties continue and remain confident that playAWARDS can evolve into a profitable standalone business. Finally, we restarted our share repurchase program this quarter, and we continue to believe our stocks trade in 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.
Operator: Thank you. And, ladies and gentlemen, at this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question comes from Ryan Sigdahl with Craig-Hallum Capital Group. Please state your question.
