Q4 2022 Playstudios Inc Earnings Call
Good day, ladies and gentlemen, thank you for standing by and welcome to the <unk> fourth quarter and year end 2022 earnings conference call.
This time, all participants are in a listen only mode.
And answer session will follow the formal presentation. Please note that this conference call is being recorded today March nine 2023, I will now hand, the call over to Samir Jane.
Of Investor Relations and Treasurer.
Okay.
Welcome everyone and thank you for joining the place studios fourth quarter and year end 2022 earnings call hosting the call today will be Andrew Pascal play Studios, Chairman and Chief Executive Officer, and Scott Peterson, Chief Financial Officer of the company our call today will contain forward looking statements about future events expectations and projections.
Statements involve risks and uncertainties that could cause actual future results to differ materially from our current expectations.
We refer you to our SEC filings for a more detailed discussion of the risk factors that could impact our future operating results and financial condition.
During the call management will also discuss certain non-GAAP financial measures. These measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is contained in our fourth quarter 2022 earnings release and in our SEC filings.
The earnings release is available on our website at IR <unk> Studios dot com with that I'll turn the call over to Andrew.
Thank you Samira and good afternoon, everyone welcome to the place GFS fourth quarter 2022, and year end earnings call given.
Given this is our first call in the new year, we're going to spend some time reviewing our recent results reaffirming our priorities along with the over viewing our outlook and guidance for the current year.
Let's start with some of the highlights 2022 was an eventful year, one in which we advanced key elements of our strategy and enhanced our overall position more specifically, we had a solid fourth quarter and full year with revenues and adjusted EBITDA exceeding both our guidance and analysts expectations.
Products from both our core and growth portfolios contributed to our positive momentum posting year over year and sequential gains.
We acquired the casual game maker Brachium and initiated its integration into our overall business platform.
We significantly expanded our game portfolio diversified our business model and more than doubled our player network from one and a half million dollars in the third quarter to over $3 2 million daily active users in the fourth.
Our development stage initiatives, My Vegas, Bingo and Tetris made noteworthy progress and have good momentum entering 2023.
Play Awards Division continued its expansion by reaching more players and adding a collection of new and exciting partnerships we.
We evolved our organization expanding our capacity in Asia, and South Eastern Europe , along with optimization focused on improving our margins and operating results.
Finally, we initiated a share repurchase program in November and have acquired roughly $2 4 million shares of our stock.
Turning to 2023, we're more convinced than ever that our unique model and strategic focus position us to outperform the market. Most of our peers are struggling to acquired and players making it difficult to grow let alone sustain their existing audience. This places even greater importance on retaining players as our industry pioneers in loyalty and rewards play I believe our <unk>.
Model positions us to weather these market challenges maintain our player network and drive performance by leveraging our real world incentives.
Since founding our company over 11 years ago. This has been our vision to craft games players loved it off of rewards they want.
It's our plan to fully exploit this model and as we do further establish our company as the leaders and rewarded play.
With that as context, let's touch on our recent financial performance and other key operating metrics.
Results were ahead of our prior guidance and street expectations, we're able to not only grow revenues, but adjusted EBITDA and EBITDA margins as well.
Thank you and I know you have $3 2 million and $11 5 million were up substantially over the quarter as we included brain him into our quarterly results for the first time excluding.
Excluding brachium users were down modestly versus the third quarter, showing relative stability against the declining industry backdrop.
We believe the results highlight the popularity of our games loyalty, that's engendered by leveraging our play awards capabilities.
That was also higher than the third quarter once adjusted for the effect of the AD based brakeman games.
Now, let's briefly touch on the general market conditions.
<unk> remained challenging, particularly around user acquisition as demonstrated by our games performance, we definitely navigated these conditions, but the difficulties remain nonetheless, our focus remains on maintaining our network as we focus on converting more of our existing players to payers. We believe this should allow us to drive growth in the face of a shifting of complicated UA environment.
The economy also remain strained, creating a broader drag for us and every other consumer facing business, while our recent slowing in inflation as a relative positive aggregate figures remain high.
Really labor pressures that picked up with many large scale job reductions we continue to operate under the assumption that we'll be facing more economic headwinds and plan to focus on creating our own momentum through company specific initiatives.
On the topic of strategy I want to remind everyone that ours consists of two key pillars. The first centers around diversifying our portfolio of games, allowing us to expand our player network and demonstrate our loyalty left across the broader collection of products.
Done this most recently by complementing our organic efforts with strategic M&A acquiring the rights the tetris and the branding portfolio of casual games.
It's focused on advancing our play awards program by developing new capabilities and expanding the collection of real World partners and benefits I believe that executing on these strategic priorities will enable us to accelerate our growth minimize grade of risk improve margins and ultimately drive substantial value, let's touch on some of our primary initiatives.
Starting with games.
Over the past year, we've materially repositioned our company by expanding from 7% to 17 games with all but four consisting of casual and puzzle products. We've evolved from a pure social casino operator to a diversified game publisher a key transition as we look to solidify our market standing as the leaders in rewarded play, let's delve a bit deeper into some of our.
Accomplishments, we continue to post steady performance in our core social casino games, a notable accomplishment given the overall weakness in the sector. Our portfolio's revenues generally match the industry down a few percentage points year over year and largely flat sequentially like the third quarter, we were able to extract higher revenues per user result.
And further improvements in opt out has mentioned earlier that you and I know you were down modestly versus the third quarter and generally better than the more significant declines posted by many of our competitors.
Going forward, we believe there are still meaningful opportunities to grow these products by further improving the monetization of existing players along with attracting new ones.
Steve This by further evolving our live operations practices, continuing to innovate and leveraging cross promotion from our 11 million plus active player network I'm excited by the potential of these efforts and believe this focus will drive topline growth and margin expansion.
Turning to our newer and growth oriented initiatives I'm happy to share that we've made significant progress. This last year and I'm encouraged by our momentum heading into 2023 as a reminder, these products include Tetris Prime My Vegas Bingo, the Brady and portfolio and our new Tetris puzzle game.
Growth in Tetris Prime continued with sequential increases in D. U N N may you in the fourth quarter, both metrics remain very healthy and speak to the enduring nature of this iconic brand.
In the quarter, we introduce debenture mode focused on adding depth and richness to the game experience. We're pleased with the early results and believe this enhancement along with limited integration of our my VIP program have contributed to the rising user engagement.
Monetization is also improved with opt out sequentially from the third quarter.
That logic and the optimization of advertising partnerships drove these games, which are still early in their full application going forward. We will continue to enhance the game with live operations deeper meta features and the full rollout of our loyalty and rewards program a key milestone for our overall business vision.
We also made notable progress on our re imagined and more casual version of Tetris, while still in development, we think conducting moderated user tests, along with limited releases with the product in isolated markets. This has allowed us to solicit early stage feedback that's critical to the evolution and optimization of the game overall, we're encouraged by the results and remain.
Committed to our strategy, we continue to believe that the Tetris game format has the potential to be its own casual game category alongside match three solitaire and bingo each of these categories demonstrates the unique power of a universally appealing game format when complemented with progression mechanics richer features in a more sophisticated live operation.
I look forward to updating you on our progress in the coming quarters.
My biggest bingo also made notable strides this quarter and we're pleased with its momentum heading into 2023.
And control of the App roughly a year ago, we've been concerned with improving the technical performance of the game by refining or completely great factor in key systems with most of the foundational work behind US we were able to focus on enhancing the game's key performance measures specific efforts included an overhaul of the game of comedy additional bingo formats, new rooms, and new live event features.
Overall these efforts that began bearing fruit with sequential gains in D. A U P. P. You are people and resulting harped out given these improvements we plan to scale the games audience do a complement of cross promotion and performance marketing in the coming months.
Lastly, I'd like to update you on our recent acquisition of brain him since acquiring the company back in October we've been focused on integrating the portfolio and team into our overall business framework I'm happy to report the process has gone well and their priorities are now aligned with the broader business more specifically, we're focused on attending to the existing collection of brands and products.
Integrating play awards mastering cross promotion and driving profitability. We expect the first stage of our integration efforts will likely take another three months after which will expand our efforts to capitalize on the next collection of growth initiatives. Along these lines, we began sharing resources and best practices for you a an AD monetization, enabling us to refine our approach.
H to growing our casualty portfolio.
Turning to the second of our strategic pillars, we've made great strides with advancing our play awards business Division. We've continued to generalize the systems tools and practices that will allow us to more fully leverage and eventually monetize the service and we've initiated the early trials with my VIP and Tetris crime.
In addition, the team has been active in qualifying and on boarding bulwark partners throughout the quarter. Our players had access to an average of 574 unique rewards, which is 6% more than the same period last year purchases were also up 6% in the quarter and 13% in 2022 versus a year ago levels.
In aggregate the retail value of purchases made by our players with nearly $130 million for the year.
Looking forward, we expect the introduction to play awards into our casual gaming titles to further increase the overall scale and engagement in our program more specifically, we expect to increase the exposure of the program by nearly 400% as we more fully integrate with tetris in the brain and collection, it's worth reinforcing the potential impact of play awards with a key fact.
And our decision to acquire these assets.
Lastly, we believe momentum in these casual categories will help validate the platform's effectiveness and catalyze the opportunities with a broader collection of strategic partners and third parties.
Doing so play awards will prove itself with a much larger and more diverse group of users. These game categories are also distinct and separate from the three had played casino genre laying any concerns that our model is limited or narrow appeal. We're confident that successful casual games will be the key to unlocking our loyalty as a service commercial opportunities.
I'd like to now take a moment to touch on our operations and overall execution.
Over the past year I highlighted some of the complexities and challenges of scaling our operations and optimizing our business. If you recall I highlighted the escalating costs in each of our primary developing hubs and the opportunity to build studios and teams and alternative markets. I also provided updates on our progress as we opened offices in Belgrade and Vietnam.
That said, we believe we're now positioned to increase our operating margins over the next 12 to 18 months. This is reflected in our 2023 guidance and a trend we aim to sustain until we've achieved parity with our industry peers to achieve best we've spent the past few quarters further refining our operating model and qualifying the changes needed to optimize our performance.
The realignment of products into common portfolios enhancing key leadership consolidating studios and applying more rigor to our capital deployment with a focus on risk adjusted returns more specifically, we recently Reoriented the company away from geographic regions and around our two primary business lines play games can play awards.
In doing so we're able to more fully leverage our centers of excellence and improve efficiency.
Within play game titles are now grouped based on their genres, social casino and casual et cetera, and we'll leverage common resources. This structure allows for economies of scale coordinated efforts across games and the ability to identify and leverage best practices quickly as part of these changes we've elected to transition the leadership of my Vegas and.
The economic slots to our Tel Aviv studio and support their execution from Vietnam and Eastern Europe . This will result in the closure of our studios in Austin, and Hong Kong with an anticipated reduction of 110 employees.
It's difficult to say goodbye to so many of our valued colleagues. We know these moves are necessary for to realize our future potential.
The next quarter will be focused on the logistics of these product transitions with the subsequent months dedicated to stabilizing our teens and normalizing our operations will provide a better sense of the overall impact of these enhancements on our next earnings call in May.
In addition to the operational discipline being applied to our games Division, we're bringing more focus and attention to play awards. This will be critically important in 'twenty three as we work towards demonstrating the broader potential of the model by fully launching our program inside of Tetris and their <unk> suite of games. This will enable us to evolve our overall business in the direction of being.
Only platform provider of comprehensive loyalty solutions to the games industry.
The structural changes that we're implementing will allow us to realize our vision for loyalty as a service.
As I mentioned earlier, we'll be deliberate and thoughtful about these changes well we have a plan of action implementation is complicated with many unknowns as such you should view our plan is fluid and something that will continually evolve. Please keep in mind, we anticipate a lag between the actions, we're taking and the results we expect with most of the benefits coming in the back.
Half of the year.
Before passing the mic to Scott I want to briefly touch on our capital position in November we initiated a share repurchase program and have spent $10 million through February acquiring our stock in the open market in total we acquired roughly two 4 million shares post the repurchase we have roughly $40 million remaining on our $50 million repo.
This authorization, even with an active repurchase program our cash balance as of December 30, <unk> remained high at $134 million were unlevered and a full access to our $81 million credit facility with the strength of our balance sheet, we remain well positioned to repurchase more shares be active in M&A pursue street.
To grow through all of the above.
I'll now turn the call over to Scott to provide specifics on the financials and share our 2023 financial guidance.
Thank you Andrew is.
As Andrew highlighted we had an excellent quarter and beat annual guidance and consensus expectations. We reported $79 4 million of revenue during the fourth quarter compared to $71 9 million last year and $72 1 million in the third quarter of 2022.
Year over year gains were bolstered by the inclusion of brain human Tetris and this year's results.
As a reminder, freemium was acquired in October of 22, while the mobile rights to Tetris were acquired in November of 'twenty one.
Adjusting for these games, we were still able to show a positive sequential gains in revenues a notable achievement given the difficult operating environment.
Adjusted EBITDA was $12 1 million compared to $12 million, a year ago, and $9 8 million in the third quarter of 'twenty two.
EBITDA margins were 15, 2%, a 170 basis point improvement sequentially.
And advertising and other revenues contributed to the margin gains, but we also saw margin gains in the social casino portfolio.
We are encouraged by this momentum and believe these trends are sustainable going forward.
As Andrew mentioned, we were pleased with our Kpis.
For the fourth quarter was $3 2 million MAU was $11 5 million up 145% on 137%, respectively over last year and up 117% and 72% sequentially.
Fourth quarter user metrics are heavily skewed by the inclusion of <unk> adjusted for this Darwin now were slightly down versus year ago figures. However, given the broad based deflation of user growth in the industry. We are encouraged with these results.
Fourth quarter auto was down sharply from last year's levels due to the impact of both tetra and brain, which are advertising based revenue models. Excluding these gains are kind of increased on a year over year and sequential basis, continuing a trend that we've seen throughout 2022, notably we saw healthy gains in my biggest bingo and Tetris two games we were.
It could be growing.
On the loyalty side available rewards grew by 6% in the quarter to 574000 units reward purchases of 512000 units increased by 6% over last year's fourth quarter for the full year over $2 2 million rewards were purchased up almost 13% versus 2021.
We continue to add World class rewards partners in the quarter, including Hilton hotels specific cycle, and then Nevada Ballet theater, including these partners play a words represents a collection of 105 real world brands that includes iconic businesses such as the Intercontinental hotels AMC theaters Royal Caribbean cruise.
And MGM resorts to our play awards platform. These brands have combined to deliver hundreds of millions of dollars of rewards benefits to millions of gamers as Andrew discussed cranium continues to be integrated into our operations and we are happy with the progress to date. We continue to believe there are numerous synergies from this transaction.
But it's still too early in the process to quantify anything just yet we will provide updates as we have them.
Well, we don't provide game level specifics as a follow up to our discussion of the contingent payment associated with the brand name acquisition I wanted to confirm that the criteria for the contingent contingent payment was not met and therefore your original purchase price of $70 million was unchanged. As a reminder, our expectation was that the contingent payment would not be paid.
And we view brand names performance to be in line with the projections, which supported the $70 million purchase price.
Turning to the balance sheet, we ended the quarter with $134 million of cash and no debt.
Borrowings in the past few remains at $81 million, all of which is available to us including the accordion feature total available borrowings are up to $156 million.
During the quarter, we began repurchasing our shares under our $50 million stock repurchase authorization through today, we have repurchased approximately $10 million of our stock or roughly $2 4 million shares.
Still have the majority of our authorization available to us.
To evaluate additional repurchases of our stock.
After the close of the quarter, we had $132 1 million total shares of common stock outstanding.
As Andrew mentioned, we remain in a strong financial position with considerable flexibility in terms of M&A and internal growth initiatives as evidenced by the recent acquisition of <unk>, we will be aggressive when the right opportunity presents itself.
Now, let me close with guidance for 2023.
We estimate that revenues will be between 300 and $320 million and adjusted EBITDA between 47, and a half and 52 and a half much.
It's implied we are assuming a notable increase in our EBIT margins.
Driving this will be a mix of efficiencies and progress in the new and developing games Andrew discussed earlier.
Also lifting margins with the inclusion of <unk> for the full year, which is substantially higher margins than our legacy business, Judy which advertising based model when modeling our 2023 results. Please consider the following one our guidance does not include synergies from Graham.
Two in part because of the initiatives outlined by Andrew earlier, we expect our guidance to be slightly weighted to the back half of the year.
Well this has historically been the case the skew maybe a bit larger this year. So please consider this while you build out your quarterly earnings models.
Finally, while we aren't guiding to an explicit share count figure, we advise against including share repurchases in your forecast, but we may purchase more shares we are unable to provide any concrete guidance for my future share repurchase activity or projected share counts with that I will pass it back to Andrew for some closing remarks.
Thank you Scott.
Before we end our prepared remarks and open the call for questions I'd like to reinforce some of the key points.
We had an excellent quarter with revenue and adjusted EBITDA above our prior guidance and consensus Street expectations. We did this while making notable progress on all of our new initiatives.
Challenging market conditions, we were able to largely sustain our network. While also showing another quarter of sequential art style games. We continue to focus on payer conversion are seeing our efforts bear fruit.
Our new game initiatives Tetris, and my biggest bingo made tangible progress this quarter and on track to show meaningful gains in 2023.
Premium is being incorporated into our broader business and the transition since moved we're already finding ways to leverage best practices and see many more opportunities ahead.
Play awards continue to gain momentum in the quarter with partners growing year over year and players purchasing 512000 rewards at a retail value of over $30 million.
Platform is poised for a step change in 2023, but the occlusion Petrus and the bringing in games.
We initiated a stock repurchase program and bought $2 4 million of our shares through February .
And we're now sharing our 2023 guidance calls for meaningful growth across the board both adjusted EBITDA and adjusted EBITDA margins are expected to increase in 2023 as a result of our efforts around increased profitability.
That said I want to thank you for joining us today and we're now happy to take your questions. Operator, Please open the lines.
Thank you we will now be conducting a question and answer session. If you'd like to ask two questions. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
You May press star two if you'd like to remove your question from the queue for participants using speaker equipment and they would be necessary to pick up your handset before pressing the star Q1 moment. Please while we poll for questions.
Yeah.
Thank you. Our first question is from Aaron Lee with Macquarie. Please proceed with your question.
Hi, great to speak with you guys. Thanks for taking my question and congrats on the strong result.
Once again I'm talking about your outlook first.
And I think you've touched upon this in your prepared remarks, but maybe you can just tie it altogether can you talk about what you have embedded in your guidance in terms of one assumptions around the consumer and macro into the timeline for scaling the Tetris games and to play awards integration. Thank you.
And I think you answered the question.
So you know our general assumption is that we're not forecasting any meaningful change in the overall macro economic environment and the challenges that we've seen in the industry will generally continue so for that reason, we kind of anticipate that our pace that we exited the year is what will sustain going forward.
But then taking into account the full benefit of a full year's ranking as.
As far as Tetris.
Current assumptions are that we'll continue to invest in and support the growth of our tetra prime product and without having any clarity around when will be in a position to launch our tetris casual products. We haven't yet included those in our outlook or our forecast.
Okay.
Yeah, Yeah very helpful.
Quick follow up you.
You know for the Brachium synergies are.
So it's been about five months I know, you're not guiding to it but has your thinking changed at all.
Hum.
In terms of the size of the synergies or the different buckets or the timeline for achieving those synergies just wonder if there's any changes there. Thanks.
No I mean generally we're kind of on pace with what we had expected.
Our first focus was just to integrate the team.
And had exposure to them in their areas of expertise, particularly around ad monetization.
Get them integrated into all of our basic business systems. So that we're fully integrated from an operating perspective.
Then we can focus on some of the synergies and ultimately start enjoying some of those benefits. So our focus is first spin on teen stabilizing the team ensuring that they're healthy and excited about the outlook being a part of play studios.
Now we will start focusing on where there are other opportunities to drive synergies.
Got it very helpful. Thank you very much.
Thank you.
Yeah.
Thank you. Our next question is from Ryan <unk> with Craig Hallum Capital Group. Please proceed with your question.
Good afternoon guys.
What I.
I want to start with.
The internal reorganization workforce reductions are you able to quantify the cost savings that you got from the 14% reduction.
I don't think we've yet fully provided the guidance because I think as I alluded, we're actually shifting those products from where they're currently hosted an operated from being Austin in Hong Kong to our studio in Tel Aviv, and then there'll be supported out of them.
Our studios in Vietnam, and South Eastern Europe .
Given that as we make those transitions were going to also then be layering in some additional.
Teams and resources to support those efforts.
We're not yet fully resolved and what the net benefit will be but we fully expect that we'll provide that on our next call.
But.
We know that it's going to be material as I said once you just highlighted it was about a 14% 14% reduction in the actual workforce.
And the majority of that is going to flow through into our benefit in the back half of the year.
And just to be clear Andrew is that a 14% net reduction or is that a 14% reduction and then you're going to be adding some additional personnel in different locations.
Yeah. So at the time of the reduction it's a it's 14%, but you know as we then transition of products, we'll be layering some people back in to service them out of those markets and I would just remind you that there's amazing talent in those markets and our cost per employee is significantly lower so we'll be able to complement that.
Passing that we currently are routine.
And actually be able to scale it up at a lower cost in hand.
Gotcha switching over you mentioned solid momentum exiting 2022 any comment on how trends have been thus far in 2023.
I mean generally we've maintained our pace and performance.
So.
I don't I don't know that you know all this.
So we don't talk about.
Any of the specific products, but you know I would just say that the trends that we saw in the year. We're seeing continue on through the first part of this quarter.
Last one for me the ARP Dow uplift on Tetris are you able to quantify how much that was.
Okay.
No because we don't speak to disclose kind of specific product performance, but I can tell you its been pretty meaningful team has done a great job optimizing that product and driving engagement and increasing ad impressions.
No just optimizing the waterfall logic. So we're seeing the benefits of all of that work and so we'll work with.
We're pretty enthused about the results and the momentum that product has right now.
Sounds good guys. Good luck. Thanks, alright, Thank you Ryan.
Yeah.
Thank you. Our next question is from Omar <unk> with Bank of America Securities. Please proceed with your question.
Hey, guys. This is Arthur on for <unk>. Thanks for taking the question. So I just wanted to.
Touch on quickly on bringing in the <unk> can you talk a little bit about you know how premium has performed on a standalone basis in the quarter. That's the first question and the second is what's sort of outlooks for brain bring in is embedded in your car in 'twenty three revenue guidance. Thank you.
Yes, Arthur Thanks for the question, but you know Unfortunately, we don't break out and speak about the specific products or subsets of our products.
What I can tell you is that the brain <unk> suite has performed as we expected.
That the we feel really good about the transaction and ultimately the price that we paid for the company and we're going to continue to look to optimize the suite of products and their performance as we integrate our play awards program and start to drive what we think will be added lift in performance as we deliver those benefits to those players.
And then also benefit from the cross promotion out of that network into the rest of our products and the other way as well so apologies for not being able to answer your question a bit more directly but we just don't break out the performance by specific groups of products.
Understood and then.
If I could just have one follow up I think some of the some of the other mobile gaming companies have reported experiencing a more challenging environment for scaling new games. You know too you know for example, 100 million dollar run rate, but it sounds like you've had some early success with the launch of taxes and bingo and congratulations but like wanting to what factors would.
Do you attribute the success to you.
Well look first of all I would generally agree that the UA environment is challenging but with that said you know all of our products.
Our investable.
We're seeing meaningful returns.
As we look to sustain the current scale and size of those audiences or if we're not able to drive the volume of players that we have in the past we are able to see qualities and the concentration of quality with most cohorts. So we're seeing healthy returns.
So you know, yes, it's difficult environment, but you know our team I think has done a really great job both on the product side, making sure that the products are engaging in April to captivate. These new players that are being exposed to them and then from our UA team.
Finding the pockets of players that seem ideally suited for our games.
So certainly difficult environment, but I think we're managing through it fairly well.
So.
So another question that I missed.
Okay.
Alright, Thanks Arthur.
Okay.
Thank you. Our next question is from Mike Hickey with the Benchmark Company. Please proceed with your question.
Hey, Andrew Scott, Congrats Hey, Mike.
Nice quarter and strong guide thanks for taking my questions I.
I guess just the first one I appreciate that.
Your performance is second half weighted but we're mostly through the first quarter here and your guide was stronger than consensus view can you give us any perspective.
On the first quarter, I think consensus view $73 million in revenue and $9 million in EBITDA is that something you guys are comfortable with and if not what should we be considering in the first quarter.
But Mike I appreciate the question, we don't provide quarterly guidance.
What I can tell you is that you know the pace that we saw coming out of the fourth quarter, we generally been able to maintain.
And so you know without getting any more specific I'll leave it to you to kind of interpret that resolve your own modeling expectations.
Alright fair enough.
Andrew on the on the Tetris casual I know you're excited about that can you sort of.
Talk a little bit more about the development of that game and I think it's taken off.
Little bit longer than you expected is that the game itself is that the macro or UA environment, I guess, what sort of I know, it's not in your guidance for the year.
How are you thinking about sort of the eventual commercialization and where are you on where you're at on development cycle. Thank you.
Yeah No I appreciate the question.
So the effort.
Started off with our early kind of a fairly comprehensive conceptual exploration by the time, we finally green led the effort.
Probably into the development cycle now you know 10 to 12 months.
Which for an altogether new products right.
I think reasonable we've been in the market with the product in some of these tertiary markets just doing technical validation and getting some early exposure to consumers. So that we can start the exercise of optimizing the product and so you know I would just say you know as has been the case.
With you now.
All of our games that process of getting it from something that youre ready to expose to your consumers to something that is now worthy and ready to be launched in to go and invest in aggressively.
Is unpredictable.
So.
We are in that cycle now and we certainly hope that in the next several months, we'll have more clarity and hopefully able to provide a better view and some guidance on our next call is why during an earlier question I mentioned that our forecast and guidance for the year. We don't include contribution from the Tetris casual.
So to the extent that we get to a place where.
We have clarity around the timing of it.
Well, then maybe we'll make an adjustment but from where we stand today, we think that's the right posture position to take.
All right. Thanks, Andrew last question the.
I guess, just the could you talk a little bit more about the transition of Tetris and bring them into your play Awards program I think both of those games are.
Primarily AD models, which is a little bit different than the other games within the rewards program. So I'm just sort of curious how you.
You got back that sort of play out.
And then yeah, I guess my part would be the partnership side I think we've all been sort of excited about your ability to sort of grow your.
You play award network by adding third party partnerships curious if you think that you'll have success this year with that or if that's more longer term.
Okay.
I appreciate the question first of all I think that the AD based products are better suited for our models and in App purchase products.
Because they the model drives engagement.
And so without requiring purchase in order to drive you know kind of continued and extended play.
The inherent mechanics of the game, obviously, you need to be entertaining, but then you'd have this loyalty program that also drives.
Longer term engagements and lift.
So we actually think that the AD based games potentially or even better suited in IEP games with that said, we've been trialing and testing and optimizing.
The play awards program within our Tetris Prime product.
And in the next several weeks, we're gonna be expanding the audience. So we're beyond the trial period, we saw.
What we expected in terms of the lift in some of the key metrics.
And it's going to coincide with the premiere of the movie about Tetris that Apple is launching at the end of March.
Great marketing and co promotion program going on with Apple they've given us thousands of Apple plus T V.
Subscriptions that are going to be part of our rewards offering with a whole other new collection of extended rewards that are to be made available to our tetris players. So you know towards the end of this month and into April now theres going to be a lot of activity and visibility and we believe organic lift in and around our whole tetris initiatives.
So this would be it's exciting for us because we get to more fully leverage our play awards program and its capabilities and the marketing team.
To really lean into this whole proposition. So they have the game. We have this movie Premier we have a rewards program and proposition.
Got apples support with all kinds of co promotion and merchandising. So it's just gonna be pretty great.
And our third party partnerships I guess on the game side, Andrew anything there.
As far as providing as a service.
I can tell you that we have initiated conversations.
We're still early in the cycle of those there's obviously really strong interests. So you know pretty confident that we're gonna be able to ultimately go to market with.
A really qualified partner to help us really demonstrate and prove out the value of this proposition, but the timing and the specifics of it are not yet fully resolved and now happy to address this in a future call once they are.
Alright, good luck guys. Thank you Andrew.
Yeah. Thanks, so much Mike.
Thank you. Our next question is from Gregg Gilbert with Northland Securities. Please proceed with your question.
Hey, good afternoon, Andrew and Scott, Thanks for taking the questions and congrats on the results.
Yeah.
Yeah, you know first if we could just maybe take a step back you know where do you attribute the upside that you saw relative to your guidance.
Maybe what drove the strong kpis in the quarter.
Look I would I would say that it wasn't concentrated within a particular product or game or initiative, where even category.
We saw general improvement.
Across the board obviously the integration of.
Brainy them, which took place in October .
Had a meaningful impact.
So we you know the integration of the team and the products and their contribution.
Was.
It obviously contributed to our improvement.
But across the portfolio.
Starting to see things firm up a bit so yeah.
No there wasn't any one major event other than the acquisition of brand new.
Okay, good to hear and or relating to the timing of new game launches.
Can we maybe just go over that for 2023, I think you said Petrus casual products not included in guidance.
Just rough expectations for for new game launches.
Yeah, I mean, I, what I can tell you is that Petrus casual is inactive development, but because we don't have clarity around when it will be completed and ready to be launched and scaled. We haven't included in our guidance. We think that's the that's overall position to take rather than to make the assumption.
And then ultimately have to shift out the timing and.
And then contend with the implications of that with all of you. So we.
We think that the safest position to take is to exclude it from the current modeling and thinking.
And then update everybody once we have more clarity.
Okay, that's fair.
And I guess lastly in relation to your M&A initiatives.
Do you expect those to take a back seat you know relative to kind of your current integration and studio restructuring or optimizing initiatives. This year.
No.
If anything I think that the exercise of Onboarding, the Tetris license and team and then ultimately rolling forward with brain in its integration.
He has helped us refine our overall approach to executing on these types of opportunities and so we're really active in continuing to look at and qualify what we think are really great companies and teams and products.
We think will be a really great complement to what we currently offer so we intend to be as active not more active than we have been in the past, we think that there's a really meaningful opportunity for us to continue to find companies that have the right profile men incorporate them not only the company, but into our play awards program ultimately and drive that scale.
Roads.
Okay, great. Thanks, guys.
Thank you.
Thank you. Our next question is from Martin Yang with Oppenheimer. Please proceed with your question.
Hi, Thank you for taking my question Krishna.
First of all at once your asphalt or guidance.
Our adjusted EBITDAR.
Into 'twenty three.
Can you maybe elaborate on the source of margin expansion do you see most coming from maybe a year over year decline marketing spending, particularly for the first half.
Or is it from the mix shift between green and the restaurant portfolio.
And a third potential as far as I see it as just the overall margin expansion on our core portfolio.
Any additional comment there will be appreciated thank you.
No. Thank you Martin I appreciate you're just highlighting you you'd answered the question.
It.
So there are those three key areas, a greater efficiency in and around our investments in UA.
So getting back to normalized levels, which were in keeping with where we were pre COVID-19, which is reinvestment rates that are somewhere between 18% to 22% as opposed to where they've been in the mid to high twenties.
And then there's the cost improvements as a result of the restructuring.
We've been working on and working through over the last several months. So as those start to really materialize, we'll start to see the benefits in the back half of the year as we've described and then the overall composition and mix of business as we continue to.
Scale are fully integrate and get the full benefit of a full year of brainy them.
And just the AD based products that have higher margins.
Thank you Andrew.
And one more question Petrus casual.
Kind of maybe talking general terms on the potential timeline you would expect.
Between maybe alpha a public beta.
Final release, no I think the.
The new game launches the smart challenged economy environment is there any way for you to maybe give us a general you know time horizon associated with upcoming your games.
And maybe more specific to Petrus casual.
Yeah, I mean, I wish that were the case, but the.
The short of it is no we can't provide any more clarity only because it's a difficult process to really nail down you're talking about looking at and qualifying your consumers' reaction to the game.
And then optimizing both.
No all the fundamental metrics that you need to see and hit certain thresholds in order to comfortably then allocate.
Millions of dollars tens of millions of dollars even to scaling blowing a product in the store environment.
So you know I think that's why we're all positioned as Ben just don't include it in the plan for this year and as we get more clarity around the timing of when it will launch then we'll go ahead and share that with everyone and incorporate that into our guidance.
Got it thank you very much.
Yeah.
That said at Nike.
Go ahead, sorry, sorry.
Yeah.
There are no further questions at this time I'd, just like to hand, the floor back over to Andrew Pascal for any closing comments.
Okay, well. Thank you well just appreciate everybody's continued interest. Thank you for tuning in and we look forward to engaging again and updating you on our progress on our next call.
Yeah.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.