Q4 2024 Playstudios Inc Earnings Call
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Good afternoon, everyone, and welcome to the Play Studios 4th quarter and year end 2024 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.
Speaker Change: Thanks, Jason and welcome everyone to our fourth quarter and year end 2024 earnings call earlier today, we published a press release containing our financial results along with the commentary for the recently completed fourth quarter and year end 2024.
Speaker Change: Included in the release the segment reporting in our usual financial disclosures Scott will discuss these materials in greater detail later, but if you haven't had a chance to review the release I'd encourage you to do so.
Speaker Change: 2024 was another eventful and challenging year for the games industry.
Speaker Change: Despite these pressures we were able to achieve our full year guidance you can make material progress on a number of strategic initiatives heading into 2025.
We sharply reduced the company's cost structure and re oriented our operations for improved profitability and cash flow.
Speaker Change: A number of new initiatives, we're incubating new promotional effort World tournament of slots was launched and very well received by our players.
Speaker Change: Let's dive a little deeper into some of the more noteworthy highlights.
Speaker Change: We closed the year with full year revenue and adjusted EBITDA in line with our 2024 guidance.
Speaker Change: We restructured our business to drive enhanced efficiency and economies of scale.
Speaker Change: You mentioned plan, which we launched in October consisted of a reduction in our total workforce of over 30%.
Speaker Change: Pension of select subscale games consolidation of key functions and a new technology strategy that included outsourcing of some of our R&D capacity.
Speaker Change: Post changes will be leaner, having a more acute focus on growth and be positioned to deliver stronger results.
Speaker Change: We advanced two new growth initiatives that we believe can reinvigorate our play games business. We believe our new sweepstakes effort has the potential to reinvigorate the growth of our social casino portfolio.
Speaker Change: Sweepstakes features continue to grow in popularity among three to play casino players, including our own we think adding sweepstakes to our current loyalty promotional offerings will substantially enhance the attraction of our games and drive real value to our company.
Speaker Change: Our goal remains to introduce sweepstakes in the coming quarters.
Speaker Change: <unk> has now been fully integrated into place studios is making solid progress with the development of a new casual Texas title.
Speaker Change: The new game will combine the highly engaging block puzzle format Tetris branded and our proven right and defend mechanic that's been popularized super scale games, such as clean master and monopoly ago by leveraging our proven game design, a well established metagame feature in the Texas brand. We believe the game has the potential to redefine the category our hope is to apogee.
Speaker Change: Game ready to be launched in the second half of 2025.
Speaker Change: Growth at play Awards continues with the addition of more players a full integration of by VIP across our major games and the Onboarding of key new rewards partnerships. The program also launched the World tournament in slots, which helped inaugural event in October last year with its million dollars rise in 500 players participating lied.
Speaker Change: The tournament drove excitement in our games and players alike, we plan to build on the tournaments momentum in 2025.
Speaker Change: Finally during the year, we purchased $31 $2 million and stock, including the purchase of roughly 9% of our outstanding shares from Microsoft Despite.
Speaker Change: Despite this we remain very well capitalized with 109 million in cash at year end.
Speaker Change: And the full availability of our $81 billion revolving credit facility.
Speaker Change: As I've reaffirmed in the past our strategy consists of two key pillars.
Speaker Change: First is expanding our play games division by driving more operating leverage from our mature portfolio as well as developing and acquiring new games a broader collection of games allows us to amplify the effect of our industry, leading loyalty platform. Most recently, we've set out to accomplish this organically through the development of new sweepstakes promotional Kate.
Speaker Change: Abilities and through strategic M&A from our acquisitions of the Texas sites Graham and picks up.
Speaker Change: The second pillar is the advancement of play awards, which can drive adoption and engagement of our game portfolio.
Speaker Change: I believe executing these strategic priorities will enable us to accelerate our growth improve margins and ultimately drive substantial value.
Speaker Change: So let's touch on some of our primary initiatives, starting with and play games.
Speaker Change: Play games has three primary goals in 2025.
Speaker Change: One improving the productivity and margins of our core casino games to growing our casualty portfolio and three advancing new initiatives currently in development.
Speaker Change: The focus for the casino portfolio in 2025 will be improve retention and monetization and pop slots My Vegas, and my Tenotomy expanding direct to consumer sales leveraging our full adoption of my VIP across our portfolio and the integration of sweepstakes into each of our primary titles.
Speaker Change: Pleased with the progress made in my Vegas, this past year and hope to build on that momentum in 2025.
Speaker Change: While top slots M. I can army had been more challenging we expect recent organizational changes and operating refinements to boost performance in 2025.
Speaker Change: It's all three games have a loyal following a strong user engagement our biggest opportunity is to convert more of our users to pay us and supported US. Our teams are intensely focused on refining warm economies, enhancing our segmentation and pricing practices and introducing this sweepstakes and other features and enrich the overall gaming experience.
Speaker Change: We're also focused on offering compelling incentives to purchase off platform to our player specific and bespoke web solution, which is focused on generating more direct sales with our players are direct to consumer business still represents a significant untapped opportunity accounting for $4 5 billion this quarter or 8% of total in App purchase revenues.
Speaker Change: Gross up from $2 5 million or 4% from the same time last year. This.
Speaker Change: This represents an 89% increase year over year.
Speaker Change: Our goal is continue to continue to increase the complement of revenues attributed to this channel with the ultimate target of over 20%, which will further improve the operating margins.
Speaker Change: Turning to our casualty portfolio. The focus in 2025 would be the continued optimization of Graham and the expansion of our Tetris franchise.
Speaker Change: <unk> had a strong 2020 for growing revenue and opt out year over year as a result of new advertising formats. The incorporation of our loyalty program and continued product improvements we plan to build on that growth in 2025. Following the successful implementation of a new technology stack in the fourth quarter.
Speaker Change: Results were weaker within our Tetris franchise this quarter as recent product changes did not have the positive effect we anticipate.
Speaker Change: We continue to view, Texas Prime has a compelling growth opportunity and plan to introduce several new features this year.
Speaker Change: Similarly, we continue to use our Texas block puzzle game to test and assess user acquisition and product strategies in anticipation of our eventual introduction of a picture with Texas product as you May recall, we acquired <unk> last year based on our belief that their flagship games can be more fully realized under the Texas land.
Speaker Change: Alongside the talented team at <unk>. So we're hard at work to make this reality and believe we can launch a new Texas casual game later this year.
Speaker Change: As I've said in prior calls developing new games is more art than science and as such the ultimate success of each is hard to predict that said, we know the Texas brand is incredibly popular with players and many of the games in the puzzle category today effect similar is that the real thing we firmly believe this creates an opportunity for us to capture.
Speaker Change: Players, who we believe will choose not been to Pinterest game, if given the option.
Now, let's turn our attention to play awards throughout 2024, our play awards and dedicated to integrating our refreshed my VIP loyalty program into our primary titles Curating and streamlining our collection of rewards partners and rolling out our inaugural where alternative minutes slots campaign.
Speaker Change: I'm happy to say, we've been successful on all fronts. My VIP has been fully integrated into all of our major goals, giving our players are consistent and seamless loyalty experience as we've discussed in the past loyalty is a unique value enhancer for our games and a proven driver of increased retention and engagement.
Speaker Change: Regarding the collection reward partners. This quarter, we added several new partners, including brands such as top golf, while also streamlining our catalog to ensure a focus on our highest performing partners.
Speaker Change: In 2024, we offered approximately $2 million in retails awards per day.
Speaker Change: Lastly in Q4, we held the inaugural my VIP alternative slots at that at the Atlantis Paradise. This exclusive tournament gave over 500 players a chance to compete for a million dollar prize generating significant excitement and raising engagement across all of our games.
Speaker Change: We intend to build on this momentum with our newer improvement world champion of slots in 2025.
Speaker Change: Where alternative slots is another example of our company's unique value proposition of connecting the digital and grilled worlds that's unmatched by any other game publisher.
Speaker Change: With these exciting initiatives in place and a reset cost structure and operating framework. We believe 2025 is shaping up to be a year of progress. We're intensely focused on growing our business and fully exploiting our unique rewarded play model.
Speaker Change: All while striking the balance between optimizing our core business, while continuing to invest in our future opportunities in doing so we will continue to expand our audience, we invigorate revenues improve margins and drive higher profits.
Speaker Change: Scott will provide more details when we outlined our 2025 guidance in a moment, however, I want to quickly touch on our thinking and approach to capital allocation.
Speaker Change: A dislocation between the market's view of our stock and what we believe to be fair value continued to widen in 2024.
Speaker Change: As such we were aggressive purchases of our stock buying back $31 million throughout the year.
Speaker Change: We'll continue to evaluate share buybacks in 2025, we also remain committed to pursuing accretive and strategic M&A opportunities that are in keeping with our overall strategy and expansion plans in the meantime, we expect to continue to generate positive cash flows.
Speaker Change: Add to our already sizable cash balance.
Speaker Change: I'll now turn the call over to Scott to provide some additional comments and share our 2025 financial guidance Scott.
Scott: Thanks, Andrew Good afternoon, everyone.
Scott: In addition to today's press release, our Form 10-K will be filed shortly.
Scott: He's worked with filings for a comprehensive summary of our quarterly and full year results.
Scott: Revenues in the quarter declined by $9 3 million or 12% versus a year ago.
Scott: Social casino and casual games were down in the quarter with larger dollar declines in social casino and larger percentage declines in casual.
Scott: Social casino weaknesses continued to reflect softness in the category and our own challenges stemming declines.
Scott: On the positive side, we've been making progress in monetization and we are seeing positive results from the recent changes in our largest game pop slots.
Scott: Longer term, we remain confident that our social casino titles can return to growth, particularly with the addition of our sweepstakes features later this year.
Scott: Lower revenues in our casual portfolio were largely driven by Tetris, where a decline in <unk> drove lower advertising revenues.
Scott: Fourth quarter, adjusted EBITDA of $12 $5 million was 15% lower than a year ago.
Scott: Adjusted EBITDA margin was 18, 4%, a 70 basis point decline versus the same quarter a year ago.
Scott: Revenue declines drove both adjusted EBITDA and adjusted EBITDA margin declines in the quarter.
Scott: Yes.
Scott: <unk> was $2 seven Niu was $11 5 million in the fourth quarter down, 19% and 14% respectively from the same period last year.
Scott: These declines were broad based across our portfolio, but largely driven by tetris and brain, which accounted for more than half of the overall decrease.
Scott: While we expect user growth to continue to be challenged we are hopeful that our new initiatives, such as sweepstakes and our new Tetris title will serve to counter these crushers. Likewise, we believe the recent integration of my VIP across all our major gains will be helpful.
Scott: Our <unk> for the quarter was 27 up 8% from year ago results. The growth in <unk> was driven by our social casino portfolio.
Scott: Any trend we've seen since the beginning of the year, we saw double digit year over year percentage gains in pop my Vegas and bringing them.
Scott: The growth in <unk> is particularly noteworthy given the large base of players and relatively low levels of arps out increasing player monetization was a key objective of ours. So we are pleased with the results. We continue to believe there is still significant opportunity for growth ahead.
Scott: We initiated our reinvention program in the fourth quarter of 2024, which will get fully realized in 2025 as Andrew mentioned earlier, our goal is to streamline our business around key opportunities expand operational efficiencies and reduce our overall cost.
Scott: While we continue to expect the program to result in annual operating cost savings for our core business of approximately $25 million to $30 million, there will be offsetting costs associated with launching and scaling our strategic priorities that will impact. Our overall consolidated results I will discuss this in greater detail when I outlined our 2025 guidance.
Scott: Right.
Scott: For the full year revenues declined 7% versus 2023 full year adjusted EBITDA was down 9% from 2023, while adjusted EBITDA margin of 19, 5% was down 50 basis points versus last year.
Scott: We ended the quarter with approximately $109 million in cash no borrowings and full availability of our $81 million revolver.
Scott: As Andrew mentioned, we restarted our share repurchase program and purchased $31 million or.
Scott: Were 13% of total issued common stock during 2020 for our remaining share repurchase authorization was 44 million at year end.
Scott: In 2025, our capital allocation goals, we will continue to be centered on maximizing share shareholder value through investing in our businesses pursuing strategic and accretive M&A and exploring other ways of returning value to our shareholders, which may include additional share buybacks.
Scott: Finally.
Scott: Our outlook for 2025, we estimate that revenues will range between 250 and $270 million.
Scott: Consolidated adjusted EBITDA will range between 45 and $55 million.
Scott: When modeling 2025 results.
Scott: Please consider the following.
Scott: Our guidance does not include the impact of acquisitions or divestitures.
Scott: Our new sweepstakes and Tetris initiatives are still in development and we have not included any revenue contributions from these efforts in our guidance. We will provide updates as we have them, but you should use your own judgment and analysis to project. How these businesses may perform.
Scott: Our current expectation is that these initiatives once proven out can contribute as much as 15% to $30 million of revenue during the year most of the benefits recognized in the fourth quarter.
Scott: While we are on track to recognize the cost savings from our restructuring we expect to redeploy some of those savings towards developing and marketing our two new initiatives as they start to show product market fit.
Scott: This in addition to the continued declines in the core business is why 2025, adjusted EBITDA is expected to be down versus 2024.
Scott: Thank you I will now turn the call back to Andrew for some closing remarks.
Andrew: Thanks, Scott and thanks to everyone for participating in today's call.
Speaker Change: Where we end our prepared remarks and open the call for questions I'd like to reinforce some key points.
Speaker Change: <unk> 2024 was a transformative year, it's positioned us for sustainable and profitable growth.
Speaker Change: Incubated two new businesses in high growth categories streamlined our operations around our strongest business lines and dramatically lowered our cost basis.
Speaker Change: Our recent development of sweepstakes promotional capabilities is expected to enhance the value proposition of our social casino portfolio, which we believe can reinvigorate our business with our recent integration of Pixar, we're more committed than ever in establishing <unk> as a world class mobile franchise, we have an exciting new game development and are working to.
Speaker Change: <unk> introducing it later this year.
Speaker Change: Play Awards continues to expand its technology partnerships and functionality the world tournament of slots as an example of this and something we plan to build on in 2025.
Speaker Change: We continue to view play awards as a key differentiating factor for our company and integral to our value proposition and growth.
Speaker Change: We're making progress on optimizing popped in my Tommy and believe both are on track with notable improvements in 2025.
Speaker Change: Bringing them performed well this past year growing revenues and opt out and we look forward to building on this momentum in 2025 with the optimization of my VIP and a new technology stack.
Speaker Change: And our balance sheet remains strong with $109 million in cash a fully undrawn credit facility and an operating business that generates positive cash flows our capital allocation strategy will continue to be focused on maximizing shareholder value through growth oriented investments in our business strategic acquisitions and exploring other ways of returning value.
Speaker Change: To our shareholders.
Speaker Change: Lastly, I continue to believe there is a large discrepancy between the core value of our business and the value ascribed to us in the public markets.
Speaker Change: Frustrating rest assured our leadership is aligned our teams are focused and we're all committed to strengthening our company I want to thank you for your time today. We appreciate your support and hope you are as encouraged about the coming years, we are.
Speaker Change: I'll now turn the call over to the operator to take your questions operator.
Speaker Change: Thank you and at this time, we will conduct 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 your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your hand.
Speaker Change: Set before pressing the star keys once again to ask a question press star one on your telephone keypad will pause for a moment, while we poll for questions. Thank you.
Unspecified Moderator: Our first question comes from Brian <unk> with Craig Hallum Capital Group. Please state your question.
Brian: Hey, good afternoon guys.
Ryan: Hey, Ryan.
Speaker Change: I want to start on sweepstakes initiatives. So based on the guidance nothing assumed in there, but if there was assume it's mostly Q4.
Speaker Change: Does that imply I guess, the new Tetris game and the sweepstakes, probably don't launch until Q3 Q4 later in there I guess my question is the sweepstakes is time is of the essence here, where you see cease and desist from several states now there's a big opportunity out there, but I don't know how long it last for so I guess talk to the timing of when we should expect.
Speaker Change: That.
Speaker Change: And then secondly to that I guess will this be integrated into as a feature of your core legacy games are you planning to have separate games.
Yeah, Okay. Thanks, Brian Great question so.
Speaker Change: First let me just comment on sweeps overall I mean, the market is growing at a pretty extraordinary rate and when you look at over the past.
Speaker Change: Four or five years, it's grown from a $700 million market to what's forecasted to be at $4 $5 billion Mark This year.
Speaker Change: And that takes into consideration some of the added regulatory oversight.
Speaker Change: Even with I think the risk of some of the jurisdictions tightening up or potentially opting out.
Speaker Change: I'll think it represents a very material growth opportunity I also want to reinforce that we view sweepstakes as just the different monetization our promotional mechanics.
Speaker Change: Is they are free to play social casino destinations and they just provide players with a different value proposition, where as they play and engage in play and monetize it can accumulate this alternative currency that they can play with and ultimately cash out for real world money.
Speaker Change: That's not all that different from the model that we've been operating for the better part of 12 to 13 years, where people play our games for free and as they do they accumulate loyalty currency to pay can then redeem for real world value.
Speaker Change: So we see it as a opportunity is aligning with the core of our business and our value proposition and Theres just no question in our minds that the.
Speaker Change: Ration of players from just simply playing for free to engaging with them claim that free to play suite solutions is what is impacting the overall pace and scale of the more traditional social casino market. So we're obviously keenly focused on figuring out the best way to go about.
Speaker Change: Exploiting this opportunity we're going to do it initially with a solution that is separate and distinct from our existing social casino suite.
Speaker Change: There's a lot of complexity associated with getting into these markets and there is certain disciplines and competency that while we have a lot of it inherent within our company because so many of us come out of the real money casino industry or world.
Speaker Change: For that reason, we appreciate its complexities and the need to operate with absolute integrity.
Speaker Change: So we're going to launch our initial offering.
Speaker Change: In the coming months and we're going to go slow we're going to scale up and build that competency and then we're going to start to incorporate and make those features and capabilities available to our existing players.
Speaker Change: Through our native apps through some form initially at cross promotion, but ultimately a deeper level of integration.
Speaker Change: And the degree to which we integrate will be a function of how we continue to feel about the overall regulatory backdrop and compliance and oversight that we want to be very mindful and respectful of.
So we will speak to that probably with a bit more depth in the coming calls coming quarters.
Speaker Change: As far as when you can think about suites impacting our overall operating performance.
Speaker Change: We're obviously investing in it today and the costs and the investments that we're making are included in the cost structure of our business and the guidance we provided.
Speaker Change: We have not included any topline contribution from sweeps this year because until we feel like we are clear about its potential and have a line of sight as to when it is that we'll be scaling that initiative.
Speaker Change: That would be best that we just exclude it from the top line guidance.
Speaker Change: Very helpful. Andrew I appreciate that and I think smart way to ask the guidance as well.
Speaker Change: For my second question, just curious if I spoke at the end of the press release page 11 of the supplemental battle in this kind of goes along with the loyalty currency.
Speaker Change: Play of warts retail value of purchases was down 38% year over year in Q4, what caused such a significant decline in the usage.
Speaker Change: There.
Speaker Change: Yeah. So there were we did a lot I would say over the last six months and really revisit in adding and cleaning up if you will the overall rewards that are being offered to our player rewards program.
Speaker Change: So a lot of the redemption activity in the past.
Speaker Change: Was for either Sweepstake style contest that we offer up within our benefits complement our other digital types of rewards.
Speaker Change: And it really kind of bolstered or.
Speaker Change: Helped to contribute to those overall purchase volumes and so we've really worked to kind of reset the core of the value proposition of our rewards business.
Speaker Change: And went through an exercise, where we actually eliminated a number of partners and skewed up the nature and types of rewards that are being offered to really kind of reset and get back to the core of its value proposition. So we fully expected that there would be a decline in redemption activity. Initially and then it would start to reset and ramp back up over time.
Speaker Change: Which we're seeing and then of course some of the redemption activity is also which is attributed to the reductions in the overall scale and volume of play that we're experiencing that I would say is attributed more to the impact of suites that I've already spoken to.
Speaker Change: Thanks, Andrew Good luck guys.
Speaker Change: Alright, Thanks Ryan.
Speaker Change: Thank you and your next question comes from Aaron <unk> with Macquarie. Please state your question.
Aaron: Hey, guys. Good afternoon, Thanks for taking my question.
Speaker Change: With regard to the reinvention plan can you just talk a bit about how you are planning to balanced your development requirements with the reduced workforce.
Does this mean, you'll be staffing up and lower cost development regions or do you think you have the right team size for the foreseeable future.
Speaker Change: Yes, Thanks Aaron.
Speaker Change:
Speaker Change: So initially the reductions in the overall capacity of the company.
Speaker Change: Really impacted just about every product in every operating function as we alluded to we took out.
Speaker Change: Just over 30% of our team members.
Speaker Change: In the coarser and the exercise of doing that.
Speaker Change: We were also able to leverage some third party development capacity relationships that we've been cultivating over the prior several years that we felt we could leverage more fully at <unk>.
Speaker Change: Lower cost and.
Speaker Change: And then to your point, we've also looked to transition and recompose, our Ts such.
Speaker Change: Such that more of the team members are located in markets that are a bit more affordable for us. So some of the Asian markets and also our studio that's in Europe.
Speaker Change: So it's a bit of a compliment that those things both in absolute reduction in capacity a shifting of our composition to these lower cost markets leveraging third party capacity and then I would also just highlight.
Speaker Change: Fairly extensive news.
Speaker Change: Artificial intelligence.
Speaker Change: Across both our creative marketing activities and a bunch of the work that we're doing.
Speaker Change: Our slot content studios and creation.
Unspecified Moderator: Got you. Thank you that's helpful.
Speaker Change: And then turning to M&A with the new company structure and focus in place.
Speaker Change: Has there been any change.
Speaker Change: In terms of the parameters for M&A has.
Speaker Change: Has anything changed in terms of what's available in the market or what are you looking for whether that's.
Speaker Change: <unk> genre et cetera.
Jason: Jason do you want to take that one.
Jason: Yes, sure. So we remain focused on M&A as one of the core pillars of our capital allocation strategy.
Jason: M&A as a tool that has to align with our strategy and since our strategy has been rather consistent hasnt to criteria of M&A and the types of assets, we look for hasn't really changed.
Jason: That being said given the pressures the market pressures we've experience.
Jason: And the value of our currency it has made it a bit more challenging for us too.
Jason: Win opportunities in the market is on some of those opportunities.
Jason: We competed for.
Jason: But we remain active and have an active pipeline, but will also remain disciplined.
Jason: You don't pay for opportunity.
Jason: And so you know that.
Jason: That's how I'd frame it there.
Jason: Got it. Thank you very much good luck guys great. Thanks, Amy.
Speaker Change: And your next question comes from Martin Yang with Oppenheimer <unk> Company. Please state your question.
Martin Yang: Hey, Thanks for taking my question first question is.
Martin Yang: Going back to Street city have reconsider.
Martin Yang: Using M&A as a way to.
Martin Yang: King quicker entry into the category.
Jason: Jason you want to speak to that.
Martin Yang: Yes.
Speaker Change: Early on in the cycle of researching this space and really getting comfortable with all of the regulatory and operating framework for this space, we did consider entering through M&A.
Martin Yang:
As we did that analysis of the kind of build versus buy and we looked at the company our company and the capabilities that we had our experience our team and our technology and our platforms.
Martin Yang: Relative to what we would have to pay to enter through M&A. We realize that we had a lot of what you needed to really build a sweepstakes capabilities internally.
Martin Yang: And we thought it would be an overall higher return on invested capital for us to build it ourselves and quickly scale.
Martin Yang: In the market.
Martin Yang: No we don't see the barriers being massive, especially given you know what we've already built over the last 12 years and so we've opted to do that for now that doesn't mean that we wouldn't for the right asset at the right time as we start to learn more about what it means to operate suites.
Martin Yang: Consider attractive M&A opportunities in this category, but for the time being we still we intend on kind of building those capabilities internally.
Martin Yang: Got it thank you.
Speaker Change: <unk> is maybe give us a sense of your longer term view.
Speaker Change: Paul Sweepstake type games.
Speaker Change: Casino games May.
Speaker Change: Interac in the longer term do you think the growth of three straight games is in.
Speaker Change: In the longer term.
Speaker Change: I'm going to be detrimental to social casino games is this genre shift.
Speaker Change: Somewhat structural in your opinion.
Speaker Change: Yeah.
Speaker Change: Martin first of all I would say I don't think it's as much as genre shift as I alluded to a bit earlier.
Speaker Change: People that are playing free to play social casino games are no different than the consumers that are playing on these dedicated sweep sites and that is because the experience and the underlying model. It's very similar people can access the casinos, whether it's a free downloaded app or whether it's going to a.
Speaker Change: <unk> website, they are given a balance of free chips that they can play with as they deplete. Those chips then they can purchase more and when they purchase more and the sweeps case theyre getting the added benefit or a bonus or a promotional free currency, which is the sweeps currency, where they can change the modality of the game.
Speaker Change: And actually play with the sweeps currency win and lose it and then ultimately cash it out so as I alluded to this is a different dimension of value in a different.
Speaker Change: <unk> mechanic to induce more monetization.
Speaker Change: And there have been surveys conducted and published that speak to the fact that 90% of the people that are actively that were surveyed enacted with playing free to play social casino apps. We're aware of is sampled and try the sweeps offerings and nearly half of them have has seen a change in <unk>.
Speaker Change: Behavior, where they spend part of or all of their time now claim the sweeps as sweeps enabled free to play casinos as an alternative so is this a structural shifts.
Speaker Change: Hi.
Speaker Change: So only in that there is a new dimension of value that's being attached to a free to play social casino experience that has really captured the attention of these same consumers.
Martin Yang: Got it thank you Andrew.
Speaker Change: Yes, Thank you Martin.
Unspecified Moderator: And your next question comes from Mike Hickey with benchmark. Please state your question.
Speaker Change: Yeah.
Speaker Change: Yeah, Hey, Andrew Jason.
Speaker Change: Thanks for taking my questions just curious Andrew on us.
Speaker Change: Consumer.
Speaker Change: I think we're starting to worrying about.
Speaker Change: Sort of a.
Speaker Change: Economic situation here on mobile.
Speaker Change: Historically school enrolling or bowl.
Speaker Change: Discretionary pullbacks so.
Speaker Change: Just curious what you're seeing today.
Speaker Change: In your player base in terms of spend if you think theres any impact here.
Speaker Change: Consumer spend and how you think about.
Speaker Change: The possibilities when you put out your 25 guidance I've got a follow up.
Mike Hickey: Yes, Thank you Mike.
Mike Hickey: Look I think that what.
Mike Hickey: We experienced in the back half of last year and then entering in.
Mike Hickey: So far the first couple of months of this year.
Mike Hickey: There is nothing that leaves us feeling like the markets just inherently going to firm up from a macro perspective so.
Mike Hickey: Is the softness that we're experiencing purely a function of some of the market dynamics that we've just been speaking to with the emergence of sweeps for sure.
Mike Hickey: But I would also say that.
Mike Hickey: Theres, probably some indication that consumers are being a bit more cautious.
Mike Hickey: Although I would say nothing that we could point to very definitively.
Mike Hickey: But I would say imbalanced, that's why we provided the guidance we have we basically assumed that the trajectory of the core business. It's going to generally continue as it has over the last several quarters. While we are actively investing in the growth opportunities that we think are going to change the slope of our top.
Mike Hickey: <unk> and catalyze our growth.
Not included that in our guidance yet for the year and Thats, because we want a bit more visibility into all of these factors that are impacting our business consumer confidence being one of them.
Mike Hickey: Well on the sweetener business.
Mike Hickey: Supply chain because obviously.
Mike Hickey: It's a big market opportunity appears to be.
Mike Hickey: But you know.
Mike Hickey: It also sort of them.
Mike Hickey: Market that feels like it's developing.
Mike Hickey: Without.
Mike Hickey: The regulatory scrutiny, the fore sight to stop it and once it started to sort of build it yourself on stage Youre seeing.
Mike Hickey: Regulation has come and advantages.
Speaker Change: And so how do you sort of balance I guess, Andrew putting resources.
Mike Hickey: And investment.
Speaker Change: Into an addressable market.
Speaker Change: In fact, probably contracting stage sort of.
Speaker Change: Put up barriers to shut it down.
Speaker Change: I guess, how do you sort of like.
Speaker Change: Position that to investors that are maybe excited for the growth of sweeps, an awful awful concerned that regulatory pressures going to restrict the market maybe significantly overtime.
Speaker Change: Yes, Mike really great question.
First I would say that.
Speaker Change: And the way that we're looking to approach the opportunity.
Speaker Change: Ultimately different from all of the other players that are in the industry today.
Speaker Change: Most all of the operators that are in the street today have no prior history of experience selling virtual goods space free to play casinos, where they're leveraging a sweepstakes promotional model to help drive the growth of their core business.
Speaker Change: Which is really what is intended with sweepstakes as a promotional mechanics.
Speaker Change: Sweepstakes laws had been around for decades, and they are leveraged by existing businesses that want to offer up promotions, where they extend and provide added value for free to their consumers their crime.
Speaker Change: We're taking more than the primary activity.
Speaker Change: So for a company like Mcdonald's that runs the monopoly promotion they are trying to sell more big Macs.
Speaker Change: Most of the players in the sweepstakes industry today are offering a free to play casino solution.
A.
Speaker Change: Approach or a vehicle through which they can appeal to our consumers that have been planning for you to play casinos for years and years. The difference for US is that we've been running this business for 12 years, and we're going to use sweepstakes. The way it was intended to sell more.
Native currencies across our portfolio of games now we're going to be very cautious in the way that we approach it as I alluded to a bit earlier, we're taking a phased approach where our initial execution will be a standalone dedicated sweepstakes offering so that we can build our competence.
Speaker Change: Fee and get ever clear about how to operate and optimize the performance of our sweep solution and then we'll start to integrate it more fully into our existing portfolio of games.
Speaker Change: In a way that we think will set a different standard.
Speaker Change: Terms of how sweepstakes should be leveraged within our industry. Our intention is to be the gold standard.
Speaker Change: One, which everyone else will be compared are measured where we do it.
Speaker Change: It was intended to sell to drive the growth in the sale of more of our core products and services, which in our case a virtual chips.
Speaker Change: So.
We're going to be responsible we're going to be deliberate.
Speaker Change: Make sure that we stay very close to and connected to all of the regulatory complexities and compliance questions.
Speaker Change: Consumers are certainly signaled is that they enjoy and want to partake in this style of free to play casinos.
Speaker Change: And so I think that what.
Speaker Change: We're more likely happen is that there'll be some level of added oversight if anything.
Speaker Change: Because it's an activity that people want to participate in and it can be managed and done responsibly and with integrity and for the benefit.
Speaker Change: The jurisdictions that embraced it and accommodate it.
Speaker Change: And so we would hope that there is going to be more of that that happens as it matures and as.
Speaker Change: Really credible legitimate.
Speaker Change: Entrants come into the market that have a long standing.
Speaker Change: History with their core business, but theyre looking to bolster.
Andrew: Thanks, Andrew one last question.
Speaker Change: Obviously, we have been.
Speaker Change: Following you for a long time and loyalty.
Speaker Change: Program has sort of been cornerstone to euro.
Value proposition to your players.
Speaker Change: <unk>.
Speaker Change: But it seems like maybe it hasn't.
Speaker Change: Driven that sort of elevated.
Speaker Change: Engagement and retention that you would expect from us.
Speaker Change: Our loyalty program that we may be seeing in other industries and so curious if you think thats.
Speaker Change: True.
Speaker Change: And.
Speaker Change: And sort of how you think what needs to sort of be done maybe on the program in terms of maybe getting you to wear.
Speaker Change: You can get that.
Speaker Change: Higher level engagements.
Speaker Change: Retention and growth from your loyalty base for your business is evolving too sweeps and maybe other areas maybe it's less of an emphasis now for you than it was in the past.
Speaker Change: Yeah, well first of all I would say.
Speaker Change: We firmly believe that the loyalty program does in fact that value.
Speaker Change: But if you were to look at and we do.
Speaker Change: Our retention rates and engagement rates as compared to our peers. When we asked the platforms to benchmark our performance.
Speaker Change: We are in and among the top of the App certainly within our genre as far as retention engagement and we think that that's attributed to.
Speaker Change: Certainly the quality of our content, but also the impact of our loyalty program.
Speaker Change: We've done a lot over the last six months to kind of reset the core value proposition and benefits that we offer through our loyalty program I think that is essential if youre going to maintain the interest of your consumers.
Speaker Change: <unk> that are participating in it you have to continue to offer not just what they want but the quantities.
Speaker Change: Is that ensure and support that the benefits are achievable.
Speaker Change: So our team does a lot to ensure that.
Benefits are right and if they are accessible and available to our players.
Speaker Change: So I think that there is.
Speaker Change: The contraction that we're seeing and certainly that just about everybody else within our category or genre is experiencing.
Speaker Change: Is this kind of structural impact suites on the industry.
Speaker Change: Which really speaks more to the core content that people are engaging with and so that's a tough thing to overcome.
Speaker Change: With.
Loyalty program in and of itself.
Speaker Change: So we think that once we've turned on the sweeps capabilities and we havent thoughtfully integrated into our existing native products. Coupled then also with the.
Speaker Change: The added benefit of our loyalty program that will give us an advantage relative to everybody else in the space.
Speaker Change: Yeah.
Speaker Change: Thank you good luck.
Speaker Change: Thank you.
Speaker Change: Thank you and there are no further questions at this time, so I'll now hand, the floor back to Andrew Pascal for closing remarks. Thank you.
Andrew Pascal: Thank you operator, and I just want to thank everybody for your continued interest in the company I appreciate that we're in a moment of transition here, we've done a lot over the last six months to really reposition the company and get us prepared for.
Speaker Change: New period of growth.
Speaker Change: We've spoken to those things, we tried to be as clear and transparent about.
Speaker Change: The restructuring exercise in the refinements to our overall expense and cost structure, while at the same time investing in new opportunities and we deeply believe in and we look forward to reporting on our progress in the coming quarters. Thank you again.
Speaker Change: Thank you and with that we conclude today's call. All parties may disconnect have a good day. Thank you.