Q1 2025 Playstudios Inc Earnings Call
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Greetings and welcome to place Studios first quarter 2025 earnings call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
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Note. This conference is being recorded.
Speaker Change: I will now turn the conference over to your host Jason Hart, Chief Strategy Officer, and head of Investor Relations. Thank you Sir you may begin.
Jason Hart: Thank you operator, good afternoon, and thank you for joining us for place studio's first quarter 2025 earnings call. Joining me on the call today are chairman and CEO, Andrew Pascal and our CFO Scott Peterson.
Jason Hart: 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.
Jason Hart: Please refer to our SEC filings for a discussion of the risks and uncertainties that may affect our future results.
Speaker Change: I'd like to remind everyone that we will 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 results are prepared in accordance with GAAP and a reconciliation to the 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: Thanks, Jason and good afternoon, everyone.
Andrew Pascal: While challenges persist we're off to a focused and productive start in 2020 fives.
Andrew Pascal: Our core business is still normalizing following the reset from last year and we're cautiously working your way through a period of transition and Recalibration.
Andrew Pascal: Market conditions across traditional social casino and casual segments remain challenging and this continues to weigh on our operating performance that said our reinvention plan is already helping us to operate with more clarity efficiency and discipline and we believe we're starting to see the foundation for future gloves, taking shape.
Andrew Pascal: Let me highlight a few key themes from the quarter.
Andrew Pascal: In addition to broader market weakness the social casino categories be impacted by the rise in popularity of sweepstakes styles offerings, which are capturing increasing my chair spends players.
Andrew Pascal: Because we don't yet offer competitive sweepstakes proposition. We believe this dynamic just primary cause of the pressure on our player activity and monetization.
Andrew Pascal: As a result, we've been hard at work on the development of a sweepstakes solution has made strong progress this quarter during the quarter, we launched our internal alpha sweepstakes promotional platform.
Andrew Pascal: This exercise provided valuable insight into golf, the technical readiness employer facing aspects of our offering.
Andrew Pascal: The feedback has been constructed and is active in informing our next phase of assignment.
Andrew Pascal: We expect to make the service available to select players in Q2 and began scaling in the back half of the year.
Andrew Pascal: We believe this new promotional mechanics, and reinvigorate, our social casino portfolio and Spano returned to growth.
Andrew Pascal: Clients has been a central focus of our development efforts, we're committed to building the most compliant transparent promotional mechanics in the industry.
Andrew Pascal: Our vision is to reclaim sweepstakes for what it was intended to be a fun engaging and trusted promotional incentive that'll drive more consumption across our social casino portfolio.
Andrew Pascal: Second development continues on our new casual Exercisers, Texas Block Party, we're applying learnings from the puzzle and break the first job is to create a differentiated and scalable gaming experience while developing games has never deterministic we remain focused on readying the product for a Q4 launch.
Andrew Pascal: Third we're realizing the benefits of our reinvention plan the cost savings program. We initiated last year is tracking to plan and then getting to improve the efficiency of our core operations.
Andrew Pascal: Turning to our business segments.
Andrew Pascal: I'll start with the play games casino portfolio.
Andrew Pascal: The social casino portfolio continues to face category bought headwinds softness across all key casino apps that said monetization improved across several core titles, our DAU increased year over year and pop slots, my Konami and especially in the my Vegas franchise, where my Vegas posted double digit gains new Conte.
Andrew Pascal: Cadence is a major focus across the portfolio as we work to re engage players and drive stronger performance.
Andrew Pascal: He has also remained focused on economy designed by your segmentation in expanding our direct to consumer channel.
Andrew Pascal: Direct to consumer remains a bright spot in our portfolio showing strong momentum and contributing to our broader efforts around margin optimization.
Andrew Pascal: Q1, our direct to consumer channel generated approximately $5 million an in app purchase revenue representing nine 8% in total IP revenue in the quarter.
Andrew Pascal: This compares to 2.38 million or three 9% in Q1 of 2024, and $4 7 million or eight 6% Q4, 2024, representing growth of 114% year over year and 6% quarter over quarter.
Andrew Pascal: As mentioned earlier, we're also investing in the development of our sweepstakes promotional capabilities, which we believe will become a meaningful feature to drive engagement and consumption that really energizes, our social casino portfolio.
Andrew Pascal: Let's talk about the casualty portfolio.
Andrew Pascal: And our casual segment performance remains soft across both breakeven, Texas crime, bringing showed early signs of monetization improvement, though overall performance was pressured by softer debut and weaker eastern Tms, we continue to invest in user acquisition and product enhancements aimed at stabilizing engagement and capturing more value from our audience.
Andrew Pascal: Tetris Prime also experienced challenges with user acquisition continuing to be the primary headwind while monetization per user held relatively steady growing the audience remains difficult in an increasingly competitive market to address this we're testing a range of new marketing and growth strategies.
Andrew Pascal: We're also preparing for the launch of our next casual title, Texas Block Party in Q1 with Polish the product implemented a number of optimizations and began technical validation in select European markets. The feedback from early players been valuable and is helping to shape. The next phase of integration.
Andrew Pascal: Assuming all metrics in line with our criteria, we expect to launch the product in Q4 and scale thereafter.
Andrew Pascal: Let's now turn to play awards.
Andrew Pascal: Play awards remain central to our broader strategy of being a leader in rewarded play.
Andrew Pascal: Through play awards, we pioneered one of the first iterations of sweepstakes style engagement offering players real world rewards the loyalty and promotional strategy as.
As the broader landscape evolves in a second flavor of sweepstakes rises in prominence or play awards platform is working closely with our games to elevate the role of our rewarded claim model and in doing so drive deeper player engagement amplify the value of our ecosystem and reinforce our differentiation in the marketplace.
Andrew Pascal: This quarter, we made great progress in this regard we've now executed the full integration of my VIP across our major games driving more unified loyalty experience in the quarter, we launched several new reward partnerships, including Golden Entertainment group, a premium partner reflective of the kind of experiential rewards that align with our broader strategy. These additions further.
Andrew Pascal: The diversity and appeal of our loyalty ecosystem, while purchases and redemptions were down double digits. This reflects our deliberate strategy to focus on premium high quality offerings over scale. The daily average retail value available rewards increased by 5% to approximately $2 million per day.
Andrew Pascal: We also recently announced the second annual $1 billion My VIP Golf tournament of slots hosted by Atlantis Paradise Island, Bahamas, taking place from October 20.
Andrew Pascal: 26 of 2025.
Andrew Pascal: The high profile tournament will bring together slot enthusiasts from the digital and real World, who will compete for top cash prize of $1 million in the prestigious title all worlds greatest slot player.
Andrew Pascal: We expect this new franchise to drive engagement across our games and we'll look forward to sharing more as the plans get rolled out.
Andrew Pascal: Turning to our financial foundation, our balance sheet remains strong ending the quarter with approximately $107 million in cash and no outstanding debt under our $81 million revolving credit facility. We continue to execute on our share repurchase program and remain active in assessing strategic M&A opportunities that align with osmose.
Andrew Pascal: Good morning.
Andrew Pascal: In summary, Q1 reflects disciplined execution in a challenging environment, we're investing in our future, while managing our cost base and position place studios for long term value creation with.
Scott Peterson: With that said I'll now turn the call over to Scott for a more detailed financial commentary.
Scott Peterson: Thanks, Andrew and good afternoon, everyone.
Scott Peterson: First quarter revenue was $63 million down approximately 19% year over year, reflecting continued softness in both our social casino and casual portfolios.
Scott Peterson: This was largely driven by category wide pressure and lower new player acquisition and engagement across most of our key titles.
Scott Peterson: Revenue was also down approximately seven 5% sequentially from the fourth quarter as a result of seasonal softness and continued <unk> pressure.
Scott Peterson: Adjusted EBITDA for the quarter was $12 million and 18, 5% decline year over year and flat sequentially.
Scott Peterson: Performance. This quarter was shaped by three key dynamics continued D au declines across the portfolio, particularly in Tetris and brainy them.
Scott Peterson: <unk> gains driven by optimization in our social casino titles and the first benefits of cost savings flowing through from our reinvention plan.
Scott Peterson: Adjusted EBITDA margin was 20% up 20 basis points from the same period last year. This increase was driven by early savings from our reinvention plan, partially offset by lower revenues.
Scott Peterson: <unk> was $2 6 million down 25% versus Q1 of 'twenty, four and down 3% sequentially.
Scott Peterson: <unk> was $11 4 million down 23% year over year, and largely flat sequentially, reflecting recent stabilization.
Scott Peterson: The majority of use your declines are concentrated in tetris and brain yet.
Scott Peterson: Yeah.
Scott Peterson: <unk> was 26 cents, an increase of eight 3% versus Q1 of 'twenty, four and largely consistent with the fourth quarter.
Scott Peterson: This was driven by targeted economy improvements in my Vegas, and optimized AD monetization and brain you.
Scott Peterson: This reflects our ongoing efforts to optimize monetization even as overall engagement remains under pressure.
Scott Peterson: We remain on track to realize between 25 and $30 million in annualized cost savings from our reinvention plan. These savings will be reinvested into our strategic priorities, including Sweepstakes and Texas Block Party.
Scott Peterson: Regarding capital allocation, we repurchased one $6 million of our stock in the quarter under our existing share repurchase authorization, which has $42 million remaining at quarter end importantly, we are reaffirming our full year 2025 guidance of net revenue between 250 and $270 million and consolidated <unk>.
Scott Peterson: <unk> EBITDA between 45 and $55 million.
Scott Peterson: Notably our guidance continues to exclude revenue contributions from sweepstakes and our new Tetris title. Although we continue to expect them to begin generating impact later this year, we will provide updates on those initiatives as we progress towards launch.
Scott Peterson: We remain confident that our current strategy will enable us to stabilize our core and unlock new growth in the quarters ahead.
Speaker Change: With that I'll turn the call back to Andrew for closing remarks.
Andrew Pascal: Thanks, Scott so to wrap up.
Andrew Pascal: We're making steady progress for investing in our future, while improving profitability our investments in the sweepstakes promotional mechanic in Texas are taking shape and we're excited about the path.
Andrew Pascal: I want to thank you for your continued support.
Andrew Pascal: Now ask the operator to open up the call for questions.
Andrew Pascal: Thank you and at this time, we will conduct our question and answer session.
Andrew Pascal: 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.
Andrew Pascal: You May press Star two if you would like to remove your question from the Q.
Andrew Pascal: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Andrew Pascal: Hi.
Speaker Change: Our first question comes from Mike Hickey with benchmark. Please state your question.
Mike Hickey: Hey, Andrew Scott, Jason Thanks for taking our questions here, Andrew Nice too.
Mike Hickey: Peer that you reaffirmed your Q2 launch of your.
Mike Hickey: New sweepstakes product just curious how confident at this point, obviously, you just reaffirmed but just your confidence on executing on on the Q2 and.
Mike Hickey: If you plan to sort of G O tested Andrew any particular states just on on monetization or any other.
Mike Hickey: Kpis that you think are irrelevant.
Mike Hickey: And then after launch just curious your confidence on your ability to scale the product and in the second half of your twenty-five thanks guys.
Mike Hickey: Yeah, Thanks for the questions Mike.
Mike Hickey: We're confident that we're going to be in a position, where we can start to introduce and slowly scale. The sweeps offering in the back half of this quarter.
Mike Hickey: Quarter.
Mike Hickey: We have already done some limited amount of technical validation.
Mike Hickey: And we're just continuing to evolve the product to make sure that.
Mike Hickey: All of the internal control standards and operating practices are solid and in place as well as the product offering and the breadth of content. We know we're gonna need so that we can go.
Mike Hickey: Go to market with something that's compelling.
Mike Hickey: So we're feeling good about where it is and the pace and progress that we're making I think that what you'll see is a very measured introduction, which will consist of several jurisdictions. Initially and then as we start to optimize the product and get even more comfortable with that.
Mike Hickey: The overall integrity of it and its appeal then we will start to expand into other markets and invest more aggressively in the back half of this year.
Mike Hickey: But overall, we are well on our plan.
Andrew Pascal: Thanks, Andrew.
Speaker Change: Last question from US It you mentioning your D.
Speaker Change: T C revenue, you're certainly getting a lot of success there.
Speaker Change: Doubling year over year to $5 million is now 10% of your virtual currency sales I guess, just remind us what's driving your success or your growth there and if you think gums.
Speaker Change: Momentum can continue obviously the ethic case seems like its a go.
Speaker Change: Gonna be a real tail tailwind for you I'm just curious your thoughts on that and then.
Speaker Change: I can't remember if you targeted.
Speaker Change: Sorry, a long term target or NOG for DTC as a percentage of total revenue and sort of what what unlocks.
Speaker Change: And we need to look at here to sort of get you to that target. Thanks guys.
Speaker Change: Yeah no. Thanks for the follow up question.
Jason Hart: Maybe I'll, let Jason take that one.
Jason Hart: Yeah. So in terms of the first question in terms of what's driven the success you know, it's definitely been a focus of ours for the period around driving more consumption directly and we do that through offering incentives for users to transact directly in.
Jason Hart: Bonus currency and loyalty points and the fact that we have a loyalty program enables us to kind of unlock additional benefits and value for players that consume with us directly and so we're going to continue to do that we think the new ruling out from the Apple and epic case.
Jason Hart: We will make that even easier.
Jason Hart: Because we now have the ability to route purchases through the direct channel more directly and we can promote and deep blank and do a lot more interesting things to make the process a bit more frictionless for the consumer.
Jason Hart: And they can become more aware of it. So we think this will just.
Jason Hart: Allow us more momentum in the direct to consumer business going forward. We haven't we haven't fully modeled what that means in terms of new contribution, but by the end of the year. So well have to get back to you. Once we kind of have I mean, we haven't published specific guidance on where we expect that to be but you know we hope it will be double where it is today.
Jason Hart: As we sit here at this time next year.
Jason Hart: Hi, Thanks, guys. Good luck.
Jason Hart: Thank you.
Speaker Change: And your next question comes from Ryan signal with Craig Hallum. Please state your question.
Ryan Signal: Good afternoon, guys. This is well on for Ian Thanks for taking our questions first wanted to ask on sweepstakes in in the development Phase could you kind of talk about maybe what's changed since you've started going after this and kind of your learnings from the initial testing.
Speaker Change: <unk>.
Ryan Signal: Yeah. Thanks for the question Ryan.
Ryan Signal: I don't know that there's anything that we've learned that it's really more just validating the overall technical stability and performance.
Ryan Signal: The platform that we built and the tools that we'll use to manage this new promotional mechanic as well as just prove out the integration of both the third party content in our own content that we're gonna be using when we launch a service.
Ryan Signal: So to this point, it's more technical validation once we get into the market.
Ryan Signal: And as I alluded to a moment ago will be a bit measured and just open up a few jurisdictions. So that we can start to then get.
Ryan Signal: Real consumer feedback about our overall proposition and how we're offering at all relative to where the rest of the market is and then we'll optimize and work on scaling and from there. So.
Ryan Signal: To this point, it's really been more about the technical validation and certification of the platform and tools that we've built.
Speaker Change: Got it and then maybe a quick follow up on the Apple Epic games lawsuit of course, it's still developing in Apple I think is appealing, but curious if you could lay out any benefits you hoped to see from that and maybe when we'll get a concrete resolution. Thanks.
Speaker Change: Yeah, I mean, certainly I'll go ahead, Jason if you want to.
Speaker Change: So yeah, I think I've mentioned on the previous question I think with the ruling we now have the ability to route purchases through a direct channel more more aggressively and we can promote it. So we think number one it's going to expand the adoption of users that kind of that convert over to direct purchases. So we hope that the ratio of our total.
Speaker Change: Sales of consumers, who purchase direct will go up and then for each one of those users that end up purchasing direct there is additional margin improvement because we don't have to pay a 30% cut on those specific purchases. So that's kind of a near term very practical and kind of technical benefits that we would assume.
Speaker Change: But over time, we also think this can enable a more strategic evolution because it enables deeper loyalty tie ins.
Speaker Change: And because of our loyalty program. We think we can do some interesting things strategically as a result of this to build a stronger connection with our consumer I wish is really what this enables long term is a deeper player relationship.
Thanks, guys.
Ryan Signal: Thanks Ryan.
Speaker Change: Your next question comes from Aaron Lee with Macquarie. Please state your question.
Aaron Lee: Hey, good afternoon, guys. Thanks for taking my question.
Speaker Change: Maybe sticking with sweepstakes for a little bit more.
Aaron Lee: You know it's.
Aaron Lee: Can you just talk about how you're thinking about the play awards externalization efforts in the context of the sweepstakes business.
Aaron Lee: Do these kind of work together to advance both or just.
Aaron Lee: Externalizing to play a worst platform kind of take a back seat just given all of the work you're doing on sweepstakes.
Aaron Lee: Okay.
Speaker Change: Yeah, no. Thank you Erinn, it's a great question.
Speaker Change: We think that they're complementary for sure and that in fact, our whole loyalty program and proposition as part of the sweepstakes promotional mechanic kind of amplifies it and its potential impact.
Speaker Change: So players of our sweeps offerings and promotions will not only be able to engage in the games and accumulate a promotional currency that can ultimately be converted to cash, but as they engage with our products and accumulate those benefits they'll also.
Speaker Change: Continue to accumulate loyalty currency and all the real world benefits and then along with that.
Speaker Change: Really bespoke and tailored level of service for all of our premium and more loyal customers. So we believe that just as the loyalty program is kind of the strategic centerpiece of our.
Speaker Change: Our existing business and enhances the overall value proposition of our existing games it'll do the same thing as we look to incorporate the sweepstakes mechanic.
Speaker Change: Got you. Thank you that's helpful.
Speaker Change: One last one for me just in terms of reward partners. You noted in the prepared remarks, you added a golden entertainment.
Speaker Change: But just curious are there any areas or areas or sectors outside of casinos that youre looking to expand to with regard to rewards partners.
Speaker Change: Yeah.
Speaker Change: I appreciate the question we've done a lot over the last couple of quarters to really kind of reset our rewards offering and really kind of more carefully curate and manage their range of partners and the types of rewards that we've introduced we want to make sure that they all fit kind of.
Speaker Change: Our entertainment and leisure positioning of the program.
Speaker Change: And so I would say going forward, we're always actively looking for the types of rewards partners that kind of enhance that positioning entertainment offerings, whether it would be.
Speaker Change: Music festivals and shows and.
Speaker Change: Theme parks and amusement park destinations.
Speaker Change: Along with the very robust offering that we have within the whole casino vertical.
Speaker Change: So we'll continue to to cycle through different partners in rewards and in test and see the ones that really resonate. The most and are demanded by our player base and and as they tell us what they want will go out and pursue and look to cultivate more of those types of partners, but that's really what motivated that shipped in the car.
Speaker Change: Opposition to the rewards that are part of our platform today.
Speaker Change: Okay. Thank you appreciate all the color good luck.
Speaker Change: Thanks, so much.
Speaker Change: I think you just remind us of the audience to ask a question press star one on your telephone keypad to remove yourself from the queue Press star two.
Speaker Change: Our next question comes from Martin Yang with Oppenheimer and company. Please state your question.
Martin Yang: Alright. Thank you for taking my question first question on the timing regarding Apple our ability to do all link on iOS devices.
Speaker Change: Expect that feature to be implemented sooner.
Speaker Change: Next up our update.
Speaker Change: Now not how soon should we expect.
Speaker Change: For you to take advantage.
Speaker Change: <unk>.
Speaker Change: I think that you'll see us with some initial implementations in the relative near term like everybody else, we're going to do all we can to take advantage of this shift in.
Speaker Change: Apple's overall position in response to the willing there are a lot of different ways.
Speaker Change: To implement.
Speaker Change: Alternative means of purchase.
Speaker Change: That reduced the amount of friction and make it easy for the players.
Speaker Change: So we're going to we're going to do what we can to enhance our existing solution, but we're also kind of revisiting some of the more fundamental approaches to how we redirect our players. So it doesn't feel so much like they are being redirected out of the app ecosystem instead, they stay within the experience. So some enhancements in the relative near.
Speaker Change: Your term and then a more comprehensive solutions and also the short term, but probably not for some number of weeks.
Mike Hickey: Got it. Thank you Andrew next question is a financial one.
Mike Hickey: Can you confirm that your EBIT target does not or have in fact included.
Speaker Change: See you.
Speaker Change: Investments for new game launches.
Speaker Change: Including sweeps and block party.
Jason Hart: Jason do you want to speak to that.
Jason Hart: Yeah. So it does have the investments that we are making in the guidance. It does not it does not include the revenue.
Jason Hart: For it because we don't because of the uncertainty around you know it contributing to our top line, we were conservative on the topline, but since we've already are incurring.
Jason Hart: Tangible costs today, we have included it in the <unk>.
Jason Hart: Costs side of the EBITDA guidance.
Jason Hart: And also you a cost associated with block Party is also included.
Jason Hart: I do not believe we have.
Jason Hart: Perfect.
Jason Hart: <unk> costs related to block party, it's just the operating expenses for the head count that's working on that those those games.
Jason Hart: That's right that's right all that the team and direct expense of the execution of.
Jason Hart: Both block party and the sweeps initiative are what we burdened the go forward outlook with but not the UA expense. Once we are in the market and we have a line of sight on the unit economics in and around our UA investments.
Jason Hart: Then we'll be able to provide more specific guidance, but suffice it to say, we won't ramp up our UA investments.
Jason Hart: The confidence that the product is performing as intended or better.
Jason Hart: Got it that's great. Thank.
Martin Yang: Thank you. Thank you Andrew Thank you Jason that's it for me Yeah, Okay. Martin Thank you.
Martin Yang: Thank you and at this time there are no further questions. So with that we will go ahead and conclude today's call. All parties may now disconnect have a good day. Thank you.