Q2 2025 Playstudios Inc Earnings Call
Good afternoon everyone and welcome to the play Studio second quarter 2025 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.
I would now like to turn the call over to Jason Han play Studios Chief strategy officer and head of investor relations Mr. Han you may begin?
Thank you, operator. Good afternoon and thank you for joining us for play. Studio's Q2 2025 earnings call joining me on the call today, are chairman and CEO Andrew Pascal. And our CFO Scott Peterson. Before we begin, please note that during this call, we may make forward-looking statements. These statements are based on our current expectations, and our subject to risks and uncertainties, that may cause actual results to differ materially.
Please refer to our FCC filings for a more detailed discussion of these risks.
We will also discuss certain non-gaap Financial measures. You should not be considered a substitute for measures prepared in accordance with gaap, reconciliations to comparable. Gaap measures can be found in our earnings release and SEC filings with that. I'll turn it over to Andrew.
Great. Thanks Jason. Good afternoon, everyone.
The dominant theme in Q2 and across the broader Market continues to be the rapid rise of social casinos. Leveraging, sweepstakes mechanics.
The structural shift is reshaping player behavior and monetization across the category, with more players gravitating toward social casino products powered by sweepstakes.
This trend is pressuring traditional offerings including our core Social Casino portfolio.
That said, these Dynamics were anticipated and they're exactly why we launched our reinvention program last year.
We entered Q2 knowing the headwinds would persist and we remain focused on advancing the new initiatives that will Define our next chapter.
While our Core Business continued to soften this quarter. We're encouraged by the early signals, we're seeing in areas like sweepstakes, direct to Consumer purchases and new game development. These signals validate our strategic Direction, and give us confidence in the path ahead.
Let me walk you through some of the key updates.
Let's start with our sweep Stakes initiative, after just 9 months, since formalizing. This effort, we're now live in open Beta cross 7 states in the early signals of promising player, retention engagement, and monetization are all trending in the right direction. We're seeing clear evidence that our proposition resonates with players.
We're taking a measured and rigorous approach to scaling focused on ensuring that when we open the product to all eligible States, the experience is fully optimized and delivers on our high standards. Play our expectations and return on ad spend thresholds. We expect to be live across the full footprint of qualified US states later this year.
I want to remind everyone on the call that our strategy consists of a phased approach. We're beginning with a standalone, web-based platform, allowing us to build operational excellence and refine our course and sweepstakes mechanics.
Over time, this will evolve into a fully integrated promotional engine, that drives chip sales across our social Casino portfolio. In parallel. We continue to actively explore complementing. Our own effort with strategic Acquisitions that could accelerate our momentum and position us for Market leadership in the category.
Let's turn to our other growth opportunity. Tetris block party.
As with any new title, we're in a phase of continuous iteration, we're finding the gameplay, tuning, the economy, and sharpening, the funnel, we're currently in the mid-stages of that cycle. And while there's still work to do, we're increasingly confident in the game's potential. We remain on track for a Q4 launch.
Like to provide a bit more color on our overall play games, publishing business.
As I already highlighted because Casino portfolio continues to be impacted by the broader Market shift towards sweepstakes products.
We're seeing ongoing softness and core titles with Dau declines across the board as the primary driver. This was partially offset by stronger unit level monetization particularly in my economy which was a bright spot in the quarter.
We also continue to scale our direct-to-consumer business, which remains a standout. In Q2, direct-to-consumer generated $6.7 million of in-app purchase revenue, up 107% year-over-year and 34% sequentially, and represented 13.9% of total in-app purchase revenue.
This momentum is driven by increased adoption and deeper engagement with our My VIP direct-to-consumer offerings.
And with Apple's recent policy changes, giving us more flexibility to promote the channel. We see even greater opportunity to build on this momentum.
Let's talk. Casual our casual portfolio. Also, remains under pressure, due to challenging market and competitive Dynamics. During the quarter. We focused on product updates, aimed at improving engagement, and retention. We believe these enhancements will better position us to deploy user acquisition more profitably in future quarters in the meantime, we've deliberately scaled back marketing. Spend to prioritize margin contribution from this portfolio and we'll continue to evaluate our approach going forward.
On the play Awards front play Awards, remains still, our core differentiator, and we continue to invest in the platform to deepen engagement and drive, long-term loyalty.
And Q2 players purchased nearly 200,000 rewards with a retail value of 13 million. While rewards purchases were down compared to q1. We're seeing encouraging signs. We focus on higher value partners, and more curated strategic offerings. That align with player preferences and our broader engagement goals.
We also ran several promotions for the upcoming, my VIP World Tournament of slots across our games, which were very well received by our players. We're excited about the momentum building around this high impact franchise activation. And we believe, it'll play a meaningful role. In re-energizing our community in the coming quarters ahead.
lastly, I'd like to briefly touch on our balance sheet and capital allocation
Our balance sheet remains Rock Solid. We ended the quarter with approximately 112.9 million in cash up from 107 million in q1. Even after deploying over 2 million to repurchase shares during the quarter.
We remain debt-free with full access to our $81 million credit facility, providing us with strategic latitude to deploy capital to high-returning initiatives in the quarters ahead.
With that, I'll turn the call over to Scott for some more financial habits.
Thanks Andrew. Good afternoon, everyone.
Second for the revenue was 59 million down approximately 18.3% year-over-year and 5.4% sequentially.
This reflects continued softness in our core casino and Casual games, which is Andrew mentioned, was driven by market, disruption and Dau declines across most titles.
The adjusted debit for the quarter was $10.7 million, down 24% year-over-year and 14.2% sequentially, reflecting limited flow-through given the revenue softness.
Adjusted, even a margin was 18.1% compared to 19.5% in the second quarter of 24 and 19.9% in the first quarter of 25.
Dau was 2.3 million down from 2.6 million in the first quarter and 3.2 million in the second quarter of 24 ma was 10 million also down from 11.4 million in the first quarter.
Park dial was 28 cents up slightly from 26 Cents, last quarter and 25 cents. A year ago, reflecting stronger monetization
Direct to Consumer revenue. For the second quarter was 6.7 million representing 13.9% of total in-app purchase Revenue. This was up from 5 million in the first quarter and 3.2 million in the second quarter of 24.
For the first half of the year, direct-to-consumer revenue totaled $11.7 million, up 109.8% year-over-year.
We ended the quarter with approximately 112.9 million in cash. No debt, and an outstanding Share account of 125.2 million.
While we're currently pacing below our full year revenue and adjusted EBITDA guidance, the softness in revenue has more than offset cost savings. We are not changing guidance at this time.
With that, I'll turn the call back to Andrew.
Thanks Scott.
To close. We're cleared about the challenges in our core business but also confident that we're taking the right steps to adapt and evolve.
Our Focus remains firmly on executing our core strategic priorities. Those being developing our sweepstakes capabilities,
Expanding our direct consumer, sales unlocking, the potential of Tetris and modernizing our core games and we're encouraged by the early traction, we're seeing of these initiatives.
The investments we're making today are building a stronger, more diversified foundation that we believe will drive renewed momentum in the quarters ahead.
We appreciate your continued support, as we move forward with purpose in this Dynamic Market.
Operator, let's open it up for questions.
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press *2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.
1 moment, please while we pull for questions.
Our first question comes from the line of Ryan sigdal with Craig Hallam Capital group please proceed with your question.
Hey, good afternoon. Andrew Scott.
Hey, I
want to start with the the Dau Mau, both down, high, 20% year-over-year. I get the challenges, uh, with with, uh, you know, everything going on in the environment. But can you split that out between Social Casino casual games? I guess, was it similar between the 2 1, better, 1, worse, and then anything within within the game construct of of either of those categories?
Yeah. Um look on the The Da declines were pretty substantial. Uh, in both cases. I think obviously a lot of that as a result of our having pulled back, pretty materially on user acquisition Investments as well.
Uh and so I would say that um it's a bit more dramatic in the Casual space than the Social Casino space. Um, but meaningful in both in both portfolios
Gotcha, um, then just sweep Stakes. I appreciate kind of the player engagement, monetization encouraging commentary, but anything you can comment from
Whether it's a quantitative kpi or anything you're willing to share a number of users, how arpel Compares just anything kind of from that early launch and then I guess given the challenges that don't seem to be abating anytime soon. Um, why not accelerate kind of the full launch of sweep Stakes?
Yeah, so we're, you know, today we're in seven different jurisdictions, live with our service and.
You know, we we started this whole effort about 9 months ago and so we're at a point where we completed our platform in about 7 months.
Initiated our initial trials in the first 2 jurisdictions.
Relied upon the data and what we're seeing from those cohorts to refine the platform and the way that we're operating the service. As we build confidence, we've opened up more jurisdictions.
Uh, I can tell you that we continue to see positive Improvement across all the key metrics. So retention continues to improve conversion rates are improving the yields. We're seeing per monetizer or improving. Uh, and we're feeling really optimistic about the evolution and the progress that we're making. And as we sit here today, you know, 9 and a half 10 months into a cycle. I think we're
We're in a pretty good place. Uh, we're feeling like in the coming months, we're going to continue to open up more jurisdictions, and we're at a place where we can start allocating more marketing capital.
And achieve the kind of return targets that are going to allow us to scale.
So, you know, it's really a function of just continuing to optimize our marketing and getting comfortable with the funnel and all of its conversion metrics.
And seeing the retention engagement and resulting monetization. It's going to allow us to get the returns so that we can then deploy meaningful capital and scaling growing that business.
And I think that we're we're on plan. So we're feeling encouraged by what we're seeing. As we continue to evolve the platform, the content in the features and and just build the competency and running this business.
Um, and I do have to say that the experience is albeit early. Um and evolving is is was impressed when I guess comparable to many of the other sweep Stakes out there um and that's you know on short thanks.
Uh, last last question for me, uh, it's probably for Scott, but just any guidepost you can put around, Q3, I guess, is a starting point, I think Q3 typically from a seasonality standpoint is pretty similar to Q2, um, I guess, would you agree with that? And any any guide posting, you have our own next quarter, expectations would be helpful. Thanks.
Yeah. I mean I I can weigh in and Scott, you know, you can offer color too but as you highlighted it no meaningful differences that we see in Q3 relative to Q2 you know our primary focus is on executing on all of these things that we think are going to restore uh, the momentum in our business. And so, you know, there's a lot that's changing and a lot that's happening within the portfolio of initiatives that we're actively investing in. We're always reluctant.
to kind of provide guidance, that's based upon all of these new initiatives until we have a clear line of sight as to their predictability, both in terms of timing, when they'll be in the market and their capacity to scale and contribute to our operating performance,
So, for that reason, we're just going to kind of hold to where we are, and I think Q3 won't look that different from what we've seen in Q2.
Andrew, good luck, guys. I'll turn it over to the others.
Great. Thanks. Ryan.
Thank you.
Our next question comes from the line of Aaron Lee with McQuarrie. Please proceed with your question.
Hey guys, good afternoon. Thanks for taking the question uh want to stay in sweepstakes for a little bit more. Um, just want to make sure I have this, right? But as a, as a relates to the sweepstakes launch, um,
Is it are there any more technical aspects that you still need to hammer out for the platform? Or is it really just about optimizing and refining? Um, how you operate at this point?
Yeah, all the core functionality that's needed to actually launch. The service has been in place for the last few months.
So, we're just continuing to refine the features, the content that we offer, and all the core practices around ensuring that all the fraud detection and just the overall integrity of the service is in place. And then, obviously, a big part of this is also testing and stressing all the different marketing approaches, channels, and campaigns.
So that we can see the right unit, economics that allow us to deploy meaningful capital and scaling that business.
So we're, you know, we're advancing along all of these different fronts.
Uh, and it's, it's meaningful, and it's complicated, you know, where the people were in the companies were competing with. They've been in the market mostly for a couple years, you know, they've got all the core capabilities and competency and around operating their platforms well in place and, and evolved, and we're doing all these things the same time. So we just want to make sure that we feel really good about the Integrity of our system, and our operating practices and our capacity to deploy capital and scaling and growing it. And that's why you've seen us in a measured way. Uh, we'll go from 2 Joor to 4 jurisdictions to now 7 Jurassic parks.
so, I would expect it, you know, in the coming months we'll start to open it up and, and hopefully, by the end of the year, uh, as I alluded to earlier, just be in all of the qualified jurisdictions, so,
It's just being measured in qualifying and making sure we're ready to go.
Understood. Yeah, I think that's the right approach.
um, and then for my follow-up, you know, once we fix again, you've obviously been building out the platform organically
Uh, you mentioned you're exploring strategic acquisitions. Any color on what those acquisitions could look like? Would it be targeting talent databases? You know, any color you could provide would be helpful. Thank you.
Hey Jason. Do you want to take that 1?
Unities, you know, do some meaningful m&a to to kind of bolster our efforts and be the kind of be in the top 3, you know of this category um as well. So you know that that's how we kind of think about it. Um so it wouldn't necessarily be to solve you know, capability gaps. It would be to kind of get market share um games.
Quicker and accelerate our path to a leadership position in the category.
Gotcha, perfect. That's helpful. Thank you very much.
Thanks a lot.
Thank you.
Our next question comes from the line of Martin Yang with Oppenheimer Company. Please proceed with your question.
And Martin, are you on mute?
Despite overall.
Hey, can you hear me?
We can hear you now Martin but we but we didn't hear you.
So, if you could repeat the question, that would be great.
Sure. Uh, my question is on the Casual portfolio, aside from new product, launches, what's the medium or long-term goal? Or expectation, for the segment. Do you expect the rest of the portfolio to
Continue gradual decline or do you expect a a turnaround at certain point uh regardless of the mackerel impact?
Well, thanks. It's a great question. So, there are two aspects to our casual strategy. There's the existing portfolio, which consists of a collection of premium products.
And as I alluded to earlier, we've been focused on margin contribution and then pulled back. Pretty materially on the Investments, we're making in user acquisition.
In support of those, we also want to invest in that portfolio.
Uh, upgrading the products with more current Tech that allows us to be faster more Dynamic with the features and content that we're introducing, that should drive better retention and engagement, which in, in that in, that advertising model is what drives Revenue. So, um, we we've been working pretty hard over the last 6 to 8 months on making those refinements and adjustments. Is it alluded to we pulled back. Pretty materially in the UA Investments, across the Casual portfolio, the Legacy portfolio and we'll continue to monitor our progress there and until we get to a place where we can start to reinvest in new cohorts of players that ultimately command more Revenue. Uh, in terms of the the sale of our ad products and units,
Uh, I I don't expect that we're going to see any meaningful growth out of the Legacy, casual portfolio.
Um, there's another dimension to the Casual strategy which as we talked about relates to the tetris strategy and franchise.
And so we have an existing Tetris product that we continue to work on refining and evolving. Uh, but we've put a lot of energy in most of our resources. Behind a new flavor of Tetris, our Tetris block party product.
Which, uh, has been in development for close to two years, and we're encouraged by the metrics we're seeing from that product. Um, they're strong and they continue to improve.
And you know the state of the market is you look to bring a new, you know, Triple-A quality casual game into the market. The table stakes are just very high in terms of the future richness in the amount of content and your capacity to really run a product with a lot of dynamism and a lot of new content constantly coming into the product.
And so we're not only refining the product to get to the core metrics that we need, but we're also investing in our capabilities to deliver the volume of content that's going to be required once we start investing in scaling and launching it. And so if if we're going to achieve the kind of scale that we've imagined for that product, we need to make sure that we're ready for it and so that's what's ongoing right now.
So we'll continue to State work to stabilize. The core Legacy, casual portfolio. And once we find that it is investable, then we'll reassess the amount of UA Investments. We're making there, and we're going to continue to advance and get ourselves ready to launch and scale up our Tetris block, party product.
All right, thank you, Andrew. Um, my other question relates to Tetris block party and overall
Uh, your DTC strategy with a new game.
This block party is designed so that it's D2C here, and the different components can have another boost relative to your platform average.
Yeah, I mean that's certainly what we hope for? We have a lot more latitude today in terms of merchandising within the app, the alternative methods of more direct purchasing from our players. And so I think to your point, absolutely, we're going to do everything we can to make sure that our players are aware of the alternative and the benefits of purchasing with us directly with that said, we don't want to introduce any friction that might limit or restrict the player from converting and starting to spend money with us.
So we've been actively. Look at optimize how we do that.
And I can tell you today that the monetization within the tetris block, party product is really solid. It's, uh, it's, it's quite encouraging, and it's going to support and allow us.
To go into the market a very competitive market and buy cohorts of players.
At and around where their, where their price today, uh, given how intense the competition is. So uh, to your point, the more direct to Consumer purchasing we can motivate the more flow through a margin that we have to then look at uh ultimately piling back and investing in scaling up and growing our audience until we achieve that critical mass and then start maturing the product and focusing on.
Improving its margins and harvesting the value.
Thank you.
Our next question comes from the line of Mike Hickey with Benchmark. Please proceed with your question.
Hey, Scott. Uh, Andrew, Jason, thanks for taking our questions, guys. I guess, Andrew, just on the...
the regulatory pressure here that we're seeing from states to ban. Um,
Sleep Stakes just kind of curious your view on how that should um Trend moving forward and and how you get comfortable launching? Um, and investing the product in States, got comfortable that the regulatory, um, piece won't change and and go against you in terms of a ban.
Look, it is it's the big question, right? We and our approach is probably not all that different from most everybody else in the space, which is that we look at the market, overall, on a state-by-state basis
And we go deep into really qualifying. What are the Regulatory and legal risks within each of those different markets?
And what are the ongoing or active efforts, both in support and opposition of the sweepstakes model, within those markets. And then we allow that to inform where it is that we're ultimately going to be deploying our capital and how aggressively we get in and across these different markets.
To the extent a market that we think is relatively reliable ends up becoming higher risk. Then of course, we immediately start to moderate our spend in that market. And so it's it's Dynamic and it'll be actively managed.
Um so it's um and you know what I would also to say is that we intend to be very active in trying to help bring uh more credibility and legitimacy to this opportunity.
So the way that we're approaching sleep space and how it's employed, we have a multi-phase strategy. The first, we're going to stand up a service that we think is incredibly well executed, and we'll compete with everything else that's in the market.
But our ultimate strategy and plan is to more deeply integrate sweep, stakes, mechanics, and opportunities with our existing native apps.
And do it in a way that's focused on stimulating and driving. The incremental sales, virtual chips that we've always sold. So, I think that there's a position that we can take is we come into the market, which is that we're employing, sweepstakes mechanics as a promotional tool, the way that they are intended. And so, I I think that there's, there's a lot that we intend to do to try and and legitimize just that this opportunity overall, and make the case for how and why it should be embraced and supported, um, as opposed to opposed
The, uh, thanks, Andrew. The market, obviously, the sweep state market, and I think you've characterized it as a very competitive.
Here.
So, when you look to launch your app and your respective markets, how significant...
Is the UA spend? How's that going to impact your sort of near-term? Eva to creation? Are you, I guess, most important, confident that with that spend, the quality of your app, relative to your competition, will in fact justify the retention you need, to achieve that?
Yeah, I mean that's the that's the the model right? Is you establish and set a certain return Horizon and as long as you're achieving and meeting that Horizon, then you should be able to confidently deploy more capital.
And so, you know, the industry generally has.
Uh working towards a, a 4 to 6 month, return horizon horizon on their ad spend. I think that's a reflection of some of the regulatory uncertainty alluded to a moment ago. Before a 6-month Horizon and return Horizon on ad spend for sweeps products compares to what has been traditionally, typical for the Social Casino industry, the more traditional social Casino industry of anywhere from 12 to 24 months
So wildly different uh to I think your question like to what extent do we think? Our investing and growing our sweeps business might adversely impact you. But, uh, well, it will during its growth cycle. But that, that that's a good thing because we're seeing the opportunity to go grab customers and market share and to scale up our service uh so that ultimately can get to a place where we then start to
Focus on flow through and improve margins and harvest the benefits.
That's how from how we see a plan out the last. The other thing I would if I could might the the other thing that I would highlight is that you know while I've alluded to the market is very competitive. There's no question about it and a lot of the players in the market are have have integrated a lot of the core platform and its capabilities and all the content that they offer. And so the amount of differentiation in and across these products as preliminary,
One of the things that we're investing in is leveraging our vast library of proprietary game content that we have, as well as leveraging a lot of the social mechanics and features that we know add.
Progression and kind of a feature richness that drives deeper engagement and makes for more compelling experience.
And so we think that, you know, as we come into the market and we start to introduce more of our own proprietary content, we're going to further differentiate ourselves from our peers and make the case for how and why people should spend more of their time and money with our sweepstakes alternative as opposed to what else is out there in the market. So that's what we hope to prove out over time.
Thanks Andrew. Last question. I understand you. You kept the guidance.
The same.
Uh, obviously your your core business is, is facing um, pretty significant. Um, pressure, you know, of course, you're also on the cusp of transitioning, to the sweep Stakes, which, uh, clearly is is exciting. But we'll also, uh, take take some investment and just
Curious, if, if you're comfortable here uh that you you have enough cash.
On the balance sheet to sort of manage, uh, through through this transition.
For sure. I mean, our cash position is very strong as I alluded to earlier.
We have all the capital we need to be very aggressive in the way that we approach.
Investing in and getting into this space.
Um and in fact have enough Capital to support both of our growth initiatives. Should they continue to show positive signs? And we look to deploy tens of millions of capital into scaling and growing both Tetris block party and our sweeps business we're in a position where we can do that.
All right, guys. Thank you for your answers. Good luck. Okay, thanks. Thanks, Mike. Appreciate it.
Thank you. And we have reached the end of the question and answer session and also uh, this does conclude today's conference and you may disconnect your lines. At this time, we thank you for your participation.