Good afternoon, everyone, and welcome to the PLAYSTUDIOS First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session and instructions will be given at that time. As a reminder, this conference is being recorded. I would now like to turn the call over to Samir Jain, Head of Investor Relations and Treasury. Mr. Jain, you may begin.

Thank you, operator. Good afternoon, and thank you for joining us for PLAYSTUDIOS' First Quarter 2024 Earnings Call. Joining me on the call today are our Chairman and CEO, Andrew Pascal; and our CFO, Scott Peterson. Before we begin, let me remind you that, during the course of this call, we will make forward-looking statements. These statements are based on our current expectations and beliefs and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for a discussion of the risks and uncertainties that may affect our future results. I would like to remind everyone that we 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. Our results are prepared in accordance with GAAP, and a reconciliation to comparable GAAP measures will be provided in our first quarter earnings release and in our SEC filings. With that, I'll pass the call to Andrew.

Thank you, Samir, and welcome, everyone, to our first quarter 2024 earnings call. As always, our commentary today is in addition to the financial disclosures we made in our press release. I encourage you to take a look at the release for a summary of our more recent performance. I'll begin with a few thoughts on the quarter and the company's outlook, after which Scott will follow with a discussion of our financials, and then we'll open the call for your questions. Revenues and adjusted AEBITDA in the quarter were ahead of consensus expectations and our own internal plans. On a year-over-year basis, and as expected, both metrics were down from year-ago levels. As I alluded to during our last call, many of our products are undergoing meaningful changes, which we expected to temper this quarter's operating performance. This was by design as we focused on building the infrastructure needed to revitalize these games and position them for growth. As a quick recap, initiatives in 2024 include a portfolio-wide adoption of our updated myVIP loyalty program, restoration of myVEGAS and myKONSMI, the generalization of playAWARDS, the launch of at least one new Tetris title, and an expansion of monetization within the Brainium portfolio. We're making notable progress on all these fronts, and I believe we're on our way to exiting the year at an improved run rate. Let's delve a bit more deeply into our PlayGAMES business division. Overall, the results in PlayGAMES continue to benefit from momentum in our growth portfolio. Tetris was again the standout, as its revenue and DAU were well ahead of year-ago figures. High levels of organic traffic were amplified by the recent fascination with Willis Gibson, the 13-year-old Tetris player who became the first person to defeat the game. The global reaction that ensued reaffirmed our belief in this beloved franchise and our plans for tapping its unrealized potential on mobile platforms. With this in mind, our Tetris Prime team has been working hard on refreshing the look and feel of the existing game, elevating its creative execution to the standards that are more consistent with the rest of our portfolio. Our goal is to have this new version ready for Tetris' 40th anniversary in June. We also plan to complement this core Tetris title with at least one new casual variant later this year, likely in the third quarter. With the mobile license in place for the foreseeable future, our long-term ambition is to establish Tetris as a premier mobile gaming brand. It's also worth noting that we continue to enjoy solid momentum from our branding portfolio, which helped this quarter's results. We've been introducing new ad units and optimizing fill rates, driving an uptick in monetization. We're expecting further improvements as we introduce rewarded video and complete the integration of the myVIP program. A unified and consistent execution of our loyalty solution across all of our primary titles is a top priority for us and something we're committed to accomplishing in the coming months. Our core portfolio is generally trending in line with the broader social casino industry, which continues to be challenged. We expect this to be the case throughout 2024, so we don't anticipate the industry's rebound this year. As a result, our focus remains on refining our technology tools and operating capabilities, which should position us well when the market dynamics improve. With that said, our top priority is to better leverage our learnings across our collection of social casino titles. In support of this, we have transitioned our myVEGAS and myKONAMI games to Tel Aviv and are deep into the process of updating the games and improving our operations. This has been an ambitious undertaking, which was further complicated by the conflict in Israel. But we're making good progress, which is reflected in the more recent pickup in daily conversion rates. We're also working on increasing our direct-to-consumer business, which is largely nascent today, the primary focus to more effectively leverage our myVIP.co player portals with our active monetizers. The use of our loyalty program is a primary driver of direct business and presents us with a differentiated strategy. Over time, I believe this will allow us to grow our direct sales and further improve our margins. Turning to playAWARDS, we continue to focus on two key themes: one, fortifying our industry-leading platform by advancing its technologies and adding new players and rewards partners; and two, generalizing the platform for extended use. Third-party game publishers remain interested in our unique offering, and we continue to qualify our best to structure a partnership. We expect these conversations to continue throughout the coming quarters, with the goal of formalizing the pilot relationship before the end of the year. As these partnerships mature, we believe we can evolve playAWARDS from a cost center to a revenue-generating loyalty-as-a-service business. Before turning the call to Scott, I want to discuss our capital position and plans for investing our available cash. We restarted our share repurchase program in the first quarter and have bought an additional $4 million of stock through today. We view our share price as deeply discounted and believe buying back our own stock creates value for all shareholders. At the same time, we remain committed to identifying and completing transformative M&A transactions. We continue to actively search for compelling opportunities and are keeping with our overall strategy and expansion plans. Our goal remains to use our capital to enhance our strategic position, drive incremental growth, and increase the value of our company. I'll now turn the call over to Scott to provide some additional comments.

Thanks, Andrew. Good afternoon, everyone. In addition to today's press release, our Form 10-Q will be filed shortly. Please look to those filings for a comprehensive summary of our first quarter results. We started the year strong with quarterly net revenues and consolidated adjusted AEBITDA ahead of consensus expectations. First quarter consolidated adjusted AEBITDA of $15.3 million was 14% lower than a year ago, while net revenues of $77.8 million were 3% lower. As a reminder, the first half of 2023 results include the benefit of a licensing agreement that ended later in the year. Adjusting for the impact of this agreement, first quarter consolidated adjusted AEBITDA and net revenues would have been roughly flat with last year's amounts. As mentioned on our last call, we are anticipating building strength throughout the year. This is due to the numerous initiatives underway that will layer into our results sequentially. DAU was 3.5 million and MAU was 14.8 million, down 2% and up 13%, respectively, from last year. MAU increased due to the Tetris activity related to the Willis Gibson exposure of beating the game. However, Tetris DAU increased over the quarter at a more modest rate. DAU declined in total, primarily through the core portfolio of our social casino games, partially offset by the Tetris increase. ARPDAU for the quarter was $0.24, flat with year-ago results. We recorded double-digit gains in myVEGAS, myKONAMI, and Brainium. Turning to playAWARDS, we continue to make progress expanding the functionality and scope of the platform. We closed the quarter with 521 available rewards and 113 reward partners. Over 500,000 rewards were purchased in the quarter, a 14% increase from a year ago. We remain focused on our full integration of playAWARDS and myVIP into our games and continue to seek out opportunities to externalize the platform. We ended the quarter with approximately $127 million in cash, no borrowings, and full availability of our $81 million revolver. As Andrew mentioned, we resumed repurchasing our shares during the quarter and have bought an additional $4 million of stock through today. As such, we have $46 million remaining on our share repurchase authorization and continue to view share buybacks as an accretive and compelling use of our capital. In addition to repurchases, our broader capital allocation goals remain the same: investing in our games; building and scaling playAWARDS; and the pursuit of strategic and accretive M&A. Our 2024 financial guidance remains the same: revenues in the range of $315 million and $325 million; and consolidated adjusted AEBITDA between $65 million and $70 million. I'll now turn the call back to Andrew for some closing remarks.

Thanks, Scott. Before we end our prepared remarks and open the call for questions, I'd like to touch on a few highlights. We had a strong quarter with revenue and adjusted AEBITDA above our and consensus expectations. We remain on track to meet our full year earnings guidance, which calls for positive sales and earnings growth this year. Changes in myVEGAS and myKONAMI are in process, and we're encouraged by the progress. We believe both games have the potential to meaningfully improve monetization this year. We remain on track for a full integration of our updated loyalty solution into all of our games by year-end. In addition to better game metrics, we expect the integration of myVIP.co to drive higher direct sales. Brainium's results are showing sequential strength on the back of expanded advertising efforts. We look for continued momentum through the year. Tetris continues to grow materially and is positioned for a strong 2024. Two new Tetris games are in development with the goal of launching one later this year. We continue to explore ways to open playAWARDS to external platforms. Conversations with third parties continue, and we remain confident that playAWARDS can evolve into a profitable stand-alone business. Finally, we restarted our share repurchase program this quarter, and we continue to believe our stock is trading well below fair value and represents tremendous value. With that, I'll turn it over to the operator. Operator, please open the line for questions.

Thank you. At this time, we will begin our question-and-answer session. Please hold on while we check for questions. Our first question comes from Ryan Sigdahl with Craig-Hallum Capital Group.

I want to start with the playAWARDS. What was the royalty revenue last year? Just can you remind me what it exactly was and why it didn't repeat? And then talk through the pipeline of the B2B opportunities and licensing opportunity for playAWARDS. And then kind of lastly, along with that, when should we expect for the segment to inflect to profitability and self-sustaining?

Thanks, Ryan. On the first question, if you recall, last year, we had a relationship with a technology provider related to a suite of blockchain technologies that we were going to incorporate into our platform, a company called Forte. So we had a licensing agreement in place with them where we were making use of their technology and, in turn, they were licensing from us some of our intellectual property and certain rights to leverage a bunch of the work that we had done in the playAWARDS space. So that expired towards the end of the year, and that's why that's not a nonrecurring revenue line item. On the B2B efforts, as I alluded to in our remarks, we've had a bunch of conversations dating back to last year with a number of different game publishers just to qualify the overall opportunity. We've taken on a lot of the feedback that we received and continue to invest in evolving our platform and tools in response to some of that feedback. We have active conversations that are still ongoing, which is why we've kind of established an expectation that, before the end of the year, we'll have our first pilot program in place. Then, based upon the performance and success of that program, we'll converge on what ultimately will be our commercial model and resolve how it is that we'll scale that business. So on the third question as to when it would turn profitable, we can't really provide any indication, but it's certainly not assumed to impact this year's performance. We'll certainly provide a bit more visibility and guidance once we have it ourselves.

Helpful. Just a follow-up on the exchange with Forte. Was that effectively a 0 margin, 0 AEBITDA then, since you were exchanging technology for technology effectively?

No. It was a high-margin opportunity. I mean, we received compensation and consideration for licensing and for the use of select IP, so it was high margin.

Got you. I didn't know if you were paying back to them for their technology, but it makes sense. Moving along to Tetris, it looks like one of the Tetris games is live in Canada. Another one says 'coming soon' in the U.S. But can you elaborate on which one of those you expect in Q3? And then any more comments on the game variance and who the targeted audience for these Tetris games will be?

Sure. We're really excited, obviously, about Tetris as a franchise. You might not know that, in June, it will be the 40th anniversary of Tetris. We're obviously looking forward to the elevated interest that Tetris will likely have, and we're going to take advantage of that and be a part of all the campaigns celebrating the 40th anniversary. A big part of that will be the refresh and revamp of our existing Tetris Prime product. So that's been ongoing, and that will be live in the June time frame. Regarding the new Tetris products, we have two casual Tetris products that have been in development for over a year now. Both are continuing to advance. We fully expect one of them will launch this year. We're not quite ready to identify and start speaking to which of the two we're going to launch with. Suffice to say, we're feeling pretty comfortable about the progress that the teams are making. As for the target audience, it's a broader, more casual audience. A lot of the people that play Tetris today tend to be more purists. We believe there's a very big audience out there that would love to play Tetris on a mobile device. Mobile games have evolved quite a bit since the first introduction of Tetris as a game format. We think that a hybrid game that takes advantage of really proven block puzzle mechanics, along with some of the other meta features that you see in the most popular casual games, will provide a more interesting and accessible experience for a much larger audience. So that's our focus regarding the consumers we're targeting.

Our next question comes from Aaron Lee with Macquarie.

So you guys saw a nice uptick in rewards purchases this quarter, obviously, both in the number of units and the retail value. Is there anything to unpack there just in terms of the driver of that? And anything you can comment on in terms of initiatives to move these metrics higher ahead of your loyalty platform commercialization?

The rewards redemptions are well distributed. The team has successfully optimized our rewards portfolio. Our players really enjoy many of the events we host, including experiences like myVEGAS. We are planning to enhance our efforts in proprietary events. One major initiative we are launching is the World Tournament of Slots, aimed at identifying the world's best slot player. This will encompass our entire portfolio and feature a series of tournaments, allowing participants to qualify for a live event that will attract a large audience. This illustrates where we see significant opportunities. Across various categories, we continue to observe strong momentum, which is encouraging as the redemptions remain diverse.

Great. That's interesting. And just a quick follow-up regarding your guidance, which you've maintained. Just given that the quarter came in above expectations, has anything changed in terms of how you're thinking about the cadence of the quarters or the weighting to the back half of the year?

We think the first quarters historically tend to be a stronger quarter. In light of just some of the lack of predictability and stability in the casino category or genre, we're not in a position yet where we're going to adjust our outlook. So we feel comfortable with where we are at the moment.

And our next question comes from David Pang with Stifel.

So just a follow-up on one of the earlier questions, but in your conversations with potential external game publishers for playAWARDS, what is the biggest source of friction or pushback you're hearing from them?

I think that, first of all, the universally positive feedback we've received shows that people recognize how unique the whole value proposition of our loyalty program is, not only having a tiered loyalty structure with all kinds of digital rewards and benefits, but also the real-world tie-ins that we provide. A lot of the constructive feedback we received is around the effort and time required to integrate a program into their product or suite of products. As you can imagine, games that have meaningful scale and momentum have dedicated teams and roadmaps with features and new content that they plan to introduce. To find room for and make development capacity available to incorporate something substantial like a loyalty program is a meaningful commitment. So they push pretty hard and want to understand more about our SDKs and integration approach and tools and support that we can provide to ensure that the time and effort to implement the program would be more predictable and lead to benefits that we've enjoyed and that they too can enjoy. It's really around the effort required to implement a well-executed loyalty program within their products. I should highlight we've made great strides in terms of making the whole exercise more efficient by creating tools and reference documentation.

Got it. That's really helpful. And then just one on the marketing environment. Can you provide an update on the mobile marketing environment? What are the platform policy changes? How is that affecting your thoughts on new game launches?

Well, look, obviously, a lot has been made of all the privacy policy changes that the platforms have instituted and how they've translated to the tools they provide and the restrictions they've imposed, making it more challenging than ever to target consumers and scale and build an audience. Those policies continue to get narrower. With that said, I think that if you have a successful game and certainly franchise brands like we have in Tetris, you generate a tremendous amount of organic traffic and interest. Our Tetris product generates well over 22 million organic installs a year. We believe that while the environment is challenging, there's an opportunity with the right types of products and franchise brands to rise above the noise, overcome a lot of these restrictions, and build a meaningful audience. If you look at our portfolio, they're based on established and beloved brands, whether that's the popular Las Vegas brands for our casino portfolio, Tetris in the casual category, or games that have at least 10 years of history and demonstrated durability and resilience of their audience. So we're very keen and clear about the complexities of user acquisition. As we continue to invest in our products, those are some of the factors we consider.

And our next question comes from Greg Gibas with Northland Securities.

Curious if you could kind of attribute what kind of drove the outperformance relative to your expectations in the quarter? I imagine Tetris was a key one, but I'm just curious how you'd attribute the outperformance.

Generally speaking, I think that the portfolio of products performed as expected. Tetris definitely was a bit of an outlier, driven by some of the residual impact of the Willis Gibson event, which I alluded to earlier. For the first time, Tetris was defeated and it became a social phenomenon. We saw a meaningful spike in installs and engagement. We've also seen pretty healthy performance momentum with our branding suite of casual products. Within the casino portfolio, we're pretty happy with some of the momentum we're seeing with our myVEGAS product, where a lot of things we've been working on seem to be translating. Those are some of the highlights.

Great. That's helpful. Regarding the spike in Tetris, it makes a lot of sense regarding how much it is in the news. Was that interest showing momentum beyond when it occurs? Are you still seeing elevated gameplay and interest? I'm just curious if that momentum has carried into Q2.

Well, I would say, if you look at the current normalized state and pace of that product relative to where it was before the Willis Gibson event, it's definitely stepped up but has regressed a little from its peak, which is to be expected.

Yes. Fair enough. Great. I know you provided some pared comments on it, but any more that you can provide us on the M&A search and how that's been trending this year?

We've got Jason on the call. I'll let him speak and provide a general update. We can't be too specific. Jason, do you want to provide some highlights?

Yes. We remain committed to our M&A strategy. There are many opportunities in the market. We have an active pipeline of companies that we continue to engage with on the M&A side. As you know, getting these M&A deals over the line is complex. We need to structure deals that are accretive to our financial profile, both in growth and margin, and they also need to be strategically compelling and timed right when we're able to transact upon them. We don't have anything closing right now that we can announce, but we're engaging in deep conversations with exciting opportunities.

Thank you. Our next question comes from Martin Yang with Oppenheimer & Co.

First question for Andrew. Can you share what your high-level thoughts are on the prerequisite for our social casino genre to recover? Anything you could point to, either internal or external, that would be helpful?

Martin, thank you. That's a good question. I think that the casino genre continues to command a lot of interest. Over time, it's gotten increasingly competitive. Recently, it has come under some pressure, but the areas of growth and opportunity have shifted to different commercial models. Our feeling is that we've got a large audience of engaged players who love this form of content. Looking at some of our peers, there's still opportunities to scale and grow the audience, although that's become more challenging. For us, it's really about looking at different commercial opportunities, ways to monetize more of our existing audience, and the direct-to-consumer opportunities, which were behind the market as far as momentum, yet we have compelling unique assets to encourage our existing players to purchase directly from us. I think the momentum we'll continue to see as we convert more players to direct purchase. As we test and try different commercial models, we can change the underlying economics, allowing us to invest more aggressively in acquiring and scaling the audience again. I assume the same is true for many of our peers.

My next question is about Tetris. Around June, in time for the 40-year anniversary, are there any other external events, large market campaigns that you should maybe point us to watch for potential industry-wide re-engagement or events that will drive new players to all things Tetris, including your game?

Sure. We have a number of campaigns lined up to celebrate the anniversary of Tetris, starting with our Tetris rebrand. We're considering it the Year of Tetris, layering in activities throughout the year. We've got some activities with our playAWARDS partners, and the Tetris Company is doing a number of campaigns that should raise the profile of Tetris as well. We are excited about the Tetris anniversary and expect it will generate buzz.

Our next question comes from Clark Lampen with BTIG.

I wanted to follow up on the topic of social casino market dynamics. Just to be clear, if we imagined that the market backdrop for mobile as a whole was improving, do you view social casino as being a steadier entity, a sub-segment that, if the market is ebbing and flowing, social casino patterns may be a bit more muted and there's less of a rising-tides-lift-all-boats dynamic?

That's generally the prevailing view. If you look at the forecasts for social casinos, the trends have generally been flat. It actually compressed a bit a couple of years ago and just last year remained flat to down slightly. The forecasts going forward indicate stagnation. Nobody tracking various companies and market trends sees any catalyst for meaningful growth. For us, we still view the category as significant; it's a $7 billion-plus market. We believe our products are differentiated, with gains in brands and features. There's more we can do to monetize our existing audience, which will change the unit economics of what we can invest to acquire new users and start driving growth. I maybe didn't explain this clearly: as we improve monetization of existing products, we'll change the dynamics around what we can continue to invest in stabilizing or growing our audience. We believe that's possible, but not without improving the overall ratio between user acquisition costs and their returns.

Got it. If we consider the confluence of these factors regarding market dynamics, monetization push, and others, what does that translate to for DAU growth? I know it's not something you explicitly guide on. But could you provide directional commentary on sequential patterns of growth?

Yes. I’ll invite any of my colleagues to weigh in if they have insights to share on this question. My view is that DAU growth going forward will be driven more by new products we introduce to the market. We see potential in existing products like Tetris, benefiting from tremendous organic interest. But the bigger opportunity lies in retaining our existing audience and monetizing it better. We believe significant opportunities exist to meaningfully increase and improve monetization across our core casino portfolio and even some casual products. Our model and loyalty program focus on retaining our audience more than most others. While many peers have seen audience contraction, we believe our loyalty program allows us to hold onto our audience, providing time to engage and convert them to spending. That focus on converting our existing audience and driving revenue among retained players will drive top-line business growth, which should translate into margin expansion as well. As we launch some of these new products, we'll leverage them to attract and acquire new players into our network, and once we incorporate the loyalty program, we can cross-promote across our portfolio and enjoy the network effects.

Thank you. There are no further questions at this time. I'll hand the floor back to management for closing remarks.

Well, thank you. I want to thank everyone for your continued interest and support. We look forward to checking in and providing further updates on the quarter.

Thank you. With that, we conclude today's call. All parties may disconnect. Have a good day.