Greetings, and welcome to the PLAYSTUDIOS Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Samir Jain, Head of Investor Relations and Treasury. Thank you, sir. You may begin.

Thank you, operator. Good afternoon. And thank you for joining us for PLAYSTUDIOS second 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'll 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 second 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 second 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 recent performance. We were very active this quarter completing many of the strategic initiatives we've been discussing for some time. As such, I'd like to use my time today to discuss these efforts in greater detail and let Scott follow with a summary of the quarter and our 2024 outlook. I'd like to start by offering some general observations and thoughts. This call marks our three-year anniversary since becoming a public company. When we made the transition, we shared our vision and plans for our future. We described our intention to expand our portfolio of games, scale our collection of players, enrich and more fully leverage our loyalty program, and diversify with our business. While our path to achieving these goals has been a bit different than originally imagined, we stand here today having made meaningful progress. From 2021 to 2023, please consider. We've expanded our game portfolio from four social casino apps to a collection of 20 games across most of the popular casual categories. Among them is the beloved Tetris franchise, a game we acquired along with the exclusive mobile rights for up to eight more years. We've increased our daily active players or DAU nearly 230% from 1.5 million to 3.4 million players. We've unified our myVIP loyalty program across our primary apps. And since the program's inception, we've extended nearly $900 million of real-world benefits to our players across a collection of nearly 600 unique rewards. We scaled revenues 8% from $287 million to $311 million. More importantly, we diversified our mix of business with AdMon games now accounting for roughly 19% of our revenues and direct off-platform purchases accounting for nearly 4% of our current sales. And we've increased adjusted EBITDA margins by 620 basis points, resulting in adjusted EBITDA growing from $39.5 million to $62.3 million or nearly 60%. I should note that we accomplished these things while contending with the structural challenges of user acquisition brought on by Apple and Google's changes to their data privacy and advertising practices, the secular contraction within our primary social casino game genre, increased competition for game assets among companies looking to grow inorganically and the complexities of being a public company. These dynamics, along with our lack of trading volume, have continued to put downward pressure on our stock price. In response, we've been opportunistic and repurchased nearly 15% of the company's Class A common stock while maintaining a solid balance sheet with over $100 million of cash, no debt, and over $80 million of borrowing capacity. I offer these reflections to set some context for our current performance and outlook. We're stronger, bigger, more diversified, and more profitable today than when we went public just three years ago. I assure you we remain focused on continuing to strengthen our company for the long term and we'll continue to make decisions that we believe will better position us for the future. With that said, let's narrow our focus and discuss the key events from this past quarter. Let's start with our playGAMES division and Tetris. The iconic brand had its 40th anniversary in June, and we celebrated with two major initiatives: the refresh of Tetris Prime and the initial limited release of the brand new game Tetris Block Puzzle. The refresh of our Tetris Prime product enhances the look and feel of the existing game and aligns it to be more consistent with the rest of our portfolio. The game’s new contemporary feel includes new animations, sound effects and a choice between the classic marathon mode and a new faster-paced adventure mode with additional levels. Player feedback has been positive, and we're optimistic the changes will further increase interest in the game. The launch of Tetris Block Puzzle represents our first extension of the Tetris franchise and the beginnings of our long-term ambition to establish it as a premier mobile gaming franchise. The game combines the popular block puzzle format with Tetris' incredible brand recognition. Players can choose between adventure mode, which offers level-based progression, and high score mode, which challenges players to surpass their previous best scores. The game is now available globally, and we're actively testing and optimizing our user acquisition strategies in anticipation of a full-scale promoted launch in the coming months. I want to remind everyone that like any new game, the outcome and ultimate success is indeterminate. However, early game metrics show promise, and player feedback has been positive. In addition to our Block Puzzle app, we're working on other new Tetris games and are hopeful that the third game in the franchise will be released later this year or early in 2025. Our recent acquisition of Pixode allows us to combine the innovative execution of their highly engaging block puzzle game with the strength of the Tetris brand. Much like the super-scaled games, such as Coin Master and Monopoly Go, Pixode combines the proven raid and defend mechanic with the popular block puzzle game format. We believe thoughtfully applying the Tetris brand to this game could substantially upend the category and drive meaningful ARPDAU. As evidenced by the modest upfront cash payment of under $5 million, this is an early-stage company, and there is much work to be done to produce an engaging and scalable product. However, we're excited about this opportunity and believe that the founders and talented Pixode will prove to be an incredible asset for our company. Beyond these recent accomplishments, we continue to work on our ongoing initiatives to strengthen our game portfolio and position us for growth. These include improving the monetization trends in myVEGAS and myKONAMI, growing profits in Brainium, expanding our mix of direct off-platform business, and the adoption of renewed merchandising of myVIP in all of our primary titles. I'm pleased with the progress we made this quarter and wanted to share some highlights. myVegas and myKONAMI are both showing increases in ARPDAU and the percentage of paying users. As popular games with a significant base of daily and monthly players, the primary opportunity is to more effectively convert and monetize them. The rise in the percentage of paying users suggests this is happening, which is very encouraging. Brainium is also seeing an increase in ARPDAU driven largely by new advertising formats. This was part of our thesis when we acquired the company at the end of 2022 as we believe the games were not monetizing at optimum rates. Our direct business has been steadily increasing through the year and was roughly 4.5% of total revenues this quarter. Our goal remains to continue to increase our direct business by leveraging our loyalty model to incentivize off-platform purchases. Finally, on myVIP adoption, we made significant progress this quarter and expect a full refresh of our myVIP branding and functionality to be completed by year-end. Collectively, with these key initiatives and our plans going forward, we remain keenly focused on expanding our audience, scaling revenues, improving margins, and driving higher profits. Let's shift our focus and share some highlights within our playAWARDS division. We kicked off a key strategic initiative this quarter with the launch of our myVIP World Tournament of Slots. This campaign embodies the unique position of our company, allowing us to integrate in-game features and content with real-world events and value in unparalleled ways. The inaugural tournament will be hosted by the Atlantis Paradise Island in the Bahamas and will take place October 24th through 27th. 500 dedicated players will be competing for a top cash prize of $1 million and the title of World's Greatest Lot Player. We're already seeing a buzz building across our games as players compete for one of the coveted tickets to the tournament. We expect the tournament to drive an increase in player engagement and increase the brand awareness of our games. It will also continue the momentum we're seeing in our myVIP program by bringing more attention to this industry-leading platform. We continue to work on advancing myVIP's technologies and adding new players and rewards partners to this ecosystem. This quarter we added numerous brands, such as Sonos, 6 Flags, Regal Cinemas, and the Disneyland Resort. We now have 131 rewards partners that offered over $160 million in retail rewards during the quarter. No other gaming publisher offers anything close to our collection of benefits, which we believe to be a significant competitive advantage for our company. Before I turn the call over to Scott, I'd like to touch on a few other general topics. On the M&A front, we continue to aggressively seek and qualify additional opportunities. Our goal remains to find large transformative acquisitions that can increase the scope and reach of our business. These opportunities are limited and difficult to execute, but we remain diligent in their pursuit. As Pixode demonstrates, the search for these acquisitions does not disqualify smaller opportunities that we believe can be additive to our business. Beyond M&A, we remain committed to using our capital to support the organic growth of our core businesses in addition to repurchasing our stock. On the latter, I was pleased we were able to execute the purchase of Microsoft's interest in 11.7 million shares in the quarter. The purchase was done at a meaningful discount to the average trading price of our shares and removed the potential overhang of a prolonged disposition by Microsoft in the secondary markets. Despite the continuing pressure on our stock price, we believe the intrinsic value of our company is well above where it's been marked by the public markets today. We have $46 million remaining on our share repurchase authorization and we'll continue to evaluate opportunities to acquire our stock. So those are some of the more noteworthy highlights. I'll now turn the call over to Scott to discuss the quarterly results and our outlook for the year.

Thank you, Andrew. In addition to today's press release, our Form 10-Q will be filed shortly. Please look at those filings for a comprehensive summary of our second quarter results. Net revenues in the quarter were $72.6 million, a 7% decrease versus a year ago. Weaker results were driven by softness in our social casino portfolio, which continues to be negatively impacted by an industry-wide slowdown. We continue to expect this category to remain challenged throughout the year. As discussed in past calls, our focus remains on the opportunities unique to our games, and we believe that progress there can drive growth despite a challenging backdrop. Our casual portfolio continues to perform strongly, with notable strength in Brainium. Andrew discussed some of the other drivers and I will reiterate that we expect the continued scaling of advertising and the full adoption of loyalty to support ongoing momentum. Likewise, Tetris Prime continues to grow, and our hope is that the addition of Tetris Block Puzzle will drive even more interest in the franchise. Second quarter consolidated adjusted EBITDA was $14.1 million compared to $16.3 million a year ago. As would be expected with a decline in revenue, we also experienced a decline in operating margins as the impact of our fixed costs were accentuated. We believe that our revenue will strengthen in the future, and as it does, we expect margins to return to their recent levels. Longer term, we still believe our business can reach margin parity with peers. The second quarter also marked the last period in '24 where we will compare against the previously disclosed non-recurring licensing agreement. That agreement added nearly $2 million to our revenue in the second quarter of 2023, most of which flowed directly to adjusted EBITDA. DAU was 3.2 million and MAU was 13.6 million, down 12% and 2% respectively from last year. DAU declines were driven by Social Casino and Brainium continuing the first-quarter trends. Tetris continued to see a pickup in users, though the growth was moderated from the first quarter when interest peaked due to Willis Gibson beating the game. ARPDAU for the first quarter was $0.25, up 9% from year ago results. Similar to the first quarter, we saw double-digit ARPDAU gains in myVEGAS, myKONAMI, and Brainium. We've been working on specific monetization initiatives in these games, so the results are very encouraging. We are still implementing changes and believe further gains are possible. Turning to playAWARDS, we continue to make progress expanding the functionality and scope of the platform. We closed the quarter with 570 available rewards and 131 reward partners. Partners added to this quarter include the Disneyland Resort, Regal Cinemas, Sonos, and 6 Flags. Over 500,000 rewards were purchased during the quarter, a 12% increase from a year ago. We remain focused on the full integration of playAWARDS and myVIP and continue to seek out opportunities to monetize the platform. We ended the quarter with approximately $106 million in cash, no borrowings and full availability of our $81 million revolver. As Andrew mentioned, we purchased nearly 9% of our Class A shares from Microsoft, accounting for the majority of the sequential decline in our cash balance. Our share repurchase authorization stands at $46 million, and we continue to view share buybacks as an accretive and compelling use of our capital. Similarly, 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. Lastly, our 2024 outlook. Given the weakness in the broader social casino category in the first six months and our expectations for continued softness throughout the year, we are revising our 2024 guidance. We now project revenue will be between $285 million and $295 million and consolidated adjusted EBITDA will be between $55 million and $60 million. These compare to our prior forecast of $315 million and $325 million in revenue and between $65 million and $70 million of consolidated adjusted EBITDA.

Thank you, Scott. Despite these secular challenges in social casino, I remain bullish on our business. In a little over a year, we've grown our mix of casual revenues from virtually zero to over 20%. We've expanded our adjusted EBITDA margins by over 600 basis points since '21 and raised adjusted EBITDA by close to 60%. We secured the mobile license for the highly valuable Tetris brand for the next eight years and have already launched the new Tetris game. We're hard at work developing new titles and making Tetris a multi-game franchise. With the purchase of our shares owned by Microsoft, we bought back approximately 10% of our outstanding Class A common stock this year and close to 15% since we initiated our current program in November of 2022. Our balance sheet remains pristine with no leverage and close to $1 in cash per share. While these accomplishments are absent in our share price, we remain committed to increasing the intrinsic value of the company and believe our stock price will ultimately reflect its true value. Lastly, I want to thank our talented teams across the globe that remain so committed to our company, our players, and our products. It's their passion and dedication that enables us to continue to move forward and further position the company for future success. Operator, please open the lines for questions.

Our first question comes from Ryan Sigdahl with Craig-Hallum Capital Corp.

Maybe I want to start with guidance, fully kind of aware of the industry challenges that are present for you guys and everybody. But looking at the second half implied revenue guidance, previously it was implying kind of up mid-single digits, now it's down high single digits. I guess anything besides the industry headwinds to call out, whether anything has slipped or puts takes, I guess, within your business, I guess, for such a wide swing in the back half?

No. I mean, it's really the change in the trajectory of the business that’s concentrated in, I think, two areas relative to what was our forecast. First is what's happening in social casino. And quite frankly, if you look across our three core titles, the shortfall is almost entirely attributed to one. And there's actually, I think, more positive signs associated with the other two. But the social casino category just continues to be challenging. And then the other is, we had anticipated that we would be scaling at this point our Tetris Block Puzzle product. It's in the market, it's open more generally across all of the primary markets. But we're not yet investing as aggressively as we originally anticipated in scaling it up. We certainly hope to be doing that in the coming months. The game is a great game, all of the metrics are very healthy. The challenge that we're having right now is just optimizing our capacity to acquire players. And so we get some amount of organic traffic but it's modest relative to our other Tetris product. And we need to stimulate more growth by being able to go and invest and acquire new users affordably and profitably. And it's just proven to be super challenging. There are incumbents in the category that are spending a lot of money making the cost per install nearly prohibitive. We think we'll overcome it, because we have what we believe is without question the strongest product in the category. And so we're exploring and testing a variety of different strategies and tactics. So we hope to be able to do that before the end of the year. But those were the two reasons really for the change in the overall forecast. Social Casino, one product within the portfolio specifically and the delay in scaling our block puzzle product.

Do you have any updates on the pipeline of potential customers for playAWARDS and how we plan to monetize it in a B2B manner?

No, there is nothing significant to share at this moment. I can tell you that we are actively exploring opportunities, but our primary focus has been on stabilizing the core casino portfolio along with several initiatives and adjusting the cost structure in response to current revenue trends. The team is diligently working on refining the cost structure of the business. Once we achieve stability in our core operations, we will have the bandwidth needed to advance this aspect of the business. For now, our priority is to stabilize the core business, concentrate on what we view as immediate growth drivers, and ensure that we are managing the cost structure appropriately. That is what we are concentrating on.

Last one for me. Just anything from a Q3 to Q4 cadence from a cost standpoint, whether it’d be advertising and customer acquisition, competing against the election or the myVIP World Tournament of slots, how much of material potentially impact that is? But just anything to be aware of from kind of a cost and/or sequential standpoint in the Q3, Q4?

Nothing meaningful. I mean, there is obviously the fourth-quarter seasonality. I mean you highlight the election, not entirely sure how that's going to impact some of the investments we make on the UA front. But no, nothing meaningful to add.

Our next question comes from Cory Carpenter with JP Morgan.

I have two. Maybe to start, just hoping you could expand a bit on the myVEGAS and KONAMI initiatives. Maybe what exactly you're doing and how far along you're on that journey? And then you just mentioned, Andrew, there's one game that's lagging. Are there things you're doing here that you think could be expanded to other games in the portfolio and applied and helpful in that manner?

So myVEGAS continues to stand out in our portfolio, experiencing consistent growth at a double-digit rate across all timeframes – year-over-year, quarter-over-quarter, and month-over-month. This indicates solid momentum and presents an opportunity to stabilize the overall casino portfolio while achieving some modest growth. However, there’s still work to be done. In contrast, KONAMI's performance is relatively flat, showing stability without growth at the moment. We believe it is also on a path to modest growth. Pop! Slots has faced contraction, especially this past quarter, where performance saw a significant slowdown. This was largely due to our management strategies regarding the product. Its underperformance can be attributed as much to our operational choices as to market conditions. Historically, Pop! Slots has been a key contributor for us, and we expect that as we resolve the identified issues, it will regain its position. Regarding recent changes, back in the second quarter of last year, we undertook a notable restructuring of the casino portfolio. myVEGAS and KONAMI were initially managed by teams in Asia and Austin, respectively. We decided to centralize the management of our casino portfolio in our Tel Aviv studio, where we have a strong talent pool, believing they could enhance the products through their combined expertise. We completed this restructuring in the second quarter, which allowed us to start stabilizing and gaining traction as we moved into the third quarter. However, that momentum faced some disruption due to the ongoing conflict in Israel, complicating our efforts. Nonetheless, we successfully achieved our goal of establishing new leadership focused on advancing these products. We are seeing positive results with both myVEGAS and KONAMI, though we have not yet seen similar success with Pop! but remain focused on stabilizing it and believe there is potential to reset that product.

And then just for a follow-up, just because Tetris so big uplift in 1Q from the player beating the game. How was the response to the 40th anniversary in terms of just consumer excitement? And I know Tetris did some specific marketing around it. So how did consumers respond to that relative to your expectations?

Yes. I mean, relative to our expectations, it fell quite short of them. And we saw some uptick in organic traffic but relative to our experience from the first quarter with what we refer to as the Willis effect, not nearly the same. So we didn't see the same kind of interest and social engagement and activation that would have translated to the kind of growth that we had imagined. So it fell short of our expectations. With that said, we've kind of reloaded, this is the year of Tetris' 40th anniversary, we've got some other cool things that we're doing with some interesting campaigns and influencers that will continue to take advantage of its milestone birthday, and we'll see if we can find a way to generate that organic interest. But we still feel like there's an opportunity there. And with that said, the year-over-year performance for Tetris continues to be strong. So when you look at how it's performed this quarter relative to the same quarter last year, it's up, and we will continue, as I said, to support it and take advantage of these opportunities.

Our next question comes from Aaron Lee with Macquarie.

Can you provide more details on the new Tetris product? Specifically, what early engagement and retention metrics are you seeing, and are there any cross-selling opportunities with your existing Tetris game? You mentioned that the timing for scaling up marketing wasn't ideal, but how do you determine when it's the right time to push this game further or what indicators you would want to see before making that decision?

In terms of the game, we're observing strong retention rates. The early retention is where we would want it to be, which is crucial for stacking cohorts and expanding the audience. This performance is holding steady as those cohorts mature. Day 30 retention remains robust, which aligns with our expectations for cohort stacking. Our focus now shifts to our ability to acquire new players at a cost that ensures we achieve the desired returns within an 18-month payback period. Currently, we face some challenges with cost per installs, but I can report that in the last 30 days, the team has effectively reduced CPIs. Our approach in discussing the product, converting traffic, and ultimately driving installs and retained installs is improving, which will influence when we are ready to invest more heavily. We will start increasing user acquisition investment once the cost of acquiring a player reaches a level that allows us to confidently expect a return within our set 18-month timeframe. Once we reach that level, we will begin to layer in additional user acquisition spending.

And then just broadly, I want to touch on your cost structure. How are you guys thinking about your cost structure right now? Do you feel like it's in the right place or are there opportunities to become more efficient while also making sure that you don't impact your product pipeline and the things that you have planned?

It is not aligned with our current revenue pace. Our senior and broader leadership teams are continually assessing how we can enhance our efficiency and productivity while supporting our products in a more cost-effective manner. This is an ongoing focus for us. However, it is complex because we aim to continue supporting our products with new content and features essential for maintaining or improving their performance. Beyond sustaining our existing products, we are also making investments and pursuing initiatives that we believe will foster future growth, particularly with the Tetris franchise. We are committed to investing in Tetris and playAWARDS as we are focused on growth. Currently, these efforts do not contribute to our margins or overall performance, as they have not yet impacted our top-line growth. Nonetheless, we are confident in these initiatives. We are rigorously analyzing their progress and performance, assessing market fit to ensure they are ready to scale. We believe the investments we make in relation to their potential benefits are the right approach. We are being cautious about reducing costs without compromising our current momentum, while strategically investing in new initiatives that will drive future growth.

Our next question comes from Clark Lampen with BTIG.

There are some pressures in the social casino portfolio related to the game you mentioned. Is this related to the new Tetris game that we are currently trying to scale, where the lifetime value metrics may not meet your expectations, or is there a problem with engagement? I would like to understand the underlying reasons for the pressure and how vulnerable you believe it might be. My second question is about the team playAWARDS opportunity. Can you clarify what you see in this area? Considering that resources are being allocated elsewhere right now, what factors have hindered your scaling efforts? Have you encountered more resistance in the sales process after onboarding? Any insights you could share would be appreciated.

You're experiencing some connection issues, but I believe I understood your two questions. The first pertains to the game in our casino portfolio that is underperforming and whether that is related to the same dynamics we see with the Tetris product, which is about player acquisition at justifiable prices to promote future growth. To put it simply, that's not the case. Pop! Slots has consistently been a strong game and a leader in monetizing our existing audience. The challenges we face are linked to our management of its economy, particularly regarding the value and playtime we offer players for free and the timing of introducing monetization elements that require them to spend money. It's a complex issue. We made some decisions that led to players not monetizing as effectively. They remain active but can play without spending as much. This is not the only issue, but it's a significant one that we are currently addressing. We've implemented several strategies already and are seeing some positive changes. Thus, the problems affecting this product are quite different. Unfortunately, Pop! Slots is the largest product in our portfolio, so an 8% to 9% drop in its performance is quite significant for our overall outlook. While our other products are stable or growing year-over-year, the decline in Pop! Slots has offset that growth. The team is dedicated to resolving these issues, and we believe we have a solid plan to stabilize it and possibly achieve modest growth. Regarding your second question about playAWARDS, it represents an opportunity. As I mentioned earlier, our leadership team is concentrated on streamlining our business and identifying where we can reduce costs while focusing on initiatives that will directly add value. The playAWARDS team is primarily focused on optimizing our own games' playAWARDS program rather than expanding the platform for third parties. We've conducted substantial market research and engaged with various game publishers about their interest in partnering with us to test these programs for potential long-term retention and loyalty benefits similar to those we see in our own portfolio. While we still see potential there, it's currently not our top priority. I hope this clarifies your question about playAWARDS.

Our next question comes from Martin Yang with Oppenheimer and Company.

My one question is about the timing of the third Tetris game. Is the launch plan relating to the third game tied to how you scale Tetris Block Puzzle and how the current UA campaign trends would that inform on your decision on the third Tetris game's launch date?

No, the answer is no. We evaluate each of these games with a comprehensive strategy for Tetris. There is a range of products designed to appeal to both dedicated Tetris fans and newer, more casual players. Each game has its own unique role within this strategy. They are being developed and tested individually in the market, and we need to ensure that they justify continued investment in both development and marketing. I hope that the insights we gain from our current products, Tetris Prime and Tetris Block Puzzle, including our successes and challenges in marketing them, will guide our strategy for launching future products in the franchise. However, the success of one game is not reliant on another for us to keep advancing and investing in our products.

I have a follow-up. As a reference to cross-promotion, can you maybe generally describe how much cross-promotion have you applied across all the games, including social casino and the casual portfolio?

Not nearly enough. So it was one of the core aspects of our whole thesis and frankly our own experience in the past. When we introduced new products, we'd incorporate the loyalty program, we’d aggressively cross-promote, and we would communicate all the benefits to the player of actually adopting and engaging with one of our new games. Adopting our loyalty program into our other titles so that we have the capacity to not just cross-promote them but to incentivize the adoption and playing of our other products is not something that we’ve executed on to our expectations. So we are in the cycle of that. We are just a few months away from having the program unified and being able to manage it, as I just described. So we should be able to see better performance and harvesting of players from our existing network that we've not yet really seen the full benefit of.

Our next question comes from David Pang with Stifel.

Just wanted to follow-up on the myVEGAS title. And given the improving trends for the title, are there plans to invest in marketing for the game?

Yes, we currently do. In fact, we are continuously assessing every two weeks the wholesale status of each title in our portfolio, along with their marketing budgets and any necessary adjustments. It's important to note that we manage the campaigns for these titles on a daily basis, if not multiple times a day. However, we review the overall budget allocation every two weeks and have decided to invest more marketing funds into that title. So yes, it deserves that attention, and we will be increasing our spending.

I would like to know your thoughts on the ongoing weakness in the social casino category. Are you noticing any effects from iGaming or overlap in the player base?

I don't believe the weakness is coming from iGaming. Instead, I think it's attributed to a new type of free-to-play casino product, specifically in the sweepstakes category. The sweepstakes industry has seen remarkable growth over the past few years, expanding from a $0.5 million market to nearly $3 billion this year. These sweepstakes offerings are free-to-play social casino products, primarily accessed online with companion mobile apps. More than 70% of the engagement happens on mobile devices. Therefore, I would consider them a complement to, if not part of, the social casino category. If you examine the challenges faced by traditional social casino operators on mobile and desktop, particularly the ones that focus solely on social casino, the main challenges stem from the rise of these sweepstakes options. What makes them so appealing is their dual currency model. Players start with a currency they can use to play for free and have the option to switch to a mode where they can play with a currency that can be accumulated and cashed out for real money. This structure complies with sweepstakes laws in about 45 states, which permit this type of gaming. Thus, it seems that these sweepstakes products are increasingly encroaching on the traditional social casino market.

Our next question comes from Greg Gibas with Northland Securities.

Wanted to get a sense of kind of within your updated guidance, what you assume for performance within the social casino versus the casual categories in the back half?

We generally have kind of assumed similar trends to what we're seeing today in terms of pace. I mean, we believe that we'll stabilize PoC. But that generally, we're going to continue to see pressure on social casino as the category. Coming from, as I just described, we think some of the broader market dynamics, the emergence of sweeps. And we'll talk about kind of our strategies and plans for sweeps on a future call when we're in a better position to. But as far as the social casino category, we're generally forecasting similar performance to what we've experienced so far this year.

And regarding kind of what you said about M&A, seeking large transformative acquisitions, kind of hard to come by, hard to get over the finish line. How active should we expect it to be maybe in the back half, should we expect some smaller opportunities like we saw from Pixode? And then given your commentary on the sweepstakes category, does it make sense for you guys to maybe pursue that?

Jason, do you want to take that question?

So we remain aggressive but disciplined in our pursuit of M&A. It's certainly something we're focused on. At all times, we have an active pipeline of companies that we are pursuing that fit into the various buckets, some of which are in that transformative bucket that are meaningful scale, but will obviously are more complex and harder to pull off as you alluded to. And some of which are really attractive, more tuck-in acquisitions that we think are strategically compelling and accretive that we can go after. And so we remain open to all of those different opportunities that can add value to the business and be accretive to either our growth or to our margin profile. When it comes to the sweepstakes business, we continue to look at different opportunities to evaluate that space. We're being very thoughtful in the way that we enter that space and consider all the different opportunities there as well, given how big of a market it's become and how dynamic it is. We want to be thoughtful. But you can expect to hear more from us around that in the future.

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

Thanks very much. So look, before we conclude the call, I just want to reaffirm a couple of key things. First of all, as a management leadership team, we are intensely focused on making sure that our business is operating efficiently and productively and that where there is an opportunity for us to take cost out of the business and improve our margins, we're going to find it and we're going to do it. But we're also a company that is deeply committed to future growth. It's not as deterministic as we'd like it to be. We're creating products that don't have functional utility. They're entertainment products that appeal to people on more of an emotional plane. We believe in the opportunities that we're investing in. We're going to continue to invest in those things, because of the future growth they represent. And hopefully, we'll continue to find the right balance between optimizing the performance of our business as it is today, as challenging as the environment is, while still investing in those things that are going to drive our future growth. So I appreciate that it's certainly difficult to engender the kind of confidence from the investor community that we would hope and want, particularly when we're having to adjust our guidance. But I believe that I, along with the team, are doing all the things that we need to do to be responsible and reacting to both our current performance while still staying focused on what we can and should be investing in to scale up our business and build the kind of confidence going forward. So I appreciate everybody's time, continued support. And I look forward to talking about our progress on our upcoming calls. Thank you very much.

Thank you. And with that, we conclude today's conference. All parties may disconnect. Have a good day. Thank you.