Greetings, and welcome to PLAYSTUDIOS First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Jason Hahn, Chief Strategy Officer and Head of Investor Relations. Thank you, sir. You may begin.

Thank you, operator. Good afternoon, and thank you for joining us for PLAYSTUDIOS first quarter 2025 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'd like to remind everyone that we will discuss certain non-GAAP financial measures during this call. These measures should not be considered as a substitute for financial results prepared in accordance with GAAP. Our results are prepared in accordance with GAAP and a reconciliation of the comparable GAAP measures will be provided in our first quarter earnings release and in our SEC filings. With that, I'll pass the call to Andrew.

Thanks, Jason, and good afternoon, everyone. While challenges persist, we are off to a focused and productive start in 2025. Our core business is still normalizing following the reset from last year, and we are cautiously working our way through a period of transition and recalibration. Market conditions across traditional social casino and casual segments remain challenging, and this continues to weigh on our operating performance. That said, our reinvention plan is already helping us operate with more clarity, efficiency, and discipline, and we believe we are starting to see the foundation for future growth taking shape. Let me highlight a few key themes from the quarter. In addition to broader market weakness, the social casino category is being impacted by the rising popularity of sweepstakes-style offerings, which are capturing increasing mind share and spend from players. Because we don't yet offer a competitive sweepstakes proposition, we believe this dynamic is the primary cause of the pressure on our player activity and monetization. As a result, we've been hard at work on the development of a sweepstakes solution and have made strong progress in this quarter. During the quarter, we launched our internal alpha of our sweepstakes promotional platform. This exercise provided valuable insight into both the technical readiness and player-facing aspects of our offering. The feedback has been constructive and is actively informing our next phase of refinement. We expect to make the service available to select players in Q2 and begin scaling in the back half of the year. We believe this new promotional mechanic can reinvigorate our social casino portfolio and spawn a return to growth. Compliance has been a central focus of our development efforts. We are committed to building the most compliant and transparent promotional mechanic in the industry. Our vision is to reclaim sweepstakes for what it was intended to be: a fun, engaging, and trusted promotional incentive that will drive more consumption across our social casino portfolio. Second, development continues on our new casual Tetris title, Tetris Block Party. We are applying learnings from the puzzle, raid, and defend genres to create a differentiated and scalable game experience. While developing games is never deterministic, we remain focused on readying the product for a Q4 launch. Third, we are realizing the benefits of our reinvention plan. The cost savings program we initiated last year is tracking to plan and beginning to improve the efficiency of our core operations. Turning to our business segments. Let's start with the Play Games casino portfolio. The social casino portfolio continues to face category-wide headwinds with softness across all key casino apps. That said, monetization improved across several core titles. ARPDAU increased year-over-year in POP! Slots, myKONAMI, and especially in the myVEGAS franchise, where myVEGAS posted double-digit gains. New content cadence is a major focus across the portfolio as we work to reengage players and drive stronger performance. Our teams also remain focused on economy design, player segmentation, and expanding our direct-to-consumer channel. Direct-to-consumer remains a bright spot in our portfolio, showing strong momentum and contributing to our broader efforts around margin optimization. In Q1, our direct-to-consumer channel generated approximately $5 million in in-app purchase revenue, representing 9.8% of total IAP revenue in the quarter. This compares to $2.3 million or 3.9% in Q1 of 2024 and $4.7 million or 8.6% in Q4 of 2024, representing growth of 114% year-over-year and 6% quarter-over-quarter. As mentioned earlier, we are also investing in the development of our sweepstakes promotional capabilities, which we believe will become a meaningful feature to drive engagement and consumption that reenergizes our social casino portfolio. Let's talk about the casual game portfolio. In our casual segment, performance remained soft across both Brainium and Tetris Prime. Brainium showed early signs of monetization improvement, though overall performance was pressured by softer DAU and weaker eCPMs. We continue to invest in user acquisition and product enhancements aimed at stabilizing engagement and capturing more value from our audience. Tetris Prime also experienced challenges with user acquisition continuing to be the primary headwind. While monetization per user held relatively steady, growing the audience remains difficult in an increasingly competitive market. To address this, we are testing a range of new marketing and growth strategies. We are also preparing for the launch of our next casual title, Tetris Block Party. In Q1, we polished the product, implemented a number of optimizations and began technical validation in select European markets. The feedback from early players has been valuable and is helping us shape the next phase of iteration. Assuming all metrics align with our criteria, we expect to launch the product in Q4 and scale thereafter. Let's now turn to playAWARDS. playAWARDS remain central to our broader strategy of being a leader in rewarded play. Through playAWARDS, we pioneered one of the first iterations of sweepstake-style engagement, offering players real-world rewards as a loyalty and promotional strategy. As the broader landscape evolves and the second flavor of sweepstakes rises in prominence, our playAWARDS platform is working closely with our games to elevate the role of our rewarded play model and in doing so, drive deeper player engagement, amplify the value of our ecosystem, and reinforce our differentiation in the marketplace. This quarter, we made great progress in this regard. We've now executed the full integration of myVIP across our major games to drive a more unified loyalty experience. In the quarter, we launched several new reward partnerships, including Foley Entertainment Group, a premium partner reflective of the kind of experiential rewards that align with our broader strategy. These additions further enhance the diversity and appeal of our loyalty ecosystem. While purchases and redemptions were down double digits, this reflects our deliberate strategy to focus on premium, high-quality offerings over scale. The daily average retail value of available rewards increased by 5% to approximately $2 million per day. We also recently announced the second annual $1 million myVIP World Tournament of Slots hosted by Atlantis Paradise Island, Bahamas, taking place from October 22 to October 26, 2025. The high-profile tournament will bring together slot enthusiasts from the digital and real world who will compete for a top cash prize of $1 million and the prestigious title of World's Greatest Slot Player. We expect this new franchise to drive engagement across our games, and we look forward to sharing more as the plans get rolled out. Turning to our financial foundation. Our balance sheet remains strong, ending the quarter with approximately $107 million in cash and no outstanding debt under our $81 million revolving credit facility. We continue to execute on our share repurchase program and remain active in assessing strategic M&A opportunities that align with our growth priorities. In summary, Q1 reflects disciplined execution in a challenging environment. We are investing in our future while managing our cost base and positioning PLAYSTUDIOS for long-term value creation.

Thanks, Andrew, and good afternoon, everyone. First quarter revenue was $63 million, down approximately 19% year-over-year, reflecting continued softness in both our social casino and casual portfolios. This was largely driven by category-wide pressure and lower new player acquisition and engagement across most of our key titles. Revenue was also down approximately 7.5% sequentially from the fourth quarter as a result of seasonal softness and continued DAU pressure. Adjusted EBITDA for the quarter was $12 million, an 18.5% decline year-over-year and flat sequentially. Performance this quarter was shaped by three key dynamics: continued DAU declines across the portfolio, particularly in Tetris and Brainium, ARPDAU gains driven by optimization in our social casino titles, and the first benefits of cost savings flowing through from our reinvention plan. Adjusted EBITDA margin was 20%, up 20 basis points from the same period last year. This increase was driven by early savings from our reinvention plan, partially offset by lower revenues. DAU was $2.6 million, down 25% versus Q1 of 2024 and down 3% sequentially. MAU was $11.4 million, down 23% year-over-year and largely flat sequentially, reflecting recent stabilization. The majority of user declines were concentrated in Tetris and Brainium. ARPDAU was $0.26, an increase of 8.3% versus Q1 of 2024 and largely consistent with the fourth quarter. This was driven by targeted economy improvements in myVEGAS and optimized ad monetization in Brainium. This reflects our ongoing efforts to optimize monetization even as overall engagement remains under pressure. We remain on track to realize between $25 million and $30 million in annualized cost savings from our reinvention plan. These savings will be reinvested into our strategic priorities, including sweepstakes and Tetris Block Party. Regarding capital allocation, we repurchased $1.6 million of our stock in the quarter under our existing share repurchase authorization, which has $42 million remaining at quarter end. Importantly, we are reaffirming our full-year 2025 guidance of net revenue between $250 million and $270 million and consolidated adjusted EBITDA between $45 million and $55 million. Notably, our guidance continues to exclude revenue contributions from sweepstakes and our new Tetris title, although we continue to expect them to begin generating impact later this year. We will provide updates on those initiatives as we progress towards launch. We remain confident that our current strategy will enable us to stabilize our core and unlock new growth in the quarters ahead.

Thanks, Scott. So to wrap up, we are making steady progress. We are investing in our future while improving profitability. Our investments in the sweepstakes promotional mechanic and Tetris are taking shape, and we are excited about the path ahead. I want to thank you for your continued support, and I'll now ask the operator to open up the call for questions.

Thank you. And at this time, we will conduct our question-and-answer session. Our first question comes from Mike Hickey with Benchmark. Please state your question.

Hey, Andrew, Scott, Jason, thanks for taking our questions here. Andrew, nice to hear that you reaffirmed your Q2 launch of your new sweepstakes product. Just curious how confident at this point, obviously, you just reaffirmed, but just your confidence on executing on the Q2. And if you plan to sort of geo-test it, Andrew, in any particular states just on monetization or any other KPIs that you think are relevant? And then after launch, just curious your confidence on your ability to scale the product in the second half of 2025. Thanks, guys.

Yes. Thanks for the questions, Mike. We're confident that we're going to be in a position where we can start to introduce and slowly scale the sweeps offering in the back half of this quarter, the second quarter. We have already done some limited amount of technical validation, and we're just continuing to evolve the product and make sure that all of the internal control standards and operating practices are solid and in place as well as the product offering and the breadth of content we know we're going to need so that we can go to market with something that's compelling. So we're feeling good about where it is and the pace and progress that we're making. I think that what you'll see is a very measured introduction, which will consist of several jurisdictions initially. And then as we start to optimize the product and get ever more comfortable with the overall integrity of it and its appeal, then we'll start to expand into other markets and invest more aggressively in the back half of this year. But overall, we're on our plan.

Thanks, Andrew. Last question from us. You mentioned your DTC revenue. You're certainly getting a lot of success there, doubling year-over-year to $5 million. It's now 10% of your virtual currency sales. I guess just remind us what's driving your success or your growth there? And if you think momentum can continue. Obviously, the Epic case seems like it's going to be a real tailwind for you. Just curious your thoughts on that. And then I can't remember if you targeted sort of a long-term target or not for DTC as a percentage of total revenue and sort of what unlocks do we need to look at here to sort of get you to that target? Thanks guys.

Yes. Thanks for the follow-up question. Maybe I'll let Jason take that one.

Yes. So in terms of the first question in terms of what's driven the success, it's definitely been a focus of ours for the period around driving more consumption directly. And we do that through offering incentives for users to transact directly and bonus currency and loyalty points and the fact that we have a loyalty program enables us to kind of unlock additional benefits and value for players that consume with us directly. And so we're going to continue to do that. We think the new ruling from the Apple and Epic case will make that even easier because we now have the ability to route purchases through the direct channel more directly, and we can promote and deep link and do a lot more interesting things to make the process a bit more frictionless for the consumer, and they can become more aware of it. So we think this will just allow us more momentum in the direct-to-consumer business going forward. We haven't fully modeled what that means in terms of new contribution by the end of the year. So we'll have to get back to you once we kind of have — we haven't published specific guidance on where we expect that to be, but we hope it will be double where it is today as we sit here at this time next year.

Thanks, guys. Good luck.

Thank you.

And your next question comes from Ryan Sigdahl with Craig-Hallum. Please state your question.

Good afternoon, guys. This is Will on for Ryan. Thanks for taking our questions. First, I wanted to ask on sweepstakes. In the development phase, can you kind of talk about maybe what's changed since you started going after this and kind of your learnings from the initial testing? Thanks.

Yes. Thanks for the question, Ryan. I don't know that there's anything that we've learned. It's really more just validating the overall technical stability and performance of the platform that we built and the tools that we'll use to manage this new promotional mechanic as well as just prove out the integration of both the third-party content and our own content that we're going to be using when we launch the service. So to this point, it's more technical validation. Once we get into the market, and as I alluded to a moment ago, we'll be a bit measured and just open up a few jurisdictions so that we can start to then get real consumer feedback about our overall proposition and how we're offering it up relative to where the rest of the market is. And then we'll optimize and work on scaling in from there. So to this point, it's really been more about the technical validation and certification of the platform and tools that we've built.

Got it. And then maybe a quick follow-up on the Apple-Epic Games lawsuit. Of course, it's still developing and Apple, I think, is appealing. But curious if you could lay out any benefits you hope to see from that and maybe when we'll get a concrete resolution? Thanks.

Yes. I mean I can certainly — go ahead, Jason, if you want to.

So yes, I think as mentioned in the previous question, I think with the ruling, we now have the ability to route purchases to a direct channel more aggressively and we can promote it. So we think, number one, it's going to expand the adoption of users that convert over to direct purchases. So we hope that the ratio of our total sales of consumers who purchase direct will go up. And then for each one of those users that end up purchasing direct, there's additional margin improvement because we don't have to pay the 30% cut on those specific purchases. So that's kind of a near-term very practical and kind of technical benefits that we would assume. But over time, we also think this could enable a more strategic evolution because it enables deeper loyalty tie-ins. And because of our loyalty program, we think we could do some interesting things strategically as a result of this to build a stronger connection with our consumer, which is really what this enables long-term is a deeper player relationship.

Thanks, guys.

Thanks, Ryan.

Your next question comes from Aaron Lee with Macquarie. Please state your question.

Hey, good afternoon, guys. Thanks for taking my question. Maybe sticking with sweepstakes for a little bit more. Can you just talk about how you're thinking about the playAWARDS externalization efforts in the context of the sweepstakes business? Do these kind of work together to advance both? Or does externalizing the playAWARDS platform kind of take a back seat just given all the work you're doing on sweepstakes? Thanks.

Yes. No. Thank you, Aaron. It's a great question. We think that they're complementary for sure. And that, in fact, our whole loyalty program and proposition as part of the sweepstakes promotional mechanic kind of amplifies it and its potential impact. So players of our sweeps offerings and promotions will not only be able to engage in the games and accumulate promotional currency that can ultimately be converted to cash. But as they engage with our products and accumulate those benefits, they'll also continue to accumulate loyalty currency and all the real-world benefits. And then along with that, a really bespoke and tailored level of service for all of our premium and more loyal customers. So we believe that just as the loyalty program is kind of the strategic centerpiece of our existing business and enhances the overall value proposition of our existing games, it will do the same thing as we look to incorporate the sweepstakes mechanic.

Got you. Thank you. That's helpful. One last one for me. Just in terms of reward partners, you noted in the prepared remarks, you added Golden Entertainment – but just curious, are there any areas or sectors outside of casinos that you're looking to expand to with regard to rewards partners?

I appreciate the question. We've done a lot over the last couple of quarters to really kind of reset our rewards offering and really kind of more carefully curate and manage the range of partners and the types of rewards that we've introduced. We want to make sure that they all fit kind of our entertainment and leisure positioning of the program. And so I would say going forward, we're always actively looking for the types of rewards partners that kind of enhance that positioning, entertainment offerings, whether it be music festivals and shows and theme parks and amusement park destinations along with the very robust offering that we have within the whole casino vertical. So we'll continue to cycle through different partners and rewards and test and see the ones that really resonate the most and are demanded by our player base. And as they tell us what they want, we'll go out and pursue and look to cultivate more of those types of partners. But that's really what's motivated the shift in the composition and mix of rewards that are part of our platform today.

Okay. Thank you. Appreciate all the color. Good luck.

Thanks so much.

Our next question comes from Martin Yang with Oppenheimer & Company. Please state your question.

Hi, thank you for taking the question. First question on the timing regarding Apple, our ability to outlink on iOS devices. Do you expect that feature to be implemented soon in your next software update? If not, how soon should we expect for you to take advantage of the ruling?

I think that you'll see us with some initial implementations in the relative near term. Like everybody else, we're going to do all we can to take advantage of this shift in Apple's overall position in response to the ruling. There are a lot of different ways to implement alternative means of purchase that reduce the amount of friction and make it easy for the players. So we're going to do what we can to enhance our existing solution, but we're also kind of revisiting some of the more fundamental approaches to how we redirect our players. So it doesn't feel so much like they're being redirected out of the app ecosystem and instead they stay within the experience. So some enhancements in the relative near-term and then more comprehensive solutions in also the short-term, but probably not for some number of weeks.

Got it. Thank you, Andrew. The next question is a financial one. Can you confirm that your EBITDA target does not or have, in fact, included the investments for new game launches, including sweepsteak and Block Party?

Jason, do you want to speak to that?

Yes. So it does have the investments that we are making in the guidance. It does not include the revenue for it because we don't — because of the uncertainty around it contributing to our topline, we were conservative on the topline. But since we've already are incurring tangible costs today, we have included it in the cost side of the EBITDA guidance.

And also UA costs associated with Block Party is also included?

I do not believe we have specific UA costs related to Block Party. It's just the operating expenses for the headcount that's working on those games.

That's right. All the team and direct expense of the execution of both Block Party and the Sweeps initiative are what we burdened the go-forward outlook with, but not the UA expense. Once we are in the market and we have a line of sight on the unit economics in and around our UA investments, then we'll be able to provide more specific guidance. But suffice to say, we won't ramp up our UA investments without the confidence that the product is performing as intended or better.

Got it. That's clear. Thank you. Thank you, Andrew. Thank you, Jason. That's it for me.

Yes. Okay, Martin, thank you.

Thank you. And at this time, there are no further questions. So with that, we will go ahead and conclude today's call. All parties may now disconnect. Have a good day. Thank you.