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Operator: Greetings. Welcome to the PLAYSTUDIOS First Quarter 2023 Earnings Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Samir Jain, Head of Treasury and Investor Relations. You may begin.

Samir Jain: Thank you, operator. Good afternoon, and thank you for joining us for PLAYSTUDIOS first quarter 2023 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.

Andrew Pascal: Thank you, Samir. Welcome to our first quarter 2023 earnings call. It’s been an eventful start to the year and we’re excited to share our progress. PLAYSTUDIOS has a 12-year history of developing and publishing free-to-play mobile games. Since becoming an operating business, we have consistently posted year-over-year revenue growth. Our success can be attributed to the quality and creative execution of our diversified portfolio of 17 games, along with our industry-only loyalty program that enables players to play the games they love while earning real-world benefits. Our strong operating performance is a result of our unique strategy, which we believe will continue to drive our growth. While we have achieved meaningful success, we are early in our journey and we believe there’s substantial growth ahead.

We are constantly evaluating new opportunities to expand our portfolio and provide our players with the best possible leisure experiences. Results this quarter were quite strong. Our revenue and adjusted EBITDA for the quarter were ahead of both Street and company expectations as we demonstrated our capacity to balance top line growth with margin and profit expansion. Adjusted EBITDA margins grew 940 basis points from year-ago levels and 710 basis points from last quarter. Margins have been steadily expanding over recent quarters and we see a clear path to achieving rates that are in line with our industry peers. I want to emphasize that our adjusted EBITDA growth is happening in conjunction with revenue growth, a rare distinction in the current environment.

We will remain focused on optimizing our performance and further improving our return on invested capital. Margin gains are being driven by cost discipline and efficiencies. As part of our efforts to further these goals, we recently initiated a comprehensive restructuring plan that called for the consolidation of several studios and a 10% reduction in our global headcount. We expect to see further benefits from these changes later this year. I’d like to emphasize that we remain committed to our core portfolio and we’ll continue to invest in these games. Our focus on high-quality content and innovative gameplay remains a key differentiator and we’re confident that our ongoing investment in these areas will continue to drive revenue growth and profitability.

Our portfolio of growth games remains a key driver of our business and we are very encouraged by the quarter’s results. Tetris, in particular, continues to perform very well, growing its user base and revenues. We are also seeing increased engagement following the launch of the Tetris movie on Apple TV+, which has introduced more players to the game. In addition to Tetris, other growth games, such as myVEGAS Bingo, MGM Slots and our Brainium collection are also performing well. On the topic of future growth drivers, playAWARDS has also made notable progress in the quarter. We remain committed to creating a best-in-class loyalty platform with playAWARDS, which we believe is a unique differentiator for our business. In the quarter, we relaunched a rewards partnership with Norwegian Cruise Line and added a new property from Gateway Casinos, which helped us achieve a 2.5% increase in unique rewards from the year-ago period.

Reward purchases at quarter-end were 440,000 and had a retail value of over $27 million. Looking ahead, we plan to integrate playAWARDS into our casual game portfolio by year-end, which we believe will provide exposure to 3 million daily average users. We see this as a springboard for a successful launch of our Loyalty-as-a-Service offering. As we’ve emphasized in the past, our ultimate goal is to evolve playAWARDS into a fully autonomous, self-sufficient and profitable business. Given this quarter’s strong results, we are raising our full year guidance. It is worth noting that we’re raising our outlook at a time when industry and economic challenges are high. We believe that our current momentum coupled with the collection of internal initiatives underway will sustain our growth despite the secular challenges.

With that said, our long-term focus remains on executing our strategic initiatives, investing in our core business and creating long-term value for our shareholders. We’re confident in our ability to deliver sustainable growth and profitability, and we look forward to sharing our progress with you in the coming quarters. In closing, I want to reaffirm how encouraged I am about our first quarter performance and excited about our future potential. Across all of our studios, teams and products, we’re seeing signs of improvement and we believe we have advanced our position as the leaders in rewarded play. Our unique business model, combined with operating discipline has resulted in strong adjusted EBITDA margins that we believe can be in line with industry peers.

Lastly, we have a strong balance sheet and cash position, enabling us to pursue a range of investment opportunities, including organic product initiatives, additional M&A targets along with stock repurchases, all of which will be focused on further increasing return on invested capital. I’ll now hand things over to Scott for a more comprehensive review of our results. Scott?

Scott Peterson: Good afternoon, everyone. During the quarter, we reported revenue of $80.1 million, a significant increase from the $70.5 million we reported in the same quarter last year. It’s important to note that even when we adjust for the impact of Brainium, our revenue was still up year-over-year. This is a testament to the company-wide growth we’ve experienced with particular momentum in our collection of growth games. Adjusted EBITDA during the quarter was $17.8 million, up 96% from year-ago results. The growth was primarily driven by the addition of Brainium, higher revenues overall and lower UA spend. Adjusted EBITDA margins were 22.2%, up 700 basis points from last quarter and 930 basis points from a year ago. Expense ratios were lower across the board and savings were broad-based.

The higher mix of advertising revenues from Brainium and Tetris also lifted margins, which is expected to continue throughout the year. While we are working to increase advertising in other games, we are early in the process and don’t expect a material impact this year. We remain focused on managing costs while still investing in growth opportunities. During the quarter, we initiated a comprehensive restructuring plan, which called for the consolidation of studios and an approximately 10% net reduction in our global headcount. We expect these changes to drive further cost savings and efficiency gains over time. DAU, daily active users and MAU, monthly active users were 3.6 and $13.1 million, respectively, which represented 129% and 89% increase over the prior year quarter.

However, when adjusted for Brainium, DAU was flat with year-ago levels, while MAU was up nearly 10%. This performance is particularly notable given the broadly negative industry trends. ARPDAU, average revenue per daily active user was down due to the increasing weight of Tetris and Brainium, which are advertising-driven businesses. However, when adjusted for these games, ARPDAU increased by 11% on a year-over-year basis. Games in our growth portfolio, myVEGAS Bingo, MGM Slots and Tetris, all saw healthy ARPDAU gains. Turning to playAWARDS, the platform made significant progress during the quarter with available rewards growing by 2.5% year-over-year to 534 unique rewards. 440,000 rewards were purchased during the quarter at a retail value of over $27 million.

The program has partnered with more than 100 brands, including Intercontinental Hotels, AMC Theatres, Royal Caribbean Cruises and MGM Resorts. playAWARDS remains a key imperative of ours and we continue to be pleased with the program’s performance in growth. Our financial position remains strong with no debt, $127 million of cash and full availability of our $81 million revolver. We have continued to repurchase shares under our buyback program and believe buying our stock is an excellent use of our capital. We will continue to evaluate M&A opportunities as well as share repurchases. As evidenced by the Tetris and Brainium transactions, the company will move quickly when the right opportunity arises. Looking ahead, we are confident in our ability to drive continued revenue growth and improve margins.

We are very pleased with our strong performance this quarter and remain focused on driving growth, while also managing costs and improving margins. As Andrew mentioned earlier, we are raising our outlook for the year to reflect this enthusiasm. We estimate that revenues will now be in the range of $305 million to $325 million, up from the previous guidance of $300 million to $320 million and adjusted EBITDA will be in the range of $50 million to $60 million, up from the prior guidance of $47.5 million to $52.5 million. The higher margins reflect efficiencies, progress in new and developing games and the inclusion of Brainium for the full year. The long-term impact of the corporate restructuring is still unknown, but we remain confident it will be a driver of both growth and margin expansion.

Finally, the guidance assumes continued industry and economic stress, which we have factored into our forecast. I’ll now turn the call back to Andrew for some closing remarks.

Andrew Pascal: Thank you, Scott. Before we end our prepared remarks and open the call for questions, I’d like to touch on a few highlights. We had an excellent quarter with revenue and adjusted EBITDA well above our Street expectations. Our business is growing across the board and doing so in a more profitable way. Adjusted EBITDA margins in the quarter expanded by over 900 basis points versus a year ago. Our efforts around efficiencies and cost containment are working. We are early in the implementation of our restructuring plan and still see numerous opportunities ahead. Tetris continues to perform strongly and is building momentum with the release of the Tetris movie at the end of March. We remain enthusiastic about our entire portfolio of growth games and expect them to contribute meaningfully to our 2023 performance.

playAWARDS was integrated into Tetris at the end of the quarter and remains on track to be added to Brainium’s games by year-end. We remain committed to expanding the reach of playAWARDS through third-party adoption of our Loyalty-as-a-Service platform. On the back of this momentum, we are raising our 2023 guidance. At the midpoint of our projections, year-over-year revenue and adjusted EBITDA growth are forecasted to be 9% and 44%, respectively. These gains are despite the continued economic and industry challenges. Finally, we continued to repurchase shares under our buyback program and believe our stock is underpriced and represents tremendous value. In closing, I’d like to share that in keeping with PLAYSTUDIOS’s progressive and forward-looking philosophy, this entire call was compiled using Generative AI, text-to-text and voice cloning tools.

It’s just one example that illustrates how we’re taking full advantage of new technologies and finding exciting ways to apply AI practices throughout our company. With that, I’ll turn it over to the operator to introduce the real members of our team. Operator, please open the lines.

Operator: Thank you. [Operator Instructions] And our first question comes from the line of David Pang with Stifel.

Operator: And our next question comes from the line of Aaron Lee with Macquarie.

Operator: And our next question comes from the line of Ryan Sigdahl with Craig Hallum.

Operator: And our next question comes from the line of Omar Dessouky with Bank of America.

Operator: And we have reached the end of the question-and-answer session. I’ll now turn the call back over to Andrew Pascal for closing remarks.

Andrew Pascal: Thank you. We appreciate everybody tuning in and taking the time to understand our performance in this past quarter. Of course, if you have any further questions, always feel free to reach out to us directly. And we appreciate your time. Thanks, everybody.

Operator: And this concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.