Good day, ladies and gentlemen. Thank you for standing by. Welcome to the PLAYSTUDIOS' Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, November 11, 2021. I will now turn the call over to Joel Agena, Corporate Secretary and General Counsel.

Thank you, operator and hello everyone. By now everyone should have access to our third quarter 2021 earnings release, which is available on the PLAYSTUDIOS' website at www.playstudios.com in the Investor Section? Before we begin our formal remarks, we need to remind everyone that some of management's comments today will be forward-looking statements within the meaning of the Private Securities litigation Reform Act of 1995 including those regarding our future plans, or mergers and acquisitions strategy, our strategic and financial objective, expected performance and financial outlook. Forward-looking statements are statements about future events and include expectations and projections, not present or historical facts, and can be identified by the use of words such as may, might, will, expect, should, anticipate or other similar terms. Forward-looking statements are subjected to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact future operating results and financial condition. These forward-looking statements are made only as of the date of this call. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. During the call, management will discuss non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation, or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our third quarter 2021 earnings release on the www.playstudios.com website. And on our Form 8-K filed with the SEC today. Hosting the call today we have Andrew Pascal, PLAYSTUDIOS' Chief Executive Officer, and Scott Peterson, Chief Financial Officer of the company. They will provide some opening remarks and then we will open the call to questions. With that, I'll turn the call over to Andrew.

Thank you, Joe, and good afternoon, everyone. Welcome to the PLAYSTUDIOS' third quarter earnings call. We're going to cover several topics in-depth today, including our results for the quarter, our views on the current state of the market and the future growth drivers of our business. Before we get started, I want to take a quick moment to reaffirm our vision and unique market position. I think it's worth highlighting that we're at a moment in time where consumers' patterns of behavior have been wildly disrupted. The global pandemic has created more physical isolation, resulting in new and more highly evolved forms of digital engagement, video conferencing; OTT media services, games, ecommerce, home delivery cryptocurrencies, NFT's, and the promise of the metaverse are pulling us in a digital direction that continues to displace real human interactions and experiences. It's our view that these dynamics have intensified people's need for real-world engagement and heightened the need among businesses to deepen their relationships with their consumers. And this is where we've positioned our company. It's a bridge that connects the digital and real-world by crafting captivating games with a mass millions of loyal and engaged players. And by incorporating loyalty mechanics with compelling rewards, we've connected them to hundreds of real-world leisure businesses. This is our vision to strengthen our position as the leaders in rewarded play. And it's through this lens that I encourage our stakeholders to evaluate and qualify our past results, our current position, and our future potential. With that said, let's touch on our recent performance; we're seeing positive momentum across most of our key metrics. Year-to-date revenue is up 4.7% to $215 million. Adjusted AEBITDA GAAP for the quarter was 9.6 million, 185% increase compared to the second quarter of '21. ARPDAU was $0.65, an increase to…

Thank you, Andrew. As Andrew mentioned at the top of the call, we reported $70.6 million of revenue during the third quarter of 2021. Like last quarter, year-over-year quarterly comparisons were impacted by the COVID restrictions that remained in place during the same quarter of 2020. Given the unusual nature of last year's quarter, we think looking at year-to-date comparisons is more useful. Year-to-date for the nine months ended September 30 of 2021, revenue was up 4.7% to $215.5 million versus $205.9 million during the same period last year. As Andrew emphasized, we're focused on positioning the company for long-term expansion. However, it's also worth highlighting that we are keenly focused on improving our margins. To the first nine months of '21, our cost of sales as a percentage of revenue improved from approximately 34.1% last year to approximately 32.4% this year. However, expenses related to UA, R&D and G&A were all up year-to-date as a direct result of the bingo launch, Kingdom Boss development and spec transaction costs. We generated $9.6 million of adjusted AEBITDA for the quarter and $27.6 million for the nine months year-to-date. It's worth noting that the most recent quarter includes the ongoing investments in product development, live ops, and user acquisition to support our bingo launch, along with the continued carrying costs of the Kingdom Boss effort, as we work towards its introduction later this year. Looking at the key operating metrics for our platform, we saw an increase in our loyalty program activity, as reward purchases returned to pre COVID levels with 570,000 purchases in the quarter versus 288,000 for the same period last year, a 98% lift. This translated to total retail value of $37.4 million or 169% increase over the $13.9 million for the same period last year. We also enjoyed…

Thank you, Scott. So there you have it, an update on our financial performance, a brief review of our market and conditions we're working through, a reaffirmation of our strategy and its merits and overview of our operating environment. The investments we're making and expanding our output, and earnest sense of where we're going and why we remain optimistic about our opportunities and insight into my deep conviction for our plans, as evidenced by my implementing a 10b5-1 program under which I'll be buying stock in the open market. For our wrap up, I want to quickly acknowledge and thank my team one in nearly 500 playmakers around the world that remain so deeply committed to our vision and plans. With that, thank you all for joining us today. We're happy to answer your questions. Operator, please open the line for questions.

[Operator Instructions] We'll take our first question from Ryan Sigdahl with Craig-Hallum.

Good afternoon, guys. Curious on the guidance that implies Q4, similar to the past two quarters, Q2, Q3, given the industry challenges, do you think that's a good baseline to assume for next year, and any visibility to when you think growth can return?

Hey, Ryan, thank you for the question. Look, as you highlight, we anticipate that our business is going to continue to pace as it has for the better part of the last two quarters. And we're obviously going to reassess as we get into the new year and establish our guidance for the upcoming year. And we'll be doing that when we report on our fourth quarter results. So you can expect that sometime in February.

On shifting over to DAUs, any commentary you can give on October directionally relative to Q3.

You say October relative to Q3?

Have DAU stabilized, increased, decreased relative to the trend that we've been seeing in the last couple quarters on DAUs.

Yes, I mean, we, look, I think we much like all of our peers are seeing DAU declines, I think ours has have been are normalizing. I think some of the DAU declines are really more a function of how we've refined our targeting and the types of players that now we're acquiring. So not necessarily in the same volumes, but of higher quality. So our focus is on our returns on our ad spend and UA investments. So what we tend to focus more on is the overall base of monetizers that we have that remain engaged in across our network. And then obviously, the returns on the new cohorts that we're acquiring. So overall, I would expect that we'll probably see some modest erosion in DAU going forward, but not as significant as we've seen in the past.

Helpful, one more MGM Slots Live launched in the quarter. Can you talk about early trends, you've seen there? And then thoughts around that game?

Sure. First of all, as a game, it's a bit of a skunkwork and a project that we've been advancing through one of our studios, it's not yet formally sanctioned, and certainly far from being launched more formally. And so it's obviously leverages one of the more important brands that we have the exclusive rights to in our portfolio and the best of our intellectual property and contents and in games from our POP! Slots product. And we've got a bunch of unique content that will be specific to that product that will come in the future in the event that we choose to sanction and adopted into our center line plan, but we've not yet made that decision.

Great. Andrew, credit to you and the other management for the stock purchase plans are planned once. I'll turn it over to the others. Thanks.

We'll take our next question from Greg Gibas with Northland securities.

Great, good afternoon, guys. Thanks for taking the questions. And likewise, sentiment for me regarding the stock purchase plan. I guess regarding the Delta and revenue sounds like most of it is coming from Kingdom Boss now expected to kind of the end of the year, I think previously was maybe mid quarter, early quarter. I guess just wondering kind of the reason for another slight delay there. Developments kind of related or just kind of perfecting it any color you can provide there.

Sure. More the latter, the game from a feature perspective is complete and we are constantly extending and refining it. And really this is about finding its market and optimizing the metrics to a degree that really warrants and justifies are transitioning into a more formal launch. With that said, I will tell you that just this week, we opened up Canada. So it really is the first time that that product is now going to be available to what is its primary target audience, that being North America, we're doing it on a somewhat of a limited basis. But so that we can acquire players that really fit the profile that we think is more ideally suited for that product. So we'll continue to watch it very closely. And obviously provide more information as we further qualify what the potential is for that product. But to your point, we hoped that it would launch earlier in this quarter, we still expect that it's going to launch before the end of the year. That's certainly every indication that we're getting from our partners and Boss Fight. And so we're looking forward to that.

Great, appreciate that. And I guess, given Vegas has been a pretty hot travel market this year, just wondering if you had any trouble maybe keeping enough redemption options available to satisfy demand from your players? I know you commented on seeing engagement and redemption hit pre COVID levels. Just wondering if you can maybe expand on that. And was that kind of Q3 timing, when that flipped over to pre COVID levels?

Sure, yes. I mean, we've seen on a fairly steady slope, the increase in reward purchases, and among our players, for the better part of the last year and a half, the rewards inventory has been constrained because of COVID. And with the reopenings, obviously, we've seen the expansion in our inventory, which we highlighted, and obviously, then the corresponding increase in purchases as we've made that inventory available. But there are still outlets and shows and concerts and venues that I've just recently come online or are still to come online. And so we certainly expect that the rewards inventory will continue to expand that speaking to the collection of partners that we already have in the portfolio or in the collection. And of course, the team is out looking and qualifying new partners. And so I fully expect that between now and the end of the year, we'll be announcing some exciting new partners that will add yet even more inventories. With that said, there's always an insatiable appetite, it seems among our players for really great rewards. And so I know the teams intensely focused on just making sure that we can deliver on that value proposition.

Great. Yes, I look forward to announcements there on new partners as well. And last for me, you mentioned expanding your teams and resources in Belgrade and Vietnam. Just wondering, how should think about maybe from OpEx or modeling perspective, any theme there that would be noticeable.

Yes, look, in the near term, there won't be any meaningful benefit, right, because as we scale and layer in that capacity, we got to get them oriented and contributing. And at that point, we'll see an increase in output and service of our different products, which we know is going to translate to more top line growth, and then we'll start to see the OpEx as a percentage of revenue normalize. So there were actively as I alluded to investing and scaling up those studios. We have great teams there. We know that they're very rich markets in terms of the talent, the breadth and depth of talent. So what we fully expect and hope is that we'll scale them through the first half of next year, and then we'll start to see the margin improvement in the latter part of the year. But we'll obviously speak to that with a bit more detail and clarity as we provide our guidance rolling into the new year.

Our next question is from Mike Hickey with The Benchmark Company.

Hey, Andrew, Scott thanks for taking my questions, guys. I guess just circling back on Kingdom Boss, can you remind us your expectation for that game whether it has changed or not similar to, I guess given there is little visibility on Bingo. And then how you thinking about user acquisition. Obviously, it's been more challenging of a mark here may be more expensive and sort of user player that's outside of your ecosystem on the slot. So just sort of curious on how you plan around them up. Thanks, guys.

Sure. So look, Kingdom Boss originally was expected to launch sometime in the early summer. And we were then going to scale it throughout the summer into fall, and hit a pace kind of exiting the year. So as we rolled into the next year, we could achieve what we thought would be the kind of revenue rate that we had forecasted for that product at maturity. And we've been clear that that was a $60 million revenue contribution. And so obviously, that's shifted out now, nearly six months. And as a result, it's impacted what we had originally anticipated for this year, we've been pretty open about that. And so from where we stand today, we think that the most conservative position to take obviously is to not really rely upon any contribution from that product in the current quarter. And then we're obviously going to exit the year with a lot more information to qualify what its potential is, and what it can contribute next year. And so we'll obviously speak to that, as we provide guidance in the new year. As it relates to Bingo. Bingo, first of all, as we highlighted in our last call, the engagement in and among the players that we have playing that product is really solid. And the monetization metrics are very strong. But we have some technical stability issues that we had to overcome and work through over the last few months. And so we think we've gotten through and pass most of those. And so we hope to be at a place where we can then start to invest in it again. We think that the profile of that product in terms of its metrics, warrants and supports, are investing in scaling and growing it. And as I highlighted…

Nice. Thank you, Andrew. Last question for me the sort of the M&A environment, curious what you are seeing; if you're sort of passing on deals where not price right or you just not finding the right game or the right team or the right genre? I was sort of just curious sort of the heartbeat of the M&A market, in your view. And then on the partnership side, it seems like maybe that would be a [Indiscernible] year partner assuming you reckon and integrate the loyalty award system to drive engagement, but sort of wondering if that platform is ready to go and if you are seeing interested in them as partners. Thanks, guys.

Yes, thanks, Mike. So the first question related to the M&A environment and first of all, I'll tell you that we like everybody else had been looking for those opportunities, great products, great teams, products that have and achieve meaningful scale. There's an operating profile to the business that we think will immediately contribute to the performance of our own and we're excited about the range of possibilities that we see and are very active in terms of our engagement with those companies, as I alluded to, there are formal processes that we've participated in. And in some cases been active in pursuing in others we'd be in qualifying them felt like they weren't, at the end, necessarily the right fit for us. And I think what's unique about us when we think about the range of M&A opportunities is that I think there's a much bigger universe of potential opportunities that are strategically significant for us and are going to unlock or drive a lot of value. We don't need necessarily to be in the market competing for all of the bigger, more substantial kind of prized assets, there are a lot of emerging younger, smaller companies with really great products that would be a great complement to our own. And so we're excited about those possibilities. And I think for a lot of the, our peers, their companies that wouldn't necessarily make the same kind of impact, given their scale and size relative to our own. So I think it broadens the universe of opportunities that we can pursue that will be very impactful for us. And they're not limited to just games, right. We've talked about our platform position, and the importance of playAWARDS, and how it is that we continue to evolve it. And so related to your second question, we are on that path of generalizing our playAWARDS program, and its underlying tools and technologies and all the operating discipline and functions that we have in service of that program, with the full expectation that it's something we can make available to third parties, that there's a lot of work to do. Still, I don't want to misrepresent where we are on that journey. We're at a place where we absolutely can support third parties today participating in our program. But it's our intention to enable other publishers and game makers to craft the fate, don't want to opt into our consumer facing program and craft one of their own that we enable that as well. So the move to a multi tenancy model is obviously an added level of complexity. And we're making those investments now. And then we'll provide a bit more clarity as we roll into the new year is to when we'll be in the market, testing out different models, and potentially onboarding some partners. So hopefully that provides a little more clarity around where we are in the cycle of leveraging our playAWARDS program as a platform.

Our next question from Matthew Cost with Morgan Stanley.

Hi, guys, thanks for taking the question, two, if I could the first one, really just following up on that last question. Are there any key investments or hurdles that we should be looking out for, as you look to sort of develop your playAWARDS platform into a service over time? And how are you measuring progress to that -- for that internally, and then just quickly on the model, payer conversion looks like it was up sequentially, and then 3Q I just wonder, what were the drivers of that in the quarter? Thanks so much.

Yes, thanks, Matt. Great questions. So as far as what are the key indicators, or what's the strategy and plan on evolving the platform, we've kind of shared and talked about their stages that we're going to move through, we've obviously used it and employed it across our portfolio of games, we fully appreciate the impact it has and the level of deep engagement long term loyalty that engenders, we wanted to then expand our portfolio not just organically, but inorganically. That's why we were focused on now acquiring and expanding the games that we can incorporate into our consumer facing brand for the Loyalty Program, which is myVIP. And so by acquiring the games and having them part of our own program, we can leverage all of the infrastructure and tools and support that we have today. And we continue to invest in evolve that tool set and the underlying technology, and all the different teams that we have internally, so that they are prepared for providing as a service to altogether third parties. And so if you were to see how that team engages with the collection of studios that we have that service all of our games, you would see a level of refinement again the tools and the support and their practices, where they treat them almost like third parties so that we can evolve and refine the way we service them. So the key things really to finally get to the ultimate vision, which is that we can open the platform up and provide loyalty as a service to publishers and game makers of any scale and size with far less intervention on our part, that's moving to that multi tenancy model that I spoke to. And there's work to be done for sure. And we -- it's all architected design, there's aspects of it that we're investing in now. But we'll provide a bit more clarity around a timeline for it. As we roll into the new year and we've always said that that's 12 to 18 months exercise for us to really prove it out and get ourselves to a place where we can then speak to and talk about the real commercial, longer term commercial implications of that model. And so we hope to be in that position as we get into the latter part of next year.

We'll move to our next question from Martin Yang with Oppenheimer and Company.

Hi, good afternoon. Thank you for taking my question. My first question is on Kingdom Boss. And it's exciting to hear your analogy to the game to AFK arena, which is known for a very deep level of life services and monetization. Can you maybe talk about the plan to support the life service after Kingdom Boss is released? And do you feel you have the appropriate resources and plan to support its post launch content updates?

Thanks Martin. It's a great question. Because I think it's true of any games that really turn into and evolve into franchises really need to be running services. And so this product, just like any other in our portfolio is going to require a consistent servicing of it with new features and new content, and a steady stream of really great heroes and characters and assets that players will amass and acquire as they get ever deeper into the game experience. And so to your point, though the team and resources that create a game need to be complemented with the resources that are accustomed to servicing a product as a service. And so that is a transition that we'll move through as we launched the product. And so I think at this point, we've been thoughtful about it. But every time we've made that transition, we always learn things in the exercise and have to adjust. But we're doing all that we can do anticipate and make sure that we're prepared when we make that transition. But we fully appreciate the importance and the need to service the product with a consistent steady stream of new content. And then also continue to refine our overall approach and practices to the way we ultimately convert and monetize that audience. And I'm going to double back a second because I know Matt asked a question about our percentage of paying users that improved quarter-over-quarter. And that's largely a function of just again, our refining our practices and approach and to the way we're converting our audience and how we manage our economies. And so we've done a lot structurally inside of the company, we have a new team called Play rise, which in a more formal way, has consolidated all of our best practices and tools that we use and managing of our products, particularly on the monetization front. And making sure that each of the different games has adopted those tools and practices. And so we're starting to see some of those benefits, and fully expect and hope that we'll see more of that as we roll into the new year.

Got it, thanks for the insight. And next question is also on Kingdom Boss, but about its UA strategy. I think, according to your original plan for a major launch, you did set aside a substantial amount for UA at launch, to support that initial player acquisition. But as you move the timeline to end of the year, there we see maybe a UA environment still challenging. Should we expect the same pacing for UA spend at launch? Is there any potential for the game to be launched, but maybe the bulk of the UA support will come later, sometime early in 2022.

Martin, I appreciate the question. I think what I think makes the most sense is for us to wait until we provide you with a bit more guidance on what's going to happen. As we roll into next year. The product and this is true of all of our games when we've launched them, we're going to support them with whatever level of UA, they can justify. And when we find cohorts of players, with a return profile that's super compelling, we'll then -- we'll increase the budget and spend beyond what we forecasted because the most valuable asset that we can acquire are engaged players that ultimately monetize. So we're going to continue to evaluate the metrics and the productivity of our UA as we get that product into North America and more broadly exposed and start driving more volume. And if it warrants and justifies the level of spend that we originally planned for, we'll layer it in. And if it doesn't, well then we'll moderate our pace. But we're not yet at a place where we have a complete picture there.

This concludes our question-and-answer session. I would now like to turn the call back over to Mr. Andrew Pascal for closing remarks.

Thank you. I appreciate everybody tuning in to get our perspective on how things played out over those last quarter. I think we tried to highlight the things that we've done that in our view really positioned the company going forward to realize its full potential. We're seeing really great growth and performance across our playAWARDS program and metrics in among our players in terms of their participation in that program. And we appreciate that there's been some added complexity in terms of looking at and forecasting our business because of delays that we've had with Kingdom Boss in particular, but we're working our way through that and look forward to rolling into the new year with a new plan. So until next quarter, again, I appreciate everybody's tuning in and your continued support. So thank you.

This does conclude today's teleconference. We thank you again for your participation. You may disconnect your lines at this time. And have a great day.