Good day, ladies and gentlemen. Thank you for standing by. Welcome to the PLAYSTUDIOS Fourth Quarter and Year-end 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference call is being recorded today, February 24, 2022. I will now turn the call over to Joel Agena, Corporate Security and General Counsel.

Thank you, operator, and hello, everyone. By now, everyone should have access to our fourth quarter and year-end 2021 earnings release, which is available on the PLAYSTUDIOS' website at www.playstudios.com in the Investors section. Some of management's comments today will be forward-looking statements about future events, expectations and projections. Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. 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. 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 fourth quarter and year-end 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, Joel, and good afternoon, everyone. Welcome to the PLAYSTUDIOS Fourth Quarter and Year-end Earnings Call. Given that it's a new year, we're going to spend some time reaffirming our priorities, reviewing our recent results along with providing our outlook and guidance for the current year. Let's start with some highlights from the past year. 2021 was incredibly eventful for our company, a year in which we positioned ourselves to advance our business and more fully capitalize on our unique model. More specifically, we went public and raised $250 million of primary capital. We expanded our game portfolio, adding, myVEGAS Bingo, MGM Slots Live and TETRIS to our existing collection of franchise products. We rebuilt our player network to pre-COVID levels, ending the fourth quarter with over 4.8 million monthly active users. We added nine new loyalty partners and enriched the collection of real-world rewards, expanding the value of available benefits from nearly $300 million to $500 million. We advanced our playAWARDS platform, tools and capabilities, moving us closer to our ultimate goal of providing our program as a service for all game makers. We attracted some amazing new talent into the company, enhancing our product design, technology and strategic capabilities. And we generated $287 million of revenue and $40 million of adjusted EBITDA. Now turning to 2022, we're more convinced than ever that our focus and strategic approach are ideal for the times. Traditional leisure and retail businesses are becoming ever more dependent on digital platforms to attract their target audience. Most do it with conventional advertising, paying the display adds that promote a product or a discounted price, and there are those that invest in deeper digital presence, extending their brands into these channels in a way that's more experiential, engaging and brand-enhancing. As I shared on…

Thank you, Andrew. As Andrew mentioned, we reported $71.9 million of revenue during the fourth quarter of 2021, up 12.4% from the same quarter last year. As has been the case all year, when evaluating the year-over-year quarterly comparisons, consider the COVID restrictions that were in place during the same periods of 2020. For the full year ending December 31, 2021, revenue was $287.4 million versus $269.9 million in the prior year. We continue to strengthen the platform and invest in our game portfolio so that we can deliver engaged and loyal players to our brand partners, yet we remain disciplined as we grow and grow profitably by generating tangible cash earnings. For the fourth quarter, we generated $12 million of adjusted EBITDA. For the full year, we recorded $39.5 million of adjusted EBITDA, which is down from $58 million during the prior year. The decrease reflects the ongoing investments in product development, live operations and user acquisitions we made during the year, which supported our Bingo launch plus the carrying costs associated with the Kingdom Boss effort. Looking at the fourth quarter's key operating metrics for our playAWARDS platform, we saw an increase in activity as reward purchases returned to pre-COVID levels with 482,000 purchases in the quarter versus 269,000 for the same period last year, a 79% lift. This translated to a total retail value of $28.8 million, 137% increase over the $12.1 million for the same period last year. We also enjoyed a healthy expansion in the composition and amount of rewards inventory, which increased 58% over the prior year to 542 unique rewards with a retail value of over $129 million, an increase of 140%. Additionally, fourth quarter DAU was 1.3 million and MAU was 4.8 million, up 0.5% and 24.8%, respectively, year-over-year and up 10.1%…

Thanks, Scott. Before we close our prepared remarks and open the call for questions, I'd like to reinforce some key points. Our revenue growth has generally outpaced the market. We're expanding our product portfolio with well-established and relevant franchise brands. We have an exciting opportunity to create a new category within the massive puzzle genre by leveraging the core TETRIS mechanic. We're bringing our Bingo product in-house, expanding our investments in the RPG category. We're scaling our teams and expanding our global development capacity. We're advancing our playAWARDS platform and preparing for future B2B opportunities. In the 10b5-1 plan that I alluded to earlier, to purchase shares in the open market has been implemented. Lastly, I want to thank our dedicated teams across the globe for their continued commitment and contributions. Thank you all for joining us today, and we're happy to answer any questions. Operator, please open the line.

[Operator Instructions] Our first question is from Ryan Sigdahl with Craig-Hallum Capital Group.

Curious to start, so MAUs saw a pretty big uplift in Q4. Monetization was the lowest of the year. I guess, is that TETRIS in there? And then secondly, what else would be driving that?

That's correct. It is the impact of TETRIS, which we incorporated into those numbers towards the very end of the quarter. So they don't reflect the full quarter, but that's what ultimately grossed up or impacted positively. The MAU given the nature of that audience and the degree to which it's monetizing it was dilutive in terms of some of the unit metrics.

Good. And then anything to comment on January, February kind of on DAUs and then ARPDAU?

Nothing specific. I mean, I think as we came out of and through the holidays -- or excuse me, through the holidays and then out of them into the new year, we carried some of that momentum and obviously into this quarter. We'll have, obviously, in this quarter, the full impact of our absorbing TETRIS in terms of user activity, both impacting MAU and DAU. Again, modest monetization, so not a really meaningful impact to revenue. But we're really thrilled because of the scale of the audience and the volume of organic installs that product generates and looking forward to improving the existing products and introducing some new ones that we think are going to allow us to retain more of that audience and obviously drive higher levels of monetization, which ultimately is what's factored into the guidance we provided for the year.

Two more from me, and then I'll turn it over to the others, just on some of the rewards. Historically, how correlated is rewards usage versus monetization to you guys in the period or future periods? I guess looking is that a leading indicator? Or is it directly correlated in the period? And then one follow-up.

It generally isn't so much a leading as a trailing indicator as people are accumulating and amassing loyalty currency and then ultimately, shopping for the benefits, which they then have to plan to consume because many of them are for destination hotels or cruises or events, so the consumption of the rewards typically tends to trail the other metrics and performance.

Makes sense. Last one, how are your newer rewards partners? I think you said you had seven if I count that right, in the quarter? How your newer rewards partners, albeit early, how are their ROI metrics relative to your more established partners?

It's really early. Inside of one quarter, it's difficult to really qualify. I can tell you, the reception generally is positive because they see the traffic increases and improvement. But again, it takes a little while before we start to see those rewards not only get purchased and [indiscernible] in the various halfs, but then ultimately consumed and fully redeemed. So you can provide maybe a bit more color in the future, but it's still a bit too early.

Our next question is from Mike Hickey with Benchmark Company.

Andrew, Scott, congrats on the quarter, guys. Kingdom Boss, I guess, not a shocker here, but maybe a little suspending development on that game. Sort of curious where you go from here. Obviously, you've put a lot of resources in that direction, not just that game, but also sort of trying to prove out that you can expand in new genres with your playAWARDS program. So just sort of curious where you go from here. And then how we should think about the capitalized expense associated with that project if we could sort of just anticipate that would be great loss in the future or -- no, I don't know if you can sell it or what you can do, that's my first question.

Okay, sure. I'll take the first part of that question and let Scott handle the second. So we obviously we're deeply committed to Kingdom Boss and spent quite a bit of time and also a lot of money advancing it through our partnership with Boss Fight. As we've shared in the past, it was complicated because we really struggled to get all the metrics to a place where we felt like the product was healthy and investable in a place where we can really commit the tens of millions of dollars that would be required in order to really scale its audience and get it to perform and contribute to the levels that we had originally anticipated. And so we just finally got to a place where we felt like continuing to consume not only the money and resource that we're applying to it, but also the capacity for members of our team, tending to it and doing all we could to support the Boss Fight Group and trying to get it to a place where it was more per formant, but we just got to a place where we felt like it's time to suspend this product and kind of regroup and assess what our other alternatives and options might be for it to the extent that we can feel -- that we feel that it has the potential ultimately to be reconstituted at some point. We just aren't in a place where we can make that decision yet, but we'll be evaluating that in the coming weeks. So that's how and why we ultimately arrived at the decision which we think is absolutely the right one to help us also bring some focus to the other new product initiatives that are getting some traction that we're pretty excited about. We want to make sure that we're allocating both our attention and our UA capital and development subsidies to the efforts that we think are going to yield for us. As far as the expense of it and when the timing of it being written off, Scott, do you want to address that?

Yes. I mean, we're evaluating that now. It will be in written off in Q1. And we're just evaluating the extent of it right now. At 12/31, we had just over $8 million of capitalized software on the book. So that would be a noncash charge, but that's not the extent of it, but that will be pretty close.

And I'm going to double back, Mike. I'm sorry, there was one other part to your question that I didn't answer, which is what implications does this have on our overall loyalty model and framework. And look, we certainly were hopeful that fundamentally, the game would perform, and then we could show that the integration of our playAWARDS proposition into the game would drive that incremental lift that we've seen across the other games in our portfolio. The fact that the base in the core product, in this case didn't perform to a level where we could really get it to the market and start to get some scale and really then as we incorporate the loyalty program, prove out its impact does in anyway invalidate our program. It just means that we won't be using this game to further validate support it.

Last question from me, on TETRIS. It seems like that's more a great acquisition. It seems like it could be sort of a case study here for the success that we could playAWARDS program. I mean, any early learnings with the game, any sort of encouraging data on the development side or maybe some new partners that you have associated with the game that you can share with us?

Yes. I mean, first of all, we've not yet incorporated the loyalty program into the versions of the game that we've inherited. So that will be coming shortly. We're seeing a great response from both our existing partners that obviously have an awareness and really a strong affinity for that brand and that franchise, and we're also seeing really great traction in and among new partners that excited about our program, but we're waiting for a product they felt it was more appropriate for their brands to be attached to or include as part of the loyalty benefits. So we're really optimistic about the impact that the presence of that brand is going to have in the program and its ability to attract new partners. And then I would just say, overall, we're really, really excited about this game. TETRIS undeniably is one of the most successful franchises in the history of consumer gaming in -- the fact that it's not yet been fully embraced or made the transition on to mobile as a platform, we think kind of represents an unrealized opportunity. And so I think there's a lot that we can learn from the existing games that are in the market as well as, as I mentioned earlier, draw inspiration from other casual games that have gone through the cycle of taking kind of the base game format, the method of playing a game, which is very popular and then complement it with all kinds of meta features and progression mechanics and more sophisticated live operations and a bit more creative depth and kind of transition a great game into really a franchise that can drive significant value, so there's a lot of work to do, but we're working with what we believe is one of the strongest assets, and so we're really excited about this opportunity.

Our next question is from Greg Gibas with Northland Securities.

Congrats on the nice results. I was just wondering, implied within your guidance, if you could kind of talk about high-level assumptions is related to where you're expecting ARPDAU growth versus maybe MAU growth, the dynamics there. And I guess, along those lines, if your guidance relies on any new games or new loyalty partners to be added to the platform and kind of how you're thinking about that.

Yes, thank you. So as far as general guidance, I know that Scott alluded to this in his remarks. We kind of expect that the core portfolio is going to grow on pace with where the market generally is expected to grow in the kind of mid-single digits, and then we're certainly expecting to scale and grow the overall size of our network. We already have with the addition of TETRIS, the current versions of the products, and we've not yet fully scaled up our Bingo product and are early in the cycle with MGM Slots Live. So we think that there's obviously room to leverage each of those products to attract a broader audience. As far as the impact on kind of the monetization metrics, we believe ARPDAUs are going to probably get compressed a little bit, but that's a function of TETRIS and its dilutive impact on the continued strength of the conversion rates in RP crews or the monetization rates among the players of our core products. And then over time, we certainly hope that we'll optimize the monetization of the TETRIS games and see better performance. But I guess to answer your question more directly, we would expect to see ARPDAU get diluted a little bit, but we're going to scale up and grow our audience as we invest in and scale in the portfolio of products.

Perfect. Very helpful. And I guess, regarding kind of your -- just wondering if you could talk about, I guess, the capital you have budgeted for some of those new titles or new developments. So MGM Slots, the new TETRIS game that you guys are working on? And then just I guess, kind of capital required or budgeted for that this year in tandem with pulling out of Kingdom Boss, just how you're thinking about that?

Yes. I mean, historically, we haven't broken out the expenses that are specific to any one product. But directionally, what I can tell you is that the MGM Slots Live product is really an extension of our POP! Slots franchise, it leverages a lot of the core content and the tools and features and the team that support and operates that franchise. And so it's relatively speaking, quite efficient. So the investments we'll be making are really more on the user acquisition side of that product. And we'll be allocating some of the UA budget that was otherwise allocated to POP! Slots, as I mentioned in my remarks. We really initiated this product as kind of a UA strategy where we felt we could leverage the strength of a really iconic gambling brand and the best of what we offer in our POP! Slots product and then put it into the market and see more productive return, or more productive UA investments and better returns. And so as I mentioned, we're encouraged by the early results of we're going to be continuing to invest in and scaling and growing that product. The Bingo game, as we talked about, we've now taken that on and internalized that effort as recently as just a few weeks ago. And so we're still in the process of fully assessing and resetting its development plan. There's a fair amount of work to be done to address some of the technical considerations or concerns that we've raised in the past. We're intensely focused on that right now. and then we'll be extending the product with more features and capabilities so that it can realize its full potential. As I've shared in prior calls, the engagement among the players that are still actively playing that game is very strong. We believe it has enormous potential. And so we look forward to also getting it to a place where we can start to ramp up the UA investments. And then from a TETRIS perspective, we are going to continue to support the existing products that are in the market and develop an altogether new version of the TETRIS app. We expect that that's going to take somewhere between six to nine months, and then we'll have it in the market alongside the existing products, and we're going to use the existing games to really further qualify the impact of our loyalty program, its capacity to drive some increased retention and improved monetization among existing games, but really in an effort to optimize how we incorporate and leverage the loyalty program in the new version of the app that we'll be launching later in the year. But as I said, we're excited about its potential. And so hopefully, that Greg, answers your question.

[Operator Instructions] Our next question is from Martin Yang with Oppenheimer.

My first question is on the key learnings you have from a bus, does that change your view on generate expansion? Do you still have intention to break into mid-core games?

Yes. No, it doesn't change our view on the relevance of our model in the mid-core genres in the RPG or strategy kind of game categories. We still think that there's a really great opportunity to employ our model. It just didn't work in this case. It's not that our model didn't work. It's just the core product just wasn't able to achieve the kind of baseline metrics that we felt we could then support, invest in and then apply our loyalty program to and then scale and grow. So loyalty programs, we've never promoted our loyalty program as a solution for a game and inherently. It doesn't have the capacity to captivate its audience. You still fundamentally need a really good game. But what we know is that when you've got a solid game and then you complement it with a loyalty program and real-world benefits as rich as ours, then it enhances its performance. So in short, there are still believers in those genres in our model and its applicability to those genres and we'll continue to look for opportunities where we can prove that out.

Got it. My next question is on during the fourth quarter, you disclosed the growth for rewards purchase and the retail value of the rewards. Both are up very strongly year-over-year, and the retail value was up more than the worse purchased. Can you maybe help us give us more context to interpret those numbers? What was driving the growth, and does that indicate a certain mix change any or rewards?

Some of it is mix change. Some of it is the continued emergence from COVID with partners kind of coming more fully online and ultimately allocating more inventory to the program, so those are the principal reasons.

Got it. My final question is on the updated version that's coming expected for TETRIS. So aside from incorporating a playAWARDS program, are you going to implement certain gameplay changes to make sure that maybe that will be a more organic integration of playAWARDS?

We're certainly going to integrate playAWARDS. The effort and what's going to take the better part of the next six months to nine months is going to be great, an entirely new version of the game. We're going to be really respectful of the core game play, the mechanic of TETRIS so that we can preserve the game that so many people love, literally hundreds of millions that play and love. But we believe that there's an opportunity for us to add more depth to the experience. So a meta layer to the game that provides for progression loops as well as a richer set of features that can then be leveraged in the way that we operate the game and conduct events and then also the degree to which we tailor the game based upon what we know the players, the experience is more responsive to the way that they're engaging with the game. So those are things that we'll be focused on. I think the team is converging on has a ton of clarity around what it is that we're going to implement and just looking forward to getting the early version of that product in the market so that we can test and refine and get to a place where we can be prepared to launch it. So -- but we fully expect that playAWARDS program with a broader collection of reward partners, many of which will be new and specific to the TETRIS franchise, we'll be ready to roll and we'll have that product, as I said, in the market in the latter part of the year.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to Andrew Pascal for closing remarks.

Thank you. I appreciate everybody taking the time to hear about our performance in the fourth quarter and the wrap up for the year and certainly looking forward to updating everyone on future calls. So thanks for your time today.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.