PLAYSTUDIOS, Inc. (NASDAQ:MYPS) reported strong first quarter 2024 results, with revenues and adjusted AEBITDA exceeding consensus expectations. The company's Tetris franchise continued to be a standout performer, with revenue and daily active users (DAUs) well ahead of the prior year. However, the company's core social casino portfolio remained challenged, in line with broader industry trends.

Business Overview

PLAYSTUDIOS is in the midst of a significant transformation, focused on revitalizing its existing games, expanding its loyalty program, and diversifying its revenue streams. The company's annual revenue reached $310.9 million in 2023, with net income of -$19.4 million and operating cash flow of $51.7 million. Free cash flow for the year was $19.3 million.

Financials

In the first quarter of 2024, the company reported net revenue of $77.8 million, down 2.9% year-over-year. Adjusted AEBITDA was $15.3 million, a 13.8% decline compared to the prior year period. The company's PlayGAMES division, which includes its social casino and casual gaming titles, generated $77.8 million in revenue, down 2.9% year-over-year. The PlayAWARDS division, which operates the company's loyalty platform, saw revenue decline 100% to $0 million due to the non-renewal of a licensing agreement.

Tetris Franchise Shines, Core Portfolio Faces Challenges

The Tetris franchise continued to be a bright spot for PLAYSTUDIOS, with revenue and DAUs well ahead of the prior year. The company attributed this performance to the global reaction to 13-year-old Willis Gibson becoming the first person to defeat the classic puzzle game. This event reaffirmed PLAYSTUDIOS' belief in the Tetris franchise and its plans to tap into its unrealized potential on mobile platforms.

The company is working to refresh the look and feel of the existing Tetris game, with the goal of launching a new version in time for the franchise's 40th anniversary in June 2024. Additionally, PLAYSTUDIOS plans to complement the core Tetris title with at least one new casual variant later this year, likely in the third quarter.

In contrast, the company's core social casino portfolio continued to face challenges, in line with broader industry trends. Management expects this segment to remain under pressure throughout 2024, and the company's focus remains on refining its technology tools and operating capabilities to position itself for a market rebound.

Loyalty Program Integration and Direct-to-Consumer Initiatives

A key priority for PLAYSTUDIOS is the full integration of its updated myVIP loyalty program across all of its primary titles by the end of 2024. The company believes this will drive increased player engagement and retention, extending the lifecycle and revenue potential of its games.

The company is also working to increase its direct-to-consumer business, which is currently nascent. By more effectively leveraging its myVIP.co player portals, PLAYSTUDIOS aims to grow its direct sales and improve margins over time.

Expansion of playAWARDS Platform

PLAYSTUDIOS continues to focus on fortifying its industry-leading playAWARDS platform by advancing its technologies and adding new players and rewards partners. The company is also working to generalize the platform for extended use, with the goal of evolving it from a cost center to a revenue-generating loyalty-as-a-service business.

The company has active conversations with third-party game publishers interested in leveraging the playAWARDS platform, and it expects to formalize its first pilot relationship before the end of 2024. As these partnerships mature, PLAYSTUDIOS believes it can generate revenue from the platform.

Capital Allocation and Outlook

PLAYSTUDIOS restarted its share repurchase program in the first quarter of 2024 and has bought an additional $4 million of stock through today. The company views its share price as deeply discounted and believes buying back its own stock creates value for shareholders.

The company remains committed to identifying and completing transformative M&A transactions, actively searching for compelling opportunities that align with its overall strategy and expansion plans.

For the full year 2024, PLAYSTUDIOS is maintaining its guidance of revenues in the range of $315 million to $325 million and consolidated adjusted AEBITDA between $65 million and $70 million.

Conclusion

PLAYSTUDIOS' first quarter 2024 results demonstrate the company's ability to navigate a challenging industry environment. The Tetris franchise continues to be a standout performer, while the company works to revitalize its core social casino portfolio and expand its direct-to-consumer and loyalty-as-a-service offerings.

With a strong balance sheet, a renewed focus on capital allocation, and a pipeline of strategic initiatives, PLAYSTUDIOS appears well-positioned to drive long-term value for shareholders. Investors should closely monitor the company's progress in executing its transformation plan and diversifying its revenue streams.