MYPS - NASDAQ

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the PLAYSTUDIOS' Fourth Quarter and Yearend 2022 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, March 09, 2023. I will now turn the call over to Samir Jain, Head of Investor Relations and Treasury.

Welcome, everyone, and thank you for joining the PLAYSTUDIOS' fourth quarter and yearend 2022 earnings call. Hosting the call today will be Andrew Pascal, PLAYSTUDIOS' Chairman and Chief Executive Officer; and Scott Peterson, Chief Financial Officer of the company. Our call today will contain forward-looking statements about future events, expectations and projections. These statements involve risks and uncertainties that could cause actual future results to differ materially from our current expectations. We refer you to our SEC filings for a more detailed discussion of the risk factors that could impact our future operating results and financial conditions. During the call, management will also discuss certain non-GAAP financial measures. These measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is contained in our fourth quarter 2022 earnings release and in our SEC filings. The earnings release is available on our website at ir.playstudios.com and in our SEC filings. With that, I'll turn the call over to Andrew.

Thank you, Samir and good afternoon, everyone. Welcome to the PLAYSTUDIOS' fourth quarter 2022 and yearend earnings call. Given this is our first call in the new year, we are going to spend some time reviewing our recent results, reaffirming our priorities along with overviewing our outlook and guidance for the current year. Let's start with some of the highlight. 2022 was an eventful year, one in which we advanced [indiscernible] strategy and enhanced our overall position. More specifically, we had a solid Position more specifically, we had a solid fourth quarter and full year with revenues and adjusted EBITDA exceeding both our guidance and analyst expectations. Products from both our core and growth portfolios contributed to our positive momentum posting year-over-year and sequential gains. We acquired the casual game maker Brainium and initiated its integration into our overall business platform. We've significantly expanded our game portfolio, diversified our business model, and more than doubled our player network from 1.5 million in the third quarter to over 3.2 million daily active users in the fourth. Our development stage initiatives by Vegas Bingo and Tetris made noteworthy progress and at good momentum entering 2023. Our playAWARDS division continued its expansion by reaching more players and adding a collection of new and exciting partnerships. We evolved our organization, expanding our capacity in Asia and Southeastern Europe, along with optimizations focused on improving our margins and operating results. And finally, we initiated a share repurchase program in November and have acquired roughly 2.4 million shares of our stock. Turning to 2023; we're more convinced than ever that our unique model and strategic focus position us to outperform the market. Most of our peers are struggling to acquire new players, making it difficult to grow, let alone sustain their existing audience. This place is even greater importance on retaining players. As our industry's pioneers and loyalty and rewarded play, I believe our model positions us to weather these market challenges, maintain our player network, and drive performance by leveraging our real world incentives. Since founding our company over 11 years ago, this has been our vision, to craft games, players love that offer rewards they want. It's our plan to fully exploit this model and as we do further establish our company as the leaders in rewarded play. With that as context, let's touch on our recent financial performance and other key operating metrics. Our results were ahead of our prior guidance and street expectations. We're able to not only grow revenues, but adjusted EBITDA and EBITDA margins as well. DAU and MAU of $3.2 million and $11.5 million were up substantially over the quarter, as we included Brainium into our quarterly results for the first time. Excluding Brainium, users were down modestly versus the third quarter, showing relative stability against the declining industry backdrop. We believe the results highlight the popularity of our games and the loyalty that's engendered by leveraging our playAWARDS capabilities. ARPDAU was also higher than the third quarter, once adjusted for the effect of the ad-based Brainium games. Now let's briefly touch on the general market conditions. Industry dynamics remain challenging, particularly around user acquisition as demonstrated by our games performance, we definitely navigated these conditions, but the difficulties remain nonetheless. Our focus remains on maintaining our network as we focus on converting more of our existing players to payers. We believe this should allow us to drive growth in the face of a shifting and complicated UA environment. The economy also remains strained, creating a broader drag for us and every other consumer facing business. While a recent slowing and inflation is a relative positive, aggregate figures remain high. Similarly, labor pressures have picked up with many large scale job reductions. We continue to operate under the assumptions that we'll be facing more economic headwinds and plan to focus on creating our own momentum through company specific initiatives. On the topic of strategy, I want to remind everyone that ours consists of two key pillars. The first centers around diversifying our portfolio of games, allowing us to expand our player network and demonstrate our loyalty lift across the broader collection of products. We've done this most recently by complementing our organic efforts with strategic M&A, acquiring the rights to Tetris and the Brainium portfolio of casual games. The second is focused on advancing our playAWARDS program by developing new capabilities and expanding the collection of real world partners and benefits. I believe that executing on these strategic priorities will enable us to accelerate our growth, minimize creative risk, improve margins and ultimately drive substantial value. Let's touch on some of our primary initiatives starting with games. Over the past year, we've materially repositioned our company by expanding from seven to 17 games with all the four consisting of casual and puzzle products, we've evolved from a pure social casino operator to a diversified game publisher, a key transition as we look to solidify our market standing as the leaders in rewarded play. Now let's delve a bit deeper into some of our key accomplishments. We continue to post steady performance in our core social casino games, a notable accomplishment given the overall weakness in the sector. Our portfolios revenues generally match the industry down a few percentage points year-over-year and largely flat sequentially. Like the third quarter, we were able to extract higher revenues per user, resulting in further improvements in a D. As mentioned earlier, DAU and MAU were down modestly versus the third quarter, and generally better than the more significant declines posted by many of our competitors. Going forward, we believe there's still meaningful opportunities to grow these products by further improving the monetization of existing players along with attracting new ones. We'll achieve this by further evolving our live operations practices, continuing to innovate and leveraging cross promotion from our 11 million plus active player network. I'm excited by the potential these efforts and believe this focus will drive top line growth and margin expansion. Turning to our newer and growth-oriented initiatives, I'm happy to share that we made significant progress this last year and I'm encouraged by our momentum heading into 2023. As a reminder, these products include Tetris Prime, myVEGAS Bingo, the Brainium portfolio, and our new Tetris puzzle. Game growth and Tetris Prime continued with sequential increases in DAU and MAU in the fourth quarter. Both metrics remain very healthy and speak to the enduring nature of this iconic brand. In the quarter, we introduced Adventure Mode focused on adding depth and richness to the game experience. We're pleased with the early results and believe this enhancement along with the limited integration of our myVIP program, have contributed to the rise in user engagement. Monetization has also improved with ARPDAU sequentially from the third quarter. Improved ad logic in the optimization of advertising partnerships drove these games, which are still early in their full application. Going forward, we'll continue to enhance the game with live operations, deeper meta features and the full rollout of our loyalty and rewards program, a key milestone for our overall business vision. We also made notable progress on our reimagined and more casual version of Tetris. While still in development, we've been conducting moderated user tests along with limited releases of the product in isolated markets. This has allowed us to solicit early stage feedback that's critical to the evolution and optimization of the game. Overall, we're encouraged by the results and remain committed to our strategy. We continue to believe that the Tetris game format has the potential to be its own casual game category alongside Match three Solitaire and Bingo. Each of these categories demonstrate the unique power of a universally appealing game format when complimented with progression mechanics, richer features, and a more sophisticated live operations. I look forward to updating you on our progress in the coming quarters. My biggest bingo also made notable strides this quarter and we're pleased with its momentum heading in 2023. Since assuming control of the app roughly a year ago, we've been consumed with improving the technical performance of the game by refining or completely refactoring key systems. With most of the foundational work behind us, we were able to focus on enhancing the game's key performance measures, specific efforts included in overhaul of the game and comedy, additional dingo formats, new rooms, and new live event features. Overall, these efforts have begun bearing fruit with sequential gains in DAU PPU, ARPU and resulting ad. Given these improvements, we plan to scale the games audience through a compliment across promotion and performance marketing in the coming months. Lastly, I'd like to update you on our recent acquisition of brain. Since acquiring the company back in October, we've been focused on integrating the portfolio and team into our overall business framework. I'm happy to report the process has gone well and their priorities are now aligned with the broader business. More specifically, we're focused on tending to the existing collection of brainy and products, integrating playAWARDS, mastering cross promotion, and driving profitability. We expect the first stage of our integration efforts will likely take another three months after which we'll expand our efforts to capitalize on the next collection of growth initiatives. Along these lines, we've become sharing resources and best practices for UA and ad monetization, enabling us to refine our approach to growing our casual portfolio. Turning to the second of our strategic pillars, we've made great strides with advancing our playAWARDS business division. We've continued to generalize the systems, tools, and practices that'll allow us to more fully leverage and eventually monetize the service, and we've initiated the early trials of myVIP and Tetris Prime. In addition, the team has been active in qualifying and onboarding reward partners throughout the quarter. Our players had access to an average of 574 unique rewards, which is 6% more than the same period last year, purchases were also up 6% in the quarter and 13% in 2022 versus year ago levels. In aggregate, the retail value of purchases made by our players was nearly 130 million for the year. Looking forward, we expect the introduction to playAWARDS into our casual gaming titles to further increase the overall scale and engagement in our program. More specifically, we expect to increase the exposure of the program by nearly 400%. As we more fully integrate with Tetris and the Brainium collection. It's worth reinforcing the potential impact of playAWARDS with a key factor in our decision to acquire these assets. Lastly, we believe momentum in these casual categories will help validate the platform's effectiveness and catalyze the opportunities with a broader collection of strategic partners and third parties. In doing so, playAWARDS will prove itself with a much larger and more diverse group of users. These game categories are also distinct and separate from the free to play casino genre allaying. Any concerns that our model has limited or narrow appeals, we're confident that success with casual games will be the key to unlocking our loyalties of service commercial opportunities. I'd like to now take a moment to touch on our operations and overall execution. Over the past year, I highlighted some of the complexities and challenges of scaling our operations and optimizing our business. If you recall, I highlighted the escalating costs in each of our primary development hubs and the opportunity to build studios and teams and alternative markets. I also provided updates on our progress as we opened offices in Belgrade and Vietnam. With that said, we believe we're now positioned to increase our operating margins over the next 12 to 18 months. This is reflected in our 2023 guidance and a trend we aim to sustain. Until we've achieved parody with our district peers to achieve this, we've spent the past few quarters further refining our operating model and qualifying the changes needed to optimize our performance. These include the realignment of products into common portfolios, enhancing key leadership, consolidating studios, and applying more rigor to our capital deployment with a focus on risk adjusted returns. More specifically, we recently reoriented the company away from geographic regions and around our two primary business lines play games and playAWARDS. In doing so, we're able to more fully leverage our centers of excellence and approve efficiency within play games. Titles are now grouped based on their genres, social casino, casual, et cetera, and will leverage common resources. This structure allows for economies of scale, coordinated efforts across games, and the ability to identify and leverage best practices quickly. As part of these changes, we've elected to transition the leadership of myVEGAS and myKONAMI slots to our Tel Aviv studio and support their execution from Vietnam and Eastern Europe. This will result in the closure of our studios in Austin and Hong Kong with an anticipated reduction of 110 employees. While it's difficult to say goodbye to so many of our value colleagues, we know these moves are necessary for to realize our future potential. The next quarter will be focused on the logistics of these product transitions. With the subsequent months dedicated to stabilizing our teams and normalizing our operations, we'll provide a better sense of the overall impact of these enhancements on our next earnings call in May. In addition to the operational disciplines being applied to our games division, we're bringing more focus and attention to playAWARDS. This will be critically important in '23 as we work towards demonstrating the broader potential of the model by fully launching our program inside of Tetris and the brain name suite of games, this will enable us to evolve our overall business in the direction of being the only platform provider of comprehensive loyalty solutions to the Gaines industry. I believe the structural changes that we're implementing will allow us to realize our vision for loyalty as a service. As I mentioned earlier, we'll be deliberate and thoughtful about these changes while we have a plan of action. Implementation is complicated with many unknowns. As such, you should view our plan as fluid in something that'll continually evolve. Please keep in mind we anticipate a lag between the actions we're taking and the results we expect with most of the benefits coming in the back half of the year. Before passing the mic to Scott, I want to briefly touch on our capital position. In November, we initiated a share repurchase program and have spent 10 million through February acquiring our stock in the open market. In total, we acquired roughly 2.4 million shares post the repurchase. We have roughly 40 million remaining on our $50 million repurchase authorization. Even with an active repurchase program, our cash balance as of December 31 remained high at $134 million. We're unlevered in a full access to our $81 million credit facility. With the strength of our balance sheet, we remain well positioned to repurchase more shares the active in M&A, pursue strategic growth or all of the above. I'll now turn the call over to Scott to provide specifics on the financials and share our 2023 financial guidance.

Thank you, Andrew. As Andrew highlighted, we had an excellent quarter and beat annual guidance and consensus expectations. We reported $79.4 million of revenue during the fourth quarter compared to $71.9 million last year and $72.1 million in the third quarter of 2022. Year over year gains were bolstered by the inclusion of Brainium and Tetris in this year's results. As a reminder, Brainium was acquired in October of 22. While the mobile rights to Tetris were acquired in November of 21, adjusting for these gain, we were still able to show positive sequential gains in revenues. A notable achievement given the difficult operating environment adjusted EBITDA is $12.1 million compared to $12 million a year ago and $9.8 million in the third quarter of '22. EBITDA margins were 15.2%, 170 basis point improvement. Sequentially growth in advertising and other revenues contributed to the margin gains. Though we also saw margin gains in the social casino portfolio, we are encouraged by this momentum and believe these trends are sustainable going forward. As Andrew mentioned, we were pleased with our KPIs. Dow for the fourth quarter was 3.2 million, and MAL was 11.5 million, up 145% and 137% respectively over last year and up 117% and 72% sequentially fourth quarter. User metrics are heavily skewed by the inclusion of Brainium adjusted for this. DAO and MAO were slightly down versus year ago figures. However, given the broad based deflation of user growth in the industry, we are encouraged with these results. Fourth quarter ATA was down sharply from last year's levels due to the impact of both Tetris and Brain, which are advertising based revenue models. Excluding these gains, Dale increased on a year over year and sequential basis continuing a trend that we've seen throughout 2022. Notably, we saw healthy gains in myVEGAS Bingo and Tetris two gains. We are actively growing. On the loyalty side, available rewards grew by 6% in the quarter to 574,000 units. Reward purchases of 512,000 units increased by 6% over last year's fourth quarter. For the full year over 2.2 million. Rewards were purchased up almost 13% versus 2021. We continue to add world-class rewards partners in the quarter, including Hilton Hotels, Pacific Cycle, and the Nevada Ballet Theater, including these partners. playAWARDS represents a collection of 105 real world brands. That includes iconic businesses such as the Intercontinental Hotels, AMC Theaters, Royal Caribbean Cruises, and MGM Resorts. Through our playAWARDS platform, these brands have combined to deliver hundreds of millions of dollars of rewards, benefits to millions of gamers. As Andrew discussed, brain continues to be integrated into our operations and we are happy with the progress to date. We continue to believe there are numerous synergies from this transaction, but are still too early in the process to quantify anything just yet. We'll provide updates as we have them. While we don't provide game level specifics; as a follow up to our discussion of the contingent payment associated with the brain acquisition, I wanted to confirm that the criteria for the contingent payment was not met, and therefore the original purchase price of 70 million was unchanged. As a reminder, our expectation was that the contingent payment would not be paid, and we view Brain's performance to be in line to the projections which supported the $70 million purchase price. Turning to the balance sheet, we ended the quarter with 134 million of cash and no debt. Our borrowing capacity remains at $81 million, all of which is available to us. Including the accordion feature, total available borrowings are up to $156 million. During the quarter, we began repurchasing our shares under our $50 million stock. We purchased authorization through today. We have repurchased approximately 10 million of our stock or roughly $2.4 million shares. We still have the majority of our authorization available to us and continue to evaluate additional repurchases of our stock. As of the close of the quarter, we add $132.1 million total shares of common stock outstanding. As Andrew mentioned, we remain in a strong financial position with considerable flexibility in terms of M&A and internal growth initiatives. As evidenced by the recent acquisition of Brainium, we will be aggressive when the right opportunity presents itself. Now, let me close with guidance for 2023. We estimate that revenues will be between $300 million and $320 million and adjusted EBITDA between 47 and a half and 52 and a half million. As implied, we are assuming a notable increase in our EBIT margins driving. This will be a mix of efficiencies and progress in the new and developing games. Andrew discussed earlier, also, lifting margins will be inclusion of brain for the full year, which is substantially higher margins than our legacy business due to its advertising based model. When modeling our 2023 results, please consider the following, one. Our guidance does not include synergies from Brain two in part because of the initiatives outlined by Andrew earlier. We expect our guidance to be slightly weighted to the back half of the year. While this has historically been the case, the skew may be a bit larger this year, so please consider this while you build out your quarterly earnings models. Finally, while we aren't guiding to an explicit share account figure, we advise against including share Purchases in your forecast. Though we may purchase more shares, we are unable to provide any concrete guidance around future share repurchase activity or projected share accounts. With that, I will pass it back to Andrew for some closing remarks.

Thank you, Scott. Before we end our prepared remarks and open the call for questions, I'd like to reinforce some of the key points. We had an excellent quarter with revenue and adjusted, but above our prior guidance and consensus through the expectations, we did this while making notable progress on all of our new initiatives, despite challenging market conditions, we were able to largely sustain our network while also showing another quarter of sequential a Dow Gains. We continue to focus on payer conversion or seeing our efforts bear fruit, our new game initiatives. Tetris and myVEGAS Bingo made tangible progress this quarter and on track to show meaningful gains in 2023. Brainium name is being incorporated into our broader business and the transition's been smooth. We're already finding ways to leverage best practices and see many more opportunities ahead. playAWARDS continue to gain momentum in the quarter with partners growing year over year and players purchasing 512,000 rewards at a retail value of over 30 million. The platform is poised for a step change in 2023 with the occlusion of Tetris and the Brain Games. We initiated a stock repurchase program and bought 2.4 million of our shares through February, and we're now sharing our 2023 guidance that calls for meaningful growth across the board. Both adjusted EBITDA and adjusted EBITDA margins are expected to increase in 2023 as a result of our efforts around increased profitability. With that said, I want to thank you for joining us today and we're now happy to take your questions. Operator, please open the lines.

Our first question is from Aaron Lee with Macquarie. Please proceed with your question.

Hi, great to speak with you guys. Thanks for taking my question and congrats on the strong result. One, you touched on your outlook first and I think you touched upon this in your prepared remarks, but maybe you can just tie it all together. Can you talk about what you have embedded in your guidance in terms of one, assumptions around the consumer and macro, and two, the timeline for scaling the Tetris games and the playAWARDS integration? Thank you.

Yeah, no, thank you Aaron for the question. So, our general assumption is that we're not forecasting any meaningful change in the overall macroeconomic environment, and that the challenges that we've seen in the industry will generally continue. So for that reason, we kind of anticipate that our pace that we exited the year is what we'll sustain going forward but then take into account the full benefit of a full year of Brainium. As far as Tetris, our current assumptions are that we'll continue to invest in and support the growth of our Tetris Prime product and without having any clarity around when we'll be in a position to launch our Tetris casual products, we haven't yet included those in our outlook or our forecasts.

Yeah, yeah, very helpful. As a quick follow up for the brain synergies so it's been about five months. I know you're at guiding to it, but has your thinking changed at all in terms of the size of the synergies or the different buckets or the timeline for achieving those synergies? Just wondering if there's any changes there. Thanks.

No, generally we we're kind of on pace with what we had expected. Our first focus was just to integrate the team and have exposure to them and their areas of expertise, particularly in around a monetization get them integrated into all of our basic business systems so that we're fully integrated from an operating perspective and then we can focus on some of the synergies and, and ultimately start enjoying some of those benefits. So our focus has first been on team stabilizing the team, ensuring that they're healthy and excited about the outlook being a part of PLAYSTUDIOS and now we'll start focusing on where there are other opportunities to drive synergies.

Thank you. Our next question is from Ryan Sigdahl with Craig-Hallum Capital Group. Please proceed with your question.

Good afternoon, guys. Want to start with the internal reorganization, workforce reductions. Are you able to quantify the cost savings that you got from the 14% reduction?

I don't think we've yet fully provided the guidance because I think, as I alluded, we're actually shifting those products from where they're currently hosted and operated from being Austin and Hong Kong to our studio in Tel Aviv, and then they'll be supported out of our studios in Vietnam and in Southeastern Europe, given that as we make those transitions, we're going to also then be layering in some additional teams and resources to support those efforts. We're not yet fully resolved on what the net benefit will be, but we fully expect that we'll provide that on our next call. So, but we know that it's gonna be material as I said, you just highlighted it's about a 14% reduction in the actual workforce and a majority of that is gonna flow through into our benefit in the back half of the year. And just to be clear, Andrew, is that a 14% net reduction or is that a 14 per percent reduction and then you're gonna be adding some additional personnel in different locations? The ladder, yeah, so at the time of the reduction, it's a, it's 14%, but as we then transition the products, we'll be layering some people back in to service them out of those markets. And I, I would just remind you that there's amazing talent in those markets and our cost per employees significantly lower. So we'll be able to, compliment the capacity that we currently have retained and actually be able to scale it up at a lower cost in the end.

Switching over, you mentioned solid momentum exiting 2022. Any comment on how trends have been thus far in 2023?

Generally we've maintained our pace and performance so I don't, I don't know that obviously we don't talk about any of the specific products, but, I would just say the trends that we saw exhibiting the year we're seeing continue on through the, the first part of this quarter.

Last one for me, the ARPDAU uplift on Tetris. Are you able to quantify how much that was?

No, only because we don't speak to or disclose kind of specific product performance, but I can tell you it's been pretty meaningful. Team's done a great job optimizing that product and driving engagement and increasing ad impressions and, just optimizing the, the waterfall logic. So we're seeing the benefits of all of that work, and so we're, we're, we're pretty enthused about the results and the momentum that product has right now.

Thank you. Our next question is from Omar Dessouky with Bank of America Security. Please proceed with your question.

Hey guys, this is Arthur on for Omar. Thanks for taking the question. So I just wanted to touch on quickly on Bringham. Can you talk a little bit about either how Brainium has performed on a standalone basis in the quarter? This is the first question and the second is what's your outlook for Brain bring in is embedded in your current '23 revenue guidance? Thank you.

Yes, Arthur, thanks for the question. But unfortunately we don't break out and speak about the specific products or subsets of our products. what I can tell you is that the Brain Room suite has performed as we expected that the, we feel really good about the transaction and ultimately the price that we paid for the company, and we're going to continue to look to optimize the suite of products and their performance as we integrate our playAWARDS program and start to drive what we think will be added lift and performance as we deliver those benefits to those players, and then also benefit from the cross promotion out of that network into the rest of our products and, and the other way as well. So, apologies for not being able to answer your question a bit more directly, but we just don't break out the performance by specific groups of products.

Understood. And if I could just have one follow up I think some of the, some of the other mobile gaming companies have reported experiencing a more challenging environment for scaling new games, to, for example, a $100 million run rate. It sounds like you've had some early successes with the launch of Tetris and Bingo and, congratulations. But like wondering to what factors would you attribute those successes to?

Look, first of all, I would generally agree that the UA environment is challenging, but with that said, all of our products are in investible. We're seeing meaningful returns as we look to sustain the current scale and size of those audiences. Or if we're not able to drive the volume of players that we have in the past we are able to see, qualities and a concentration of quality within those cohorts. So we're seeing healthy returns. So, yes, it's difficult environment, but, our team, I think has done a really great job both on the product side, making sure that the products are engaging and able to captivate these new players that are being exposed to them, and then from our UA team, finding the pockets of players that, that seem ideally suited for our games. So certainly, a difficult environment, but I think we're managing through it fairly well. So is there another question? Question that I Yes. No. Okay. All right. Thanks Arthur. Thanks guys.

Thank you. Our next question is from Mike Hickey with The Benchmark Company. Please proceed with your question.

Hey, Andrew, Scott congratulations. Hey, Mike, guys, nice quarter and, and strong guide. Thanks for taking my questions. I guess just the first one, I appreciate that your performance is second half weighted but we're mostly through the first quarter here, and your guide was stronger than consensus View. Can you give us any perspective on the first quarter, I think Consensus view is $73 million in revenue and 9 million in EBITDA. Is that something you guys are comfortable with and if not what should we be considering in the first quarter?

Look, Mike, appreciate the question. We don't provide quarterly guidance. What I can tell you is that, the pace that we saw coming out of the fourth quarter, we generally been able to maintain. And so without getting any more specific, I'll, I'll leave it to you to kind of interpret that and resolve your own modeling expectations.

All right, fair enough. The and then on Andrew, on the on the Tetris casual, I know you were excited about that. Can you sort of talk a little bit more about the, the development of, of that game, and I think it's taken a, a little bit longer than you expected. Is, is that the game itself? Is that the macro or UA environment? What, I guess what sort of, and now it's not in your guidance for the year, sort of how, how you thinking about sort of the eventual commercialization and where you on, where you're at on the development cycle? Thank you.

Yeah, no, I appreciate the question. So, the effort, started off with our early kind of, and fairly comprehensive conceptual explorations, and by the time we finally green lit the effort, we're probably into the development cycle now, 10 months to 12 months which for an altogether new products Indonesia, rose I think reasonable. We've been in the market with the product in some of these tertiary markets just doing technical validation and getting some early exposure to consumers so that we can start the exercise of optimizing the product. And so, I would just say, as has been the case with, all of our games, that process of getting it from something that you're ready to expose to your consumers, to something that is now worthy and ready to be launched and to go and invest in aggressively is unpredictable. So, we're in that cycle now, and we'd certainly hope that in the next several months we'll have more clarity and hopefully able to provide a, a better view and some guidance on our next call. It's why during an earlier question, I had mentioned that our forecasts and guidance for the year really don't include a contribution from the Tetris casual product. So to the extent that we get to a place where we have clarity around the timing of it well then maybe we'll make an adjustment. But from where we stand today, we think that's the right posture or position to take.

Nice, thanks, Andrew. Last question. I guess just the, could you talk a little bit more about the transition of, of Tetris and, and Brain and into your playAWARDS program? I think both those games are primarily ad models, which is a little bit different than the other games within the awards program. So I'm just sort of curious how you expect that sort of what play out. And then yeah, I guess the next part would be the, the partnership side. I think we've all been sort of excited about your ability to sort of grow your, your playAWARDS network by adding third party partnerships. Curious if you think that you'll have success this year with that, or if that's more longer term.

Well, appreciate the question. First of all, I think that the ad-based products are better suited for our model than an ad purchase products because they, the model drives engagement, and so without requiring purchase in order to drive, kind of continued and extended play the inherent mechanics of the game obviously need to be entertaining. But then you have this loyalty program that also drives, longer term engagement and lift. So we actually think that the ad-based games potentially are even better suited than i p games. With that said, we've been trialing and testing and optimizing the Play playAWARDS program within our Tetris Prime product. In, in the next several weeks, we're gonna be expanding the audience. So we're, we're beyond the trial period. We saw what we expected in terms of the lift and some of the key metrics. And it's going to coincide with the premiere of the movie about Tetris that Apple is launching at the end of March. We have a great marketing and co-promotion program going on with Apple. They've given us thousands of Apple plus tv subscriptions that are going to be part of our rewards offering with a whole other new collection of extended rewards that are gonna be made available to our Tetris players. So, towards the end of this month and into April there's gonna be a lot of activity and visibility, and we believe organic lift in and around our whole Tetris initiative. So this will be, it's exciting for us because we get to really more fully leverage our playAWARDS program and its capabilities and the marketing team to really lean into this whole proposition. So they have the game, we have this movie premiere, we have our rewards program and proposition and we've got Apple support with all kinds of co-promotion and merchandising. So it's be pretty great.

Nice. And our third party partnerships, I guess on, on the game side, Andrew, anything there?

As far as providing as a service? We, I can tell you that we have initiated conversations. We're still early in the cycle of those. There's obviously really strong interest. So, pretty confident that we're going to be able to ultimately go to market with a really qualified partner, help us really demonstrate and prove out the value of this proposition. But the timing and the specifics of it are not yet fully resolved and happy to address this in a future call once they are.

Thank you. Our next question is from Greg Gibas with Northland Security. Please proceed with your question.

Hey, good afternoon, Andrew and Scott, thanks for taking the questions and congrats on the results. Yeah, thank you. Yeah, first if we could just maybe take a step back, where do you attribute the upside that you saw relative to your guidance? Maybe what drove those strong KPIs in the quarter?

Look, I would, I would say that it wasn't concentrated within a particular product or game or initiative or even category that we, we saw general improvements across the board. Obviously the integration of Brainium, which took place in October had a meaningful impact. And so we, the integration of the team and the products and their contribution was, was obviously contributed to our improvement. But across the portfolio, we, we started to see things firm up a bit. So yeah, there wasn't any one major event other than the acquisition of brand new.

Okay, good to hear. And we're relating to the timing of due game launches could we maybe just go over that for 2023? I think you said Tetris casual products not included in guidance just rough expectations for, for new game launches?

Yeah, what I can tell you is that Tetris casual is inactive development, but because we don't have clarity around when it will be completed and ready to be launched and scaled, we haven't included in our guidance, we think that's the best overall position to take rather than to make the assumptions and then ultimately have to shift out the timing and then contend with the implications of that with all of you. So we think that the safest position to take is to exclude it from the current modeling and thinking and then update everybody once we have more clarity.

Okay. I think that's fair. I guess lastly, in relation to your m and a initiatives, do you maybe expect those to take a backseat, relative to kind of your current integration and studio restructuring or optimizing initiatives this year?

No. if anything, I think that the exercise of onboarding the Tetris license and team and then ultimately rolling forward with Brainium and its integration has helped us refine our overall approach to executing on these types of opportunities. And so we're, we're really active in continuing to look at and qualify what we think are really great companies and teams and products that we think will be a really great compliment to what we currently offer. So no, we intend to be as active, not more active than we have been in the past. We think that there's a really meaningful opportunity for us to continue to find companies that have the right profile and then incorporate them not only into the company, but into our Play Wars program ultimately, and drive that scale and growth.

Thank you. Our next question is from Martin Yang with Oppenheimer. Please proceed with your question.

Hi, thank you for taking my question. I first of all want to ask about guidance for just EBITDA into '23. What, can you maybe elaborate on a source of margin expansion? Do you see most coming from maybe a year of year decline on marketing spending, particularly for the first half, or is it from the mix shift between Bringham and the resident portfolio? And the third potential source I see is just the overall margin expansion on the core portfolio. Any additional comment that will be appreciated? Thank you.

No, thank you, Martin. I appreciate your just highlighting you've, you've answered the question by posing it. So there are those three key areas greater efficiency in and around our investments in ua. So getting back to normalized levels, which we're in keeping with where we were pre-COVID, which is reinvestment rates that are somewhere between 18% to 22% as opposed to where they've been in the mid-20%. And then there's the cost improvements as a result of the restructuring that we've been working on and working through over the last several months. So as those start to really materialize, we'll start to see the benefits in the back half of the years we've described, and then the overall composition and mix of business as we continue to scale or fully integrate and get the full benefit of a full year of Brainium and just the ad based products that have higher margins.

Thank you, Andrew. Alan, one more question citrus casual. Can you may be talking general terms on the potential timeline you would expect between maybe alpha or public beta and a final release? I think the, maybe the new game launch is a smart challenge in the current environment. Is there any way for, for you to maybe give us a, the general time horizon associated with upcoming new games? And maybe more specific to Tetris casual?

Yeah, I wish that were the case, but the short of it is no we can't provide any more clarity, only because it's a difficult process to really nail down. You're talking about looking at and qualifying your consumer's reaction to the game and then optimizing both all the fundamental metrics that you need to see and hit certain thresholds in order to comfortably then allocate, millions of dollars, tens of millions of dollars even to scaling, growing a product in the current environment. So, I think that's why, our overall position has been just don't include it in the plan for this year. And as we get more clarity around the timing of when it'll launch, then we'll go ahead and share that with everyone and incorporate that into our guidance. Yeah, with that said, thank you. Go ahead. Sorry, operator.

No there are no further questions at this time. I'd just like to hand the floor back over to Andrew Pascal for any closing comments.

Okay. Well, thank you. We just appreciate everybody's continued interest. Thank you for tuning in and we look forward to engaging again and updating you on our progress on our next call.