Good day ladies and gentlemen, thank you for standing by. Welcome to the PLAYSTUDIOS Second Quarter 2021 Earnings Conference Call. At this time all participants are in listen-only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded today, August 11 2021.

I will now turn the conference over to Mr. Joel Agena, Corporate Secretary and General Counsel. Please go ahead, sir..

Thank you, operator and hello everyone. By now everyone should have access to our second 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, our mergers and acquisition strategy, our strategic and financial objective, expected performance and financial outlook.

Forward-looking statements or 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 or expect should anticipate, other similar terms.

Forward-looking statements are subject 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 second quarter of 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 Q2 earnings call, our first update as a publicly traded company. I'd like to start by taking a moment to welcome our newest shareholders and to thank the Acies team for their partnership and support.

Becoming a public company is an important milestone as it provides us with the standing and resources we need to realize our full potential. So please know that we're grateful to our extended group of stakeholders, partners and advisors for embracing our vision and supporting our plans.

It's been just over 10 years since a small collection of us founded PLAYSTUDIOS. We had a simple and novel idea to engage people with captivating games and reward their loyalty with real world benefits. And today, over 110 million people have downloaded a PLAYSTUDIOS game and enjoyed over $500 million of real world rewards.

As we now look forward with an expanded view of our opportunities. I feel it's important for investors to understand our story started over 10 years ago, and stretches into the future well beyond the first few months of our being a public company.

And so, I'd like to start our first earnings call by taking a few minutes to provide some context and reaffirm our vision and plans for the future. Our vision is surprisingly simple, leverage compelling games to attract and engage players and use our unique loyalty program to enrich their experience and convert them into real world consumers.

This focus on play for free own for real has resulted in a collection of franchise games, millions of players, and an expensive portfolio of over 500 unique rewards. I should note that we've accomplished this through our own organic efforts. Having assembled every team produced every game attracted every player and secured every partner.

The result is a gaming ecosystem that is totally unique among the 1000s of companies serving our $175 billion industry. The first proof point of our model was our myVegas Slots product which we launched on Facebook back in August of 2012. It was a mash up of the popular resource management games of the day in game mechanics from the casino industry.

It also leveraged most of the iconic Las Vegas brands in our industry first loyalty program. Players were invited to play social casino games, build their own virtual version of Las Vegas, and earn enough loyalty points to visit the real one.

Within months, we'd amassed hundreds of 1000s of players spawn self-organized fan groups, and delivered new consumers to our rewards partners. It was clear we were on to something.

Having validated the strength of our model on the web, we turned our attention to mobile and executed a growth plan that called for a suite of games each focused on a specific subcategory within the casino genre.

In the span of just four years, we updated myVegas Slots, Launched my Konami and introduced POP Slots, each of which quickly scaled and became franchises with evergreen characteristics. We also expanded our royalty benefits adding partners in Canada, Western Europe, Australia, New Zealand, and select regions in Asia. It was clear our model is working.

With a string of successes, a history of profitability, and the nearly a decade of experience supporting the power of our paradigm, we set out to explore it more fully.

In recent years, we've abstracted the loyalty programs, technologies, tools, features and functions, and constituted playAWARDS, a platform tailored to optimizing the long-term value of players. And now we're beginning to leverage it more fully by applying it across a broader collection of games and genres.

Our most recent implementation of our playAWARDS model is with myVEGAS Bingo, an innovative take on a one of the most widely known and popular casual gaming formats. The Bingo categories among the fastest growing in mobile gaming posting a year-over-year growth rate of nearly 40% and topping $800 million.

We entered the market back in late March with a game that embodies who we are as a company, standard setting creative execution, innovative game mechanics, proprietary IP, and our play for free firm for real value proposition.

In our first few months, we scaled our audience to over 100,000 players and are seeing retention engagement and conversion metrics that rival the long standing leaders in the category. We're also seeing some of the highest participation rates in our loyalty program.

While it's still early in the cycle of establishing this product, we believe it's on a path to becoming another franchise in our portfolio, contributing the expected $45 million of annualized revenue maturity. Next up is Kingdom Boss, an innovative and beautifully executed RPG game that brings the dynamism of rewards to the $6 billion vertical.

For the first time, players will be able to go to battle in an immersive fantasy world, while accumulating benefits in the real one. Our development partners of Boos Fight Entertainment have spent nearly two years crafting this game, which is now in its beta test.

Assuming the launch criteria are satisfied, we plan to introduce the product globally later this year. In addition to these new products, we've continued to qualify and onboard new rewards partners.

During the quarter we welcomed Intercontinental Hotel Group, innovative Music, City Gallery, Sycuan Casino Resort, Singing Hills Golf Resort, Peppermill Resorts and additional MGM resort properties. We also recently secured relationships with the Bowlero Bowling and attractions in the Anschutz Entertainment Group or AEG.

This collection of new partners further illustrates our capacity to both broaden and deepen our benefits, enabling us to keep our promise of delivering games players love with rewards they want. Which brings us to the principal reason for our going public. We firmly believe that loyalty will play an important role in the future of gaming.

And we built the products, tools, teams and capabilities to solidify our standing as the loyalty leaders. But to fully exploit this position, we need to demonstrate the value of our model across genres. With that said, we plan to accelerate our expansion by acquiring companies, teams, games and players that we can integrate into our platform.

In doing so, we'll compress our growth cycle, minimize creative risk, and lift the results that will drive shareholder value. Executing on this M&A strategy calls for significant resources. And having completed our recent merger and public listing we now have roughly $380 million of liquidity, including over $230 million of cash on our balance sheet.

Allocating that capital to our M&A strategy is a priority for Management and the Board. To that end, I'm thrilled that Jason Hahn has joined us as our Head of Corporate and Business Development.

Jason brings to our leadership team his 15 plus years of strategic corporate development and banking experience from companies like NBC Universal, Activision Blizzard, and JP Morgan. Now before we turn our attention to our second quarter results, I'd like to reinforce a few key points.

First, our vision and strategy have always been focused on creating value over the long-term. If you look at our history, you'll find moments when we focused on preparing for future opportunities, followed by periods when we've searched forward.

2021 was always intended to be one of these formative periods, whether it be the investments in new products like Bingo and Kingdom Boss, the expansion of our playAWARDS initiatives, going public, or executing an M&A plan. '21 is and was always about advancing our strategy and seeding the growth for '22 and beyond.

I also want to highlight the creating a great game is more organic and a timeless predictable exercise. While the production and execution can be tightly managed, getting the core experience and play value right is less deterministic. And this was the case with some of our other products, and is proving to be the case with Kingdom Boss as well.

As a result, the timeline for its launch and resulting revenue contributions have shifted out impacting our expectations for the balance of this year. Given the strategic significance of this product, it's critical that we take the time needed to optimize the experience.

It's our view that the short term impact will be more than offset by its long-term contributions. With that said, we currently expect 2021 revenues to now be between $290 million and $300 million. Additionally, we currently expect 2021 adjusted EBITDA to be between $35 million and $40 million.

I'll now turn the call over to Scott to provide more specifics on the financials. .

Thank you, Andrew. We're pleased to report $70.8 million of revenue during the second quarter of 2021. Clearly year-over-year, comparisons this quarter are impacted by the stay-at-home restrictions that were in place during the second quarter of 2020.

Given the unusual nature of last year's quarter, we think looking at year-to-date comparisons is useful. Year-to-date for the six months ending June 30 of 2021 the revenue is up 6.4% to $144.9 million versus $136.2 million during the same period last year. As Andrew emphasized, we are focused on growth.

Whether it's optimizing our core franchises, launching new games or investing in our playAWARDS platform. We're focused on positioning the company for continued expansion. However, it's also worth highlighting that we are disciplined and look to continue to grow profitably.

Through the first six months our cost of sales as a percentage of revenue has improved from approximately 34% last year to approximately 32.5% this year. We generated $3.4 million of adjusted EBITDA for the quarter and $17.9 million for the six months year-to-date.

It's worth noting that the most recent quarter includes stepped up investments in product development, live operations, 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 underlying quarterly operating metrics, daily active users or DIU were 1.25 million and monthly active users or MAU were 4.3 million, down 3.8% year-over-year, but up 15.1% quarter-over-quarter. Average revenue per daily active user or ARPDAU was $0.62, up 12.7% year-over-year, but down 5% quarter-over-quarter.

And payer conversion rate was 2.7% up approximately 40 basis points year-over-year and down approximately 10 basis points sequentially. We also saw an increase in our loyalty program activity, as we work purchases returned to pre-COVID levels, the 534,000 purchases in the quarter versus 173,000 for the same period last year, a 209% lift.

Turning to the balance sheet. We ended the quarter with approximately $230 million in cash. In addition, as we previously announced we entered into a new $75 million five year secured revolving credit facility with a company option to increase the facility for up to an additional $75 million.

The revolver is currently undrawn, post the close of our merger we have 125.8 million shares of common stock outstanding. We are very well capitalized to execute our multiyear plan and address our key priorities of launching Bingo and Kingdom Boss and exploring opportunistic and accretive M&A.

Lastly, I'd like to touch on guidance and clarify our overall approach. We will provide a range of expected annual revenue and adjusted EBITDA and updated each quarter. We expect to initiate guidance for any upcoming year when we report the fourth quarter and year end results of the prior year.

As Andrew mentioned, we currently expect 2021 revenues to now be between $290 million and $300 million representing year-over-year growth of roughly 10% at the midpoint. In addition, we now expect full year 2021 adjusted EBITDA to be between $35 million and $40 million.

Our guidance reflects that continued ramp up of myVEGAS Bingo and a modest contribution from Kingdom Boss given the anticipated launch timeline. Within that, I'll pass it back to Andrew for some closing remarks. .

Thank you, Scott. Before I open things up for questions, I'd like to provide a quick recap. Since our founding 10 years ago, we've remained true to our vision, create great games and reward the loyalty of our players with real world benefits.

We've proven our unique model and expanded organically with a portfolio of five apps, all published on our playAWARDS platform. We're poised to expand our market opportunity and accelerate our growth by applying our loyalty model to other games and game genres.

We've just recently entered the casual market with our Bingo product and expect to soon launch Kingdom Boss, our first foray into the RPG genre. We've enhanced our collection of loyalty benefits by adding more partners and more in key categories such as resort destinations, amusement centers, concerts, shows, and special events.

We've secured the resources to more fully leverage our model and accelerate our growth through M&A activity. We generated $145 million in revenue for the first six months of the year, a 6.4% increase over the same six month period in 2020. And we remain profitable generating nearly $18 million of adjusted EBITDA so far this year.

And we've augmented our teams with the experience and skills needed to execute our plans. In short, our company is better positioned today than ever to solidify its unique market position and realize its full potential.

Lastly, I want to thank my Co-founders and our nearly 500 colleagues and team members around the world, their dedication and uncompromising commitment, inspiring, and the life force of our business. I know that it's their dynamism, creativity and grit that drives our success. And I look forward to continuing to grow together.

With that, I thank you all for joining us today. And we're happy to answer any questions. Operator, please open the line for questions..

[Operator Instructions] We'll go first to Ryan Sigdahl with Craig Hallum. Your line is open. Sir, please go ahead..

Good afternoon, Andrew, Scott, thanks for taking my questions. .

Ryan, great to hear from you. .

Curious, even or I guess, to start on Kingdom Boss, so previous expectation was second half launch.

I guess, can you clarify exactly when you're expecting to now and then what the previous expectation was?.

Yes, I mean, what our previous expectation was it was going to launch in the summer, we indicated that it was likely to move into the sometime in the late fall. And so we're continuing to work on evolving the product.

But as I just shared, until we feel really confident about all of the metrics, we have very specific criteria that we hold a product to, before we launch it, we're going to continue to just invest in getting it right.

And so we're in that cycle, we still have a deep belief in it as a product, and we don't want to compromise it by launching it too early. So it'll be very later part of this year. So the contributions that we now expect from Kingdom Boss are really quite marginal..

And I guess what exactly are you looking for? Because it's being beta tested in various smaller international countries, reviews look good, ratings look good.

I guess can you clarify what exactly you're waiting for?.

Sure. I mean, that the cycle it and it's not unique to us, that every product goes through is, you focus first on the capacity for the product to retain its audience.

So all the key retention metrics, and then you focus on engagement, to make sure that you're seeing that kind of behavior and lasting commitment to the product from those players you've retained. And then ultimately, its capacity to convert some of those players to payers, and they monetize at the rates and levels that you would expect.

And so you work through the cycle of optimizing a product, really advancing through those three key kinds of measures of performance.

And so it's tough to read retention all together, because we are in kind of markets that aren't considered to be our primary markets, but we're able to benchmark kind of how the overall product performs from a retention perspective.

And then the same is true in terms of engagement, we're in markets where we feel like we can benchmark the overall level of appeal of the product in terms of frequency of play, and the length of time per session and total time play per day.

And then the actual behavior at a very granular level within the app, so that we can see, the key features that we think are going to drive the long-term value and engagement are what in fact the players are responding to. So it's complicated, sometimes, as you go through and we iterate on the product in a cycle of every two weeks.

And so we're learning, adjusting, optimizing, and then releasing a new version of the product to measure and see how it performs. This is not a typical, every product goes through this exercise.

What is as I shared less predictable, is when it ends, and it ends when you feel like in balance, you have those collection of metrics at a place that really supports you're then investing the 10s of millions of dollars in scaling and growing the product.

I will also share that when you first launch a product, you attract all these early adopters, people that are avid within that particular genre. And they oftentimes establish this core base of what I referred to as golden cohorts, users that are going to play the most intensely.

And it serves as the foundation for the product that you're going to scale and grow from. And so you want to make sure that you've got the product at a place where you'll be able to appeal to and retain those players. So we don't want to lose or miss out on that opportunity. Feel, as I said good about where the product is.

We know we still have work to do our partners are boss fight are intensely focused on it. And so hopefully that provides a bit of clarity. .

Yes, helpful. So curious, if you cut relative to your financial revenue targets as part of the SPAC leaseback process, you cut revenue by $33 million. Sounds like a few months maybe as long as a half a year. Seems like there's more, I guess what was the Kingdom Boss expectation this year, I see $60 million.

But that's full run rate ramped up for 2022 for a full year.

So I guess it feels -- seems like there's more coming out, anyway, you can bridge that?.

Well, there's a couple things. So first of all, as we talked about, right, Kingdom Boss shifts out to six months, at least, hopefully, as I said, we're going to get it launched before the years out. But what shifting out of this year, it's most productive, or months.

So a substantial amount of majority of the adjustment as a result of shifting our Kingdom Boss. What we have shared previously, is that Bingo launched about six weeks later than what we originally anticipated. We're really excited about Bingo and its reception and what we're seeing from the players that are engaged with the product.

Like others, what we are seeing in the market from a scale and growth perspective is higher CPIs. And like a lot of our peers, we're kind of working through the changes in the UAE market, so that we can optimize how it is that we continue to scale and grow that product. So there's a modest adjustment, coming out of Bingo.

But as we shared, we fully believe that at maturity that products going to accomplish and achieve all the things that we expected from it. So between the modest delay and Bingo the environment that we're seeing as we continue to scale and grow it.

And then of course, as we just talked about the shifting out of Kingdom Boss, those were the principal reasons for the adjustment that we made..

And then not looking for specific 2022 guidance, obviously, at this point, but given you did get financial targets just recently there and knowing what you know now, both these games will be launched, I guess, what's your confidence in organic revenue, as well as EBITDA margin expansion in '22 and beyond?.

What we think that the core portfolio is going to grow. And that we're also as it does, we're going to see some margin growth and expansion. I mean, that was a key part of our story.

I mean, as we continue to scale and grow and take advantage of a bunch of things we're doing operationally, we're going to see our margins expand and drive the kind of profitability that we forecasted. As far as the impact of these delays into next year, we're in the process of doing that modeling.

As Scott share, we’ll provide that guidance as we get a little bit closer to the start of the year. But suffice it to say, if you really look at where we're going to exit this year relative to what was expected, there'll be some impact in next year. And we'll sit down and provide some clarity around that as we work through that exercise. .

One more for me, we've seen significant strength and rebound in Vegas casino results as well as just visitation trends. Your apps have trended a bit closer to the casual game peers without that loyalty attachment.

Any thoughts, I guess on Vegas strength just as a correlation to the business? Or is it more about kind of the mobile game industry overall? Thanks..

Yes, no, I appreciate the question. So look, I mean, I think that we’re in the mobile games industry, right, we're appealing to our consumers and players and scaling growing our audience. And of course, they love this proposition where they can take advantage of these real world benefits.

And they are, we shared just a moment ago, Scott highlighted the fact that we are at pre-COVID levels, in terms of in game purchases of the rewards, people are taking advantage of these benefits, not surprising, because they've had a year and a half to amass and accumulate a whole bunch of loyalty currency that they haven't really been able to spend.

And so as our reward partners come back online and we continue to expand with new partners and new reward opportunities and our players are taking advantage of those benefits.

And so as they kind of burn through a lot of the loyalty that they've accumulated, we would then fully expect that the program will start to have some of the kind aspirational qualities that motivates the long-term engagement as people then work towards, get even more rewards that they want. So that's what we kind of expect.

So, there's some correlation to just the interest in people getting out and traveling again and enjoying a lot of the benefits that we offer. But we are a mobile game company. And so the fluctuations in the market affect us just as they do everybody else. .

Thanks, Andrew. I'll turn it over to others. .

Okay, cool. Thanks, Ryan..

We’ll go next to Mike Hickey with Benchmark. Your line is open, sir, please go ahead..

Hi, it's Dirk on behalf of Mike Hickey. If you could help with a couple of questions.

Maybe start with talking about how you're leveraging your award partners for user acquisition and tie that in to Kingdom Boss is a different genre and how you plan to utilize that?.

Sure, look it's one of the I think it's one of the strengths of our model is that particularly when we onboard a new partner and we work through the initial exercise, that we're kind of getting settled into how to leverage and make use of our platform and our channel and our network of players that we also in turn, resolve how best to partner with them to drive the acquisition of players for us.

So we do a lot of that with our different partners. It's why we've always enjoyed pretty healthy organic growth, we firmly believe it comes from to a meaningful extent, the marketing that's being done on our behalf by those partners.

As it relates specifically to Kingdom Boss, we talked about over the last six months, as we marketed our SPAC transaction and merger. We talked about the need to expand the portfolio of partners that we have, so that we have benefits that really align and fit with what we expect to be the audience for Kingdom Boss.

And so the group's been hard at work and we've done that, we've on-boarded, Boeing and amusement centers, new relationship with AEG, other concert venues. So, there's a bunch of new partners that we believe are absolutely going to align with that particular audience, also some eSports partners.

So there's a ton of new categories and new inventory that really is intended to appeal to we went after it specifically for Kingdom Boss..

And then can we hop to M&A for a minute just given the challenges a lot of mobile guys are having with IDSA? Can you speak to how you see that as a driver potentially for future deals?.

Sure. So look, we're now actively in the market, advancing and looking for opportunities that we think are well suited for us. As we've also talked about, we think that our platform is going to allow us to really drive the performance and lift of products that we acquire, and more deeply engaged players that we acquire.

And so we're really committed to this. It is, as I shared, the principal reason for our going public was to have the currency that we can bring to bear to go execute on an M&A strategy. And so it's been great that we just recently hired Jason Hahn, he's been a fantastic addition to the team and he's dug right in.

And so we're as I said, looking at lots of different opportunities to really accelerate our growth through acquiring the right types of products and networks of players and ideally also really passionate capable teams. So it is a primary focus of ours. It'll be a really significant driver of our growth going forward..

Great. And one last one from us. One of the larger competitors noticed some player engagement weakness from those added early this year.

Have you noticed anything similar within your player base?.

No, I mean, I would say not specifically. And I think like what we've heard and see from our peers, the more recent environment and how we go about sourcing players has kind of been changed up a bit. I mean, they're obviously a lots been made of apples deprecation of IDFA.

And the fact that there are -- there's a cause for a very different approach to acquire players. And so not surprisingly, as you tend to open up or relax, or you don't have the same capability to really target very specific types of players, you're casting a broader net, and you're acquiring a lot of players that you may not have otherwise.

And so I think that for many impacts both retention as well as some of the engagement metrics that you see. Now, in spite of that, we continue to see really healthy retention, the costs of acquiring users have gone up.

And so we've moderated our pace as we continue to work through and understand how best to deploy our resources to ensure that we continue to get the returns that we expect. But nothing from an engagement perspective, that I would say is no worry. .

Thank you. .

Thank you, Dirk..

We’ll go next to Martin Yang with Oppenheimer and Company. Your line is open, sir, please go ahead..

Thank you. My first question is on the conversion rates trend year-over-year.

Can you maybe talk about, what goes into the change there? Is there any, just normal fluctuation? Or is this something you have tweaked in your UA campaigns or marketing campaigns?.

So just to be clear, and conversion rate, you're talking about the percentage of players that become payers?.

That's right. .

Yes, as opposed to the performance of our conversion rate with advertising. So, the PPU and the advances in PPU are a result of a very deliberate focus on our part. To be fair, some of this assumption of the DAU erosion that we and many others have seen, but they're very real increases in PPU, that we see within our portfolio.

And believe that there's a lot of opportunity there. So our capacity to hold on to players for an extended period of time is proven.

What we see and particularly as we benchmark ourselves to our peers, there's a lot of opportunity for us to continue to convert more of that audience to payers, as we do that's going to drive that organic growth that we've alluded to. So we fully expect that PPU will continue to grow.

And that there's also opportunity on the revenue per paying user to improve as well. So, we're intensely focused on continuing to optimize how we extract value out of our existing network with our existing products..

Thank you, Andrew.

So with more a workhorse being signed on, have you seen a change in user behavior and their redemption rate for those real world rewards?.

So, as I said that the way the funnel starts is with kind of the purchases in the app, and then we track to see what the ultimate fulfillment and use of those rewards looks like.

There's typically a lag as you can understand, because a lot of our rewards are destination based, so people buy them, then they make their plans to travel and then they go consume them.

And so I think we're just now finally getting to a place where the volumes are such that the statistics are meaningful and can be relied upon to kind of signal to us the trends. I mean, with that said, we're seeing really healthy engagement with the whole program.

It's hard, I think, to draw conclusions just yet, because as I mentioned, during the course of COVID, our players have amassed enormous amount of loyalty currency that they're now finally able to spend on stuff they want, as all these rewards have come back online.

And I would also share, there's a lot of them that aren't fully back online yet, a lot of the cruise partners and shows, concert opportunities, things like that, buffets, which are hugely popular with our audience. Those have not yet come back online yet and they're among the most popular of our rewards.

So, the fact that we're seeing, purchase volumes that rival where we were pre-COVID, with a lot of the most popular inventory still not yet even back online in the platform that's coming here shortly. We're seeing, we're really pleased with what we're seeing from an engagement perspective..

Thank you.

My last question is on OpEx, can you go into the breakdown of each of the OpEx items and the first whether -- the second quarter is a good indicator of put a run rate for the rest of the year?.

Yes, I mean, from an OpEx perspective, and we haven't provide granular detail in terms of the specific line items, what I can tell you is that we have been investing in new studios, in markets where we can tap really great talent, but far more affordably, which means that we can expand our capacity at a much lower cost per employee.

And so that's been an area of focus for us for about the last year. And before you can fully benefit from that, you have to scale up those teams and get them to a place where they fully understand the tech stack and tools and your development pipelines. And so we're working through that exercise.

And then we'll be able to leverage those resources more fully. So we're nearly 100 people in Belgrade, building out a studio in Vietnam, we have another distributed group that works globally. And so those are some of the initiatives that are going to allow us to refine our cost structure going forward, and service our products more affordably.

So hopefully that's some color that kind of signals that our expectation is that our cost structure is going to improve. And certainly from a margin perspective, we're going to see more flow through going forward by getting better leverage out of our capacity. .

Andrew, I would just also highlight that there was in the quarter, there's $7.5 million of merger related expenses, transaction bonus and charitable contribution that was detailed in the merger agreement as listed as a reconciling item in our adjusted EBITDA reconciliation. So those are -- the most of those are in G&A.

So those aren't necessarily recurring. .

Any other comments on sales and marketing for the rest of the year?.

Now, just that we're going to be continuing to support the existing portfolio, our investment rates historically been, between 18% and 20% of revenue, obviously, the new products, which are earlier in their cycle, we invest in far more aggressively.

And so we'll continue to invest in and ramp Bingo, we fully expected that product will continue to grow throughout the balance of this year. We've moderated the pace a little bit in terms of the rate with which we're investing as we're kind of sorting out, kind of where are the opportunities for us to source the right players for that product.

So on a blended basis, UA investments for this year will be a little bit below what was originally anticipated, obviously, also as a result of shifting out Kingdom Boss..

Thanks for the insights. .

Thank you, Martin..

[Operator Instructions] We'll move next to Greg Gibas with Northland Securities. Your line is open, sir, please go ahead..

Great. Hey, Andrew, and Scott, thanks for taking the questions. I guess just to be clear on guidance. Revenue down $33 million, you kind of mentioned that the majority coming from Kingdom Boss being pushed six months or so and then Bingo six weeks later than expected.

Wanted to ask, I guess, are there any other factors or assumptions with your other games in the portfolio that are changing? Or are those assumptions mostly remained unchanged?.

I mean, look from our perspective, we talked about the fact that the first quarter was stronger than what we had expected. We enjoyed pretty healthy growth, we exceeded most of our market peers. And then we fully expected that that would normalize coming into the second quarter, and that's the way it's played out.

And so as we look forward, we believe that we're going to see growth from our core portfolio, but modest growth, which was generally what we had always forecasted. The growth drivers were more attributed to the new products that we were launching. But as I just highlighted, we believe that there's a lot of opportunity in our core portfolio.

And the teams are working hard and there's some exciting stuff that's going to be coming into the market across each of the products between now and the end of the year. So generally Speaking the performance of the core offering through the first half of the year is generally in line with what we expected..

Okay, great. And if I could follow-up on myVEGAS Bingos launch, it seemed like it was a strong launch better than you expected.

But just wanted to kind of ask, how that launch went relative to your expectations, and maybe relative to previous game launches, and if there's any metrics or numbers you can provide there?.

We provided an overall kind of number in terms of -- when we launched, we scaled the product up to over 100,000 DAU pretty quick. We had expected that because our prior experience in launching each of our other products was similar. In fact, we were able to drive more growth out of our network.

And we believe that was more a function of launching a new slot product with a slot audience. And so this is the first time actually, I guess, with the exception of Blackjack, where we launched a product that was not a slot product, and marketed it to this network of players.

And so, while we did a bunch of surveys to try and qualify and estimate what we thought the contribution would be from our network, it was hard to really dial that in.

With that said, a meaningful percentage, more than a majority of the players that we've sourced so far and that are actively engaged in playing the myVEGAS Bingo product are from our network. And then we've layered on top of that these new cohorts of players that were sourcing out in the market.

And so what I will tell you is that the rate and pace with which we are sourcing and scaling growing the app is more moderated than what we had imagined. That's by our choosing, I mean we -- as we source traffic, particularly in the environment today where CPIs have gone up.

And it's more difficult to target and profile the customers or the players that you're going after, we just felt that it was smart for us to be a bit more measured, go after higher quality players that we know are going to monetize and the long term players.

And so that's been our focus where when you first launch, you might choose to have a complement of or optimize for both engagement and returns on your ad spend, we've shifted our emphasis to more returns on ad spend, higher quality cohorts of players and users, albeit smaller cohorts of players.

And so what you should expect to see them is maybe a smaller overall audience for the product, or at least at the rate with which it grows, but with stronger unit metrics, in terms of conversion rates, and ultimately the monetization and what we see in terms of the resulting art gaps..

Okay, great. Yes, that's helpful Andrew. I wanted to ask you about the loyalty partner base pipeline.

Are you seeing stronger interest from new brands? And I guess its interest growing maybe relative to beginning of the year or a year ago, and just kind of how you think, as your portfolio of games gets more awareness, will that process be easier in terms of adding new partners?.

For sure, absolutely. We're seeing great interest from the different types of companies that we've approached, and those that are approaching us, with Wyndham in the past. So we feel really good about the standing and the position of playAWARDS as a platform.

And look -- maybe I'll take this opportunity to reinforce that, over the long-term, sure, we have amazing game makers within this company. We have this incredible platform that we're trying to very thoughtfully position as a growth driver for our business.

And so the whole idea was leverage it for on organic games, and go do strategic partnerships, with products that we control and go acquire other companies with existing products, integrate those, and progressively demonstrate and prove out that the loyalty program drives the same kind of lift for them, as it has for us.

In the cycle of doing that, continue to enrich the tool set, so that when we get to the end of that cycle, we're in a position where we can open the platform up and really let the marketplace grow and expand with far less intervention on our part. That's when we unlock, in my view enormous value.

And so we appreciate we got to work ourselves into that position. I think we've articulated a thoughtful strategy for how we're going to do that. And we're in the early stages of it. .

Okay, great. Thanks, guys. .

With no other questions holding, I’ll now turn the conference back to Management for any additional or closing comments..

Okay, I just want to again, thank everybody for participating and we look forward to our future calls and continuing to update everybody on our performance and results. So, thank you..

Ladies and gentlemen, that will conclude today's conference. We thank you for your participation. You may disconnect at this time and have a great day..