PlayStudios(MYPS) - 2023 Q1 - Quarterly Report

Game Portfolio and Revenue Generation - The company has developed a portfolio of free-to-play social casino games, including award-winning titles like POP! Slots and myVEGAS Slots, which are available on multiple platforms[107]. - Revenue is primarily generated from the sale of virtual currency, with a significant concentration in North America, and players can also earn loyalty points through the playAWARDS program[110]. Player Engagement and Acquisition - The company incurs substantial costs related to player acquisition, focusing on advertising and marketing to grow its player base and reactivate lapsed players[116]. - The company invests significantly in game development and enhancing the playAWARDS and myVIP programs to drive player engagement and retention[121]. - The loyalty program offers real-world rewards at no cost to the company, which are crucial for maintaining player interest and encouraging in-game purchases[121]. Key Performance Indicators - Daily Active Users (DAU) and Monthly Active Users (MAU) are key performance indicators, with DAU defined as the number of individuals playing a game on a particular day[119][120]. - Daily Paying Users (DPU) measures the number of individuals making purchases in a game daily, with Average DPU calculated for performance tracking[124]. - Average Revenue Per DAU (ARPDAU) is used to assess overall monetization, calculated as game and advertising revenue divided by Average DAU[126]. - The Average Daily Payer Conversion rate fell to 0.8%, a decrease of 1.2 percentage points or 60.0% from 2.0% in the prior year[129]. Financial Performance - Net revenue for the three months ended March 31, 2023, was $80.1 million, an increase of $9.7 million or 13.7% compared to $70.4 million in the same period of 2022[131]. - Advertising revenue surged by $9.0 million to $13.1 million, reflecting a 221.1% increase, while virtual currency revenue decreased by $1.6 million to $64.4 million, a decline of 2.4%[129]. - Operating expenses decreased by $2.96 million to $82.3 million, a reduction of 3.5% compared to $85.3 million in the same period of 2022[132]. - The net loss for the three months ended March 31, 2023, was $25.2 million, compared to a net loss of $2.6 million in the same period of 2022, representing an increase in loss of 89.8%[127]. - Adjusted EBITDA (AEBITDA) for the three months ended March 31, 2023, was $17.8 million, with an AEBITDA margin of 22.2%, compared to $9.1 million and 12.9% in the same period of 2022[146]. Cash Flow and Liquidity - Cash and cash equivalents as of March 31, 2023, totaled $127.5 million, indicating sufficient liquidity to fund operations and capital expenditures for at least the next twelve months[148]. - For the three months ended March 31, 2023, net cash provided by operating activities was $4.5 million, a decrease of 61% from $11.6 million in the same period of 2022[151]. - Cash used in investing activities increased to $7.6 million in Q1 2023 from $5.1 million in Q1 2022, primarily due to game development and property purchases[152]. - Financing activities used $3.5 million of net cash in Q1 2023, compared to a cash inflow of $0.1 million in Q1 2022, largely due to $5.4 million in share repurchases[154]. - As of March 31, 2023, cash and cash equivalents totaled $127.5 million, down from $134.0 million at the end of 2022[159]. Risks and Economic Impact - The impact of COVID-19 has led to disruptions in operations and may affect player purchasing decisions due to economic conditions[112][113]. - The company faces risks from third-party platform agreements, which charge transaction fees of approximately 30% on in-game purchases[116]. - The company is exposed to foreign currency risks, particularly from transactions in currencies other than the U.S. Dollar, which could materially impact future operating results[160]. - A significant portion of headcount-related expenses is denominated in New Israeli Shekels, exposing the company to additional foreign currency risks[161]. Restructuring and Investment Strategy - Restructuring expenses decreased by $4.6 million to $4.0 million, primarily due to a non-cash impairment charge related to the suspension of a game development project[139]. - The company plans to continue significant investments to support business growth and may require additional funds for new game development and acquisitions[148]. - The company has not entered into investments for trading or speculative purposes, focusing instead on preserving capital and meeting liquidity requirements[159].