PLAYSTUDIOS, Inc. (NASDAQ:MYPS) Q3 2024 Earnings Call Transcript

PLAYSTUDIOS, Inc. (NASDAQ:MYPS) Q3 2024 Earnings Call Transcript November 4, 2024

PLAYSTUDIOS, Inc. misses on earnings expectations. Reported EPS is $-0.02 EPS, expectations were $-0.01714.

Operator: Greetings, and welcome to the PLAYSTUDIOS Third Quarter 2024 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. Its now my pleasure to turn the call over to Samir Jain, Head of Treasury and Investor Relations. Samir Jain, please go ahead.

Samir Jain: Thank you, operator. Good afternoon, and thank you for joining us for PLAYSTUDIOS third quarter 2024 earnings call. Joining me on the call today are our Chairman and CEO, Andrew Pascal; and our CFO, Scott Peterson. Before we begin, let me remind you that during the course of this call will make forward-looking statements. These statements are based on our current expectations and beliefs and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for a discussion of the risks and uncertainties that may affect our future results. I’d like to remind everyone that we will discuss certain non-GAAP financial measures during this call. These measures should not be considered as a substitute for financial results prepared in accordance with GAAP.

Our results are prepared in accordance with GAAP and a reconciliation to comparable GAAP measures will be provided in our third quarter earnings release and in our SEC filings. With that, I’ll pass the call to Andrew.

Andrew Pascal: Great. Thank you, Samir, and welcome everyone to our third quarter 2024 earnings call. As always, our commentary today is in addition to the financial disclosures we made in our press release. So I encourage you to take a look at the release for a summary of our recent performance. I’ll begin with a few thoughts on the quarter and the company’s outlook, after which Scott will follow with a discussion of our financials. We’ll then open the call up for your questions. Revenues and adjusted EBITDA in the quarter were ahead of consensus estimates and generally in line with our expectations. On a year-over-year basis, revenues were down 6% while adjusted EBITDA increased 8%. We remain focused on stabilizing revenue and increasing profitability.

After carefully evaluating the potential impact of retooling our business on both revenues and profitability, we concluded that the resetting of our cost structure is critical to our success going forward. This reinvention plan, if you will, which was launched in October consists of a reduction in our total workforce of over 30%. The suspension of select sub-scale games, the consolidation of key functions, and a new technology strategy focused on improving the productivity of R&D capacity. While we’ll provide more visibility into the overall financial impact of this plan when we provide guidance for the coming year, I can share that we expect these changes to result in normalized annual cost savings of approximately $25 million to $30 million.

Consistent with this focus, I was encouraged that our adjusted EBITDA margins of 20.5% grew 270 basis points versus a year ago and 100 basis points compared to the second quarter. Gains were driven by efficiencies, lower cost of sales and reduced user acquisition spend. I believe the more recent measures we’ve taken will further improve our profitability, bringing us closer to the margin profile of our peers. Now, let’s dig deeper into our playGAMES division where we continue to focus on three key initiatives; first, stabilizing our social casino portfolio and returning it to positive sales growth; second, scaling and expanding our portfolio of growth games, which include Tetris and Branium; and third, expanding the breadth of our offering through acquisitions and new categories.

We’re making progress in all fronts in social casino year-over-year ARPDAU and revenue per paying user have been increasing in both myVEGAS and myKONAMI since the beginning of the year. As popular games with a significant base of daily and monthly players increasing these metrics is the key to improving results. It’s been a more challenging year for Pop! Slots, however, there are a number of reasons why but I believe we’ve made the appropriate changes to get the game back on course. Though early compared to the second quarter, Pop! showed sequential increases in revenue and ARPDAU. We’re looking to build on this momentum and return the game back to growth. Our direct-to-consumer business still represents a significant untapped opportunity, accounting for 7.2% of total revenues this quarter, up from 4.5% last quarter.

Our goal is to continue to increase the complement of revenues attributed to this channel with an ultimate target of over 20%. We continue to make progress optimizing games in our growth portfolio. Branium had another strong quarter, posting year-over-year growth in revenues and ARPDAU, higher sales are being driven by the introduction of new advertising formats such as banners and rewarded video, while increased profitability is a function of operating leverage. Results within our Tetris franchise were mixed in the quarter as the brand’s 40th anniversary had a more muted effect than we anticipated. Similarly, we continue to test and assess user acquisition strategies for Tetris Block Puzzle, which is still in the early stages of its optimization cycle.

Lastly, let’s quickly touch on new initiatives. Integration of our recent acquisition Pixode is progressing smoothly. The team has begun work to combine Pixode’s highly engaging block puzzle game with the Tetris brand. As a reminder, Pixode uses the proven raid and defend mechanic that’s been popularized in super scaled games such as Coin Master and Monopoly Go. By leveraging the Tetris brand, we believe this game has the potential to substantially upend the Block Puzzle category. We’re still in the early days of development, but our hope is to have a game ready for sometime in 2025. We’re also working to better understand the rapidly growing sweepstakes promotional model and how it can potentially revitalize our social casino portfolio.

Given its increasing popularity, along with our unique and relevant collection of strategic assets, we’ve elected to incubate our own [indiscernible] solution and evolve our rewarded play and promotional capabilities. Now, let’s turn our attention to playAWARDS. Our product teams have been dedicated to integrating our refreshed myVIP loyalty program into our primary titles by year-end, leveraging our industry-leading collection of rewards and benefits, the program enriches the value proposition for our players and creates a strategic point of difference for our games. This quarter, we added 11 new partners including brands such as Hoover, Atlantis, Bahamas, Borgata and a collection of national theme parks. At quarter end, we had 133 partners offering nearly $2.3 million in retail rewards per day.

No other game publisher offers anything close. Once fully integrated, we look for myVIP to further enhance the lifetime value of our players and drive greater long-term value. Lastly, I want to discuss our capital position and plans for investing our available cash. We restarted our share repurchase program in the third quarter and including transactions we completed in the spring, we’ve repurchased nearly 10% of our total issued stock this year. We continue to believe that the intrinsic value of our company is greater than its public valuation and buying back our stock rates value for all shareholders. At the same time, our large cash holdings and annual cash generation allow us to invest in our businesses and pursue external acquisitions.

On the latter, we remain committed to pursuing strategic and accretive M&A transactions and are actively searching for compelling opportunities. I’ll now turn the call over to Scott to discuss the quarterly results and our outlook for the year. Scott?

Scott Peterson: Thanks, Andrew. In addition to today’s press release, our Form 10-Q will be filed shortly. Please look to those filings for a comprehensive summary of our third quarter results. Net revenues in the quarter were $71.2 million, a 6% decrease versus a year ago. Our portfolio of social games accounted for the majority of the decline due to continued weakness in the category. While we don’t expect industry trends to reverse anytime soon, we are hopeful that the rate of pressure will ease in the coming quarters. Similarly, we were encouraged that our social casino portfolio showed sequential revenue growth versus the second quarter, particularly in our largest game Pop! Slots. Our longer-term focus in social casino remains on improving performance of our games to drive growth regardless of the industry backdrop.

Performance in our casual portfolio was mixed this quarter with some slowing in Tetris and continued strength at Branium. Some of the drivers of these results included the scaling of advertising, product updates and full adoption of our loyalty offering. Third quarter consolidated adjusted EBITDA was $14.6 million, an 8% increase versus $13.5 million a year ago. Adjusted EBITDA margins of 20.5% expanded 270 basis points versus a year ago and 100 basis points versus last quarter. Gains were driven by an increase in direct-to-consumer sales, a higher mix of advertising revenues and lower user acquisition spend. As discussed in previous calls, we believe there’s an opportunity to increase our margins considerably and that we can eventually reach consolidated adjusted EBITDA margin closer to our peers.

DAU was $3 million and MAU was $12.7 million in the third quarter, down 16% and 8% respectively from the same period last year. DAU declines were broad-based but largely driven by social casino and Branium. ARPDAU for the quarter was $0.26, up 13% from year ago results. Continuing a trend we’ve seen since the beginning of the year, we saw double-digit year-over-year percentage ARPDAU gains in myVEGAS, myKONAMI and Branium. Also encouraging was a double-digit year-over-year and sequential ARPDAU gain for Pop! Slots, we’re hopeful that these early results can lead to positive long-term momentum. Turning to playAWARDS, we continue to make progress expanding the functionality and scope of the platform. We closed the quarter with 532 available rewards and 133 rewards partners.

Brands added this quarter include Universal Studios, Hoover, Atlantis, Bahamas and Borgata. Nearly 450,000 rewards were purchased during the quarter at a retail value of $25 million. As Andrew mentioned, in October, we began the process of resetting our cost structure through a plan, which consists of a reduction in our total workforce, the suspension of select sub-scale gains, the consolidation of key functions and a new technology strategy. As a result of this reset, we will be recording a charge in the fourth quarter of between $14 million and $16 million, approximately half of which is related to severance and contract termination payments, with the other half related to non-cash charges for the impairment of capitalized software costs and fixed assets.

We ended the year with approximately $105 million in cash, no borrowings and full availability of our $81 million revolver. As Andrew mentioned, we restarted our share repurchase program and year-to-date have bought back $29.2 million of our stock or 10% of our total issued stock through the end of the quarter. Our share repurchase authorization currently stands at $45 million. Beyond repurchases, our capital allocation goals remain the same, investing in our businesses and pursuing strategic and accretive M&A. Our 2024 financial guidance of revenues in the range of $285 million and $295 million and consolidated adjusted EBITDA between $55 million and $65 million remain unchanged. I will now turn the call back to Andrew for some closing remarks.

Andrew Pascal: Thanks, Scott. Before we end our prepared remarks and open the call for questions, I’d like to touch on a few highlights. We recently launched a comprehensive restructuring, which will simplify our business, focus our talent and drive further margin improvements and profitability. Despite continued industry pressures, which are impacting our sales, we were able to grow adjusted EBITDA by 8% versus a year ago and increase our margin by 270 basis points over the same period. Increased monetization efforts myVEGAS and Branium are working for the third quarter in a row, we saw double-digit year-over-year gains in ARPDAU across both titles. We look for momentum to continue to 2025. Pixode has been integrated into our operations and we’re making progress on our new Tetris title.

Our goal remains to have the new game complete and in the market at some point in 2025. And we formally constituted our sweepstakes promotions initiative and look forward to leveraging this promotional mechanic to reinvigorate our social casino portfolio. With that, I’ll turn it over to the operator. Operator, please open the line for questions.

Operator: Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from Aaron Lee from Macquarie. Your line is now live.

Q&A Session

Aaron Lee: Hey, good afternoon. Thanks for taking my question. So, wanted to start…

Andrew Pascal: Hey Aaron, how are you?

Aaron Lee: Good, good. Wanted to start with the double-digit ARPDAU increases for myVEGAS and Branium and some of the titles you talked about. Can you comment on what the drivers of this growth were and whether you think these gains are sustainable over the coming quarters?

Andrew Pascal: Sure. In the casual portfolio, which is the Branium portfolio, as we alluded to the increases are being driven by some new add units that we’ve incorporated into those games. And so we hope and expect that we’ll continue to enjoy that lift in performance. There are still yet even more add products and opportunities that we feel we’ve not yet exploited within that portfolio, and we will in the coming months. Within the social casino portfolio, the improvements are being driven primarily by increases in both conversion PPU, which is up slightly, as well as improvements in our people, so the degree to which people that are converting are actually spending. So that’s translated to the list that we alluded to.

Aaron Lee: Okay, got you. That’s helpful. And then just going – turning to sweepstakes for a second, you touched on this in your prepared remarks briefly. But any more color you can provide on the initiatives that you’re working on to kind of reverse some of those headwinds that you’re seeing in the myVIP loyalty program? I think you talked about some sweepstakes promotional initiatives, but just any more color on what you’re working on there?

Andrew Pascal: Sure. As we alluded to on the last call, we believe that the emergence of sweepstakes as a promotional mechanic and a driver of monetization is proving to be significant. The scale and magnitude of the games and services that are exploiting sweepstakes is very substantial today. I believe it’s a $3 billion plus market. And if you look at the games and the underlying services that are being provided the content, they’re free to play social casino products. And so what we recognize is that there’s an opportunity for us to leverage and exploit our games and our content and our large network of players and use the sweepstakes promotional mechanic to reinvigorate then drive higher level of engagement activation and monetization.

And so we’ve recently more formally constituted our own effort where we’re building out our own systems and tools and enriching what we’ve already had in place through playAWARDS, which is our capacity to deliver sweepstakes style, mechanics and rewards in exchange for our player’s deeper engagement which is going to enrich the set of capabilities that we have there. So we have a formal team that we’ve now constituted internally that’s advancing all the underlying technology tools that we’ll be using to take advantage of that promotional opportunity going forward.

Aaron Lee: Okay, great. Appreciate the color. Sounds very interesting.

Andrew Pascal: Cool. Yes, we’re pretty excited about it.

Operator: Thank you. Next question is coming from Ryan Sigdahl from Craig-Hallum. Your line is now live.

Unidentified Analyst: Good afternoon, this is Will on for Ryan. Thanks for taking our questions. Just wanted to follow-up quickly on sort of what you saw with Pop! Slots during the quarter. Sounds like a little bit of sequential improvement. Curious, maybe going into October and Q4 how the whole portfolio has trended so far.

Andrew Pascal: Look, I think overall what we’ve highlighted is that within the portfolio there have been mixed results for the past few quarters. That while we saw some improved performance from myVEGAS and KONAMI, it was more than offset by some of the erosion that we were seeing within Pop! Slots. We don’t typically break out and speak more specifically to the metrics for each product, but as we alluded to in the opening of the call, we’ve seen things stabilize with Pop! Slots. A lot of the reinvention exercise that we just went through and I alluded to is about bringing a different level of focus and simplicity to the teams that are focused on advancing that product. And so our outlook were encouraged by some of the performance that we’re seeing and the opportunities that we have ahead of us to continue to improve its performance.

So once we get through this quarter and provide a bit more guidance as to our outlook in coming year, we’ll provide a bit more color.

Unidentified Analyst: Sounds great. And then maybe following up a bit on sort of monetizing playAWARDS to a greater scale, maybe through a partnership, how negotiations sort of gone with any potential partners? And any update there would be great.

Andrew Pascal: Sure. Thank you. So as we’ve alluded to in the past few quarters, we went out into the market and started to test the overall interest in our loyalty program and providing as a service. The response was very instructive. People universally recognized how unique the program is to us and were intrigued and wanted to learn more. They also provided fairly specific feedback about some of the points of friction that we’d have to overcome in order to provide it as a service. And playAWARDS team has been working pretty diligently on advancing the platform and its capabilities so that we can in fact, provide it as a service to third parties. With that said, what I will tell you is that we’re pumping the brakes a bit on the whole playAWARDS as a service opportunity.

We’ve invested a lot in it. We still believe it as a long-term driver of our value. But in keeping with the whole refocusing of the company and simplification and really bearing down on the core franchises that are the more immediate drivers of performance and near-term growth, we’re going to moderate the investments that we make in generalizing and leveraging playAWARDS as a platform, at least in the relative midterm. We’ll revisit that as we get deeper into the coming year.

Unidentified Analyst: Good to know. Thanks guys.

Operator: Thank you. [Operator Instructions] Our next question is coming from Mike Hickey from Benchmark. Your line is now live.

Mike Hickey: Hey, Andrew, Scott, Samir, thanks for taking our questions. Just curious on the risk here, pretty meaningful. How’s that going to impact your existing live services or pipeline? When we think about 2025 revenue growth, I think we have an idea where you want EBITDA margin to be, but how is this going to impact your revenue growth in 2025 in your existing games?

Andrew Pascal: Well, that’s an excellent question and I think it’s obviously been very tough to predict. We’ve certainly worked very hard in the whole redesign of the company and eliminating what has effectively occurred of the team and our capacity. We’ve done everything we can to ensure that we minimize the adverse impact that that will have our revenue performance. But it’s difficult to predict. What we believe is that while there may be some very near-term lack of predictability or some instability, that the moves and the changes that we’ve now implemented are going to ultimately translate to our bringing yet even more focus to the right products and initiatives with the best of our talent that is then able to bring about the performance that we think is possible, the unrealized performance and growth that we see within the portfolio.

So a long winded way of saying, hard to really understand what the more immediate adverse impact might be, but we pretty firmly believe that the changes we’ve now instituted are going to ultimately enable us to perform better and then have more resources that we can then invest in our future growth. So as we get into the New Year and we’ll have a much clear line of sight on the overall impact of this restructuring.

Mike Hickey: Okay, thank you. The – and then on the rewards…

Scott Peterson: Sorry. I just want to – hi, this is Scott, I just wanted to add everything Andrew just said obviously is true, but we still were confident enough to not change our guidance, our year end guidance. So we’re still feeling like between what we previously published is still going to – we feel like we’re going to make it for this year.

Mike Hickey: Yes. On your rewards, do you think there’s something wrong with the offering or the mix that you have? I mean, you look at your DAU decline of 16%. I know social casino is under pressure, but I’m guessing that’s worse than the market. I mean, do you think you need to sort of reinvigorate your rewards here? What’s disconnect that’s not giving you better retention from your player base?

Andrew Pascal: Yes. I actually think that, the DAU in aggregate is down, but it’s disproportionately impacted by the casual portfolio and Tetris more specifically where we have that spike in engagement and activity in the first quarter really resulted in just a ton of organic interested growth. And so those users kind of normalized and the people that were picking up the product more as a novelty, not necessarily as committed long-term new players we’ve kind of now worked through. So we don’t again give visibility into the specific composition of our DAU. But it was impacted disproportionately by the declines more in the casual portfolio.

Mike Hickey: Okay, last question. Do you think there’s any – when you look at your player base and their engagement with your rewards, are you seeing a potential softness here maybe just in terms of consumer – your consumer demand to travel to VEGAS. I mean is that in part you think the problem or do you think demand for travel is still there? Or maybe it doesn’t matter. Thanks guys.

Andrew Pascal: Yes. Thanks for the question. Look, I think that the proposition that we offer to our core casino audience is clear, valued and it’s actively engaged with. And the more we do to leverage the partnerships that we have in really unique and creative ways, the more it activates our audience. So for example, just last week we concluded our World Tournament of Slots series, where over the preceding four to five months we ran a whole collection of in game events and activations and had unique slot games that we’d introduced that provided our players with an opportunity to win an entry into a real world slot tournament, where we were going to crown the world’s best slot player and give away a million dollars. And so the level of interest and engagement was incredibly high.

We had 500 players. We participated in that event. It was a complement of our own players majority, over 80% of the players came from our network. But then we also had nearly 100 players that were provided by our partner, which gave us access to some really highly valued and compelling players. So I think the more what we recognize is that we really need to double down on the more creative executions of different events and activities across the collection of partners we have that that’s something that our players really respond to. So give a bunch of examples of that. We’re going to be doing a lot more of that going forward. I think generally what that reinforces is that the program is very compelling, but it requires that the underlying rewards and benefits have to align with what the players are interested in and want to take advantage of.

For the core slot and social casino players that we have, they still value everything that we offer in and around the casino industry and the casino portfolio partners. We need to continue to evolve and test the collection of partners that we offer for our casual games to make sure that those rewards and those partners specifically align with and appeal to those players. That’s something we continue to actively work on.

Mike Hickey: Thanks guys. Good luck.

Andrew Pascal: Yes, thanks.

Operator: Thank you. Next question is coming from Danny Pfeiffer from JP Morgan. Your line is now live.

Danny Pfeiffer: Hey, thanks for the questions. For the first, can you maybe unpack what has driven Tetris to slow in the quarter and if there are any changes you plan on making there? And I have a follow up. Thanks.

Andrew Pascal: Yes. As I alluded to a moment ago, the declines in Tetris are just a function of its audience, which spiked in the first part of the year as a result of the just social engagement activity that resulted from the 16-year old kid that beat Tetris for the first time. So the Willis effect, as we call it, drove just a spike of growth and performance in the first part of the year and that’s continued to normalize over the last couple of quarters. As far as all the plans that we have going forward, I can tell you that Tetris Prime, which is the primary product that we have right now in production, has a very rich roadmap and set of features that are going to make – continue to make the game ever more engaging in terms of its events and activities and play modes.

And so you’ll see those features and the density of kind of events and activities that we actually conduct in game just improve in the coming months and quarters. We, as I alluded to on our last call, had completed a comprehensive refresh of that product, which also provides us with a ton of latitude to incorporate these new features that I mentioned. So rich roadmap going forward that hopefully will continue to drive the engagement among our existing audience. And then we’ll continue to hopefully convert and retain a lot of the organic traffic that continues to be very strong for that game.

Danny Pfeiffer: Got you. And then any color you can provide on a timeline for how long could take to incubate the sweepstake capabilities and maybe what drove the decision to build rather than buy in this category. Thanks.

Andrew Pascal: I mean, I’ll take the second part of the question first. The build versus buy is this function of economics and overall execution. And so we felt that when we looked at our capabilities and the systems and tools that we already have in place that support our sweepstakes activities that we currently execute, we felt that the incremental effort required on our part to develop those capabilities and the resulting economics that we would then be able to retain and not have to share more than justified the perceived risk and time to market assessment. So for that reason, we constitute our own effort. As far as the timeframe and when we expect to be in the market with sweepstakes capabilities, it will be certainly in the first half of this coming year.

We hope that by the end of the first quarter, we’ll be in the market testing and validating our solution and its capabilities and then be in a position where we can incorporate those capabilities and really start to actively promote it in the second quarter timeframe. That’s current outlook.

Danny Pfeiffer: Thanks.

Andrew Pascal: Yes.

Operator: Thank you. Next question is coming from David Pang from Stifel. Your line is now live.

David Pang: Great, thanks. Just wanted to follow up on the sweepstakes initiative. Are there any issues of offering the sweepstakes product on mobile? And secondly, can you just talk about how the sweepstakes offering could coexist with your existing playAWARDS offering?

Andrew Pascal: Sure. So we currently offer within playAWARDS a variety of sweepstakes alternatives. And so – and the way it works within our existing mobile apps is that people engage in playing our games and as they do, they accumulate a loyalty currency. They can then go into the loyalty or the benefit store and then they can use that currency to buy a whole variety of different reward types, one of which are sweepstakes. And so you can go in and you can use your currency to actually convert and opt into different sweepstakes opportunities. So that’s the existing set of capabilities that we have. It’s a bit different from the current model that’s being exploited by a lot of these sweepstakes providers where as people acquire or accumulate more free-to-play game currency, they are rewarded with as an inducement increment of three sweepstakes entries, which they can then actually switch the mode of their game and actually put those at risk.

They can effectively play with them and they can win them and lose them and then ultimately they can convert them for real world value. And so that is the added capability that we’ll be implementing. We’re going to do it in some respects, very much like some of the leading providers in the market, which is with a dedicated web solution. But clearly what we have is an opportunity to integrate those capabilities into our existing apps or at least expose that value proposition to our existing players so that they too can be converted and participate in this promotional opportunity as a complement to their engagement in our core primary games. And I would highlight that’s the fundamental difference for us. We fully intend to leverage the sweepstakes model to drive deeper engagement with our existing programs, games, franchise products.

So it’s not necessarily just intended to be a standalone alternative to our existing products. It is truly intended to be an enhanced value proposition or offering for those players that engage with our existing products more deeply.

David Pang: Got it. Thank you.

Andrew Pascal: Yes.

Operator: Thank you. Next question is coming from Greg Gibas from Northland Securities. Your line is now live.

Greg Gibas: Hey, thanks, Andrew, Scott, Samir. Appreciate it. I guess I wanted to follow up on the $25 million to $30 million cost savings. Where would you say we stand today like, did you start implementing these in Q3? And I guess I wanted to ask, maybe when you expect to fully realize those savings?

Andrew Pascal: Yes, so the reduction in our workforce was initiated last week and we’ll complete that exercise in the next week to 10 days. There are different statutes and practices that we have to adhere to across the various jurisdictions that we’re in. But we fully expect that we’ll complete that exercise, as I said, in the next week and a half. That is a majority of the cost reductions that we’re going to experience. There are others, there are a number of other structural things that we’re going to be doing that will also further reduce our overall operating expenses. We fully expect that those will be realized and implemented throughout the balance of this year so that we enter the new year with the reset base cost structure for the business. And of course, all of the more immediate tax or, excuse me, cash implications of the restructuring will be born in the current quarter so.

Greg Gibas: Great. That’s very helpful. And as it relates to, I think you said 14 million to 16 million in Q4, I think you said the kind of severance, contract payouts, capitalized software costs, you just wanted to get a little bit more color on, maybe for modeling purposes, how those should be accounted for those charges?

Andrew Pascal: I’m sorry, could you say that last part again?

Greg Gibas: Yes. Just from a modeling perspective, how we should think about accounting for those charges when they’re reported in Q4? I guess that may be either like a rough breakout or will they all be kind of one time add backs? Just wanted to get a little bit more color on that part.

Andrew Pascal: Yes, they’ll be – actually we have a – in our reconciliation, we have a kind of a restructuring in other category they’ll be included there. I mean, but as I said in my speech, it’s – of the 14 million to 16 million, approximately half is impairment of like, write-off of software cap and then the other half is going to be severance and some other contract determinations [ph], et cetera. But it’ll be added back and it will be disclosed in our reconciliation of EBITDA.

Greg Gibas: Perfect. That’s helpful. And lastly just regarding the new Tetris title, you talked about it completed and in market in 2025. Any more kind of specific color on the timeframe there?

Andrew Pascal: I don’t think so. We’re always reluctant to provide overly specific timeframes for when a new game is ready to be launched because it’s just not that deterministic. If it all goes well, it’ll be relatively early in the year, in the first half of the year certainly. And if it takes a bit longer for us to optimize the product and to hit and see all the performance metrics that we’ll need in order to really lean into it and start to invest in it aggressively, well then it’ll stretch into the mid to latter part of the year as we actually get it into the market and we’re able to test and validate and get a sense for where it is in its cycle. We can certainly provide a bit of color, but it’s hard to predict with any certainty.

Greg Gibas: Okay. That’s fair. Thank you.

Operator: Thank you. Next question is coming from Martin Yang with Oppenheimer. Your line is now live.

Martin Yang: Hi, thank you taking for question. My first question on the games that are being optimized and impacted, can you give us more details on which side of the business is a more social casino or more casual portfolio that has seen more games being streamlined?

Andrew Pascal: Yes. It really impacts both. Although I would say within the social casino portfolio, we have the core titles which are myVEGAS mobile, Pop! Slots, MGM Slots Live and myKONAMI Slots. All of those products are going through some form of refactoring. So the organizations have been kind of reset, streamlined some resources and third party development resources and support are being leveraged so that we can more efficiently service those products. So they’re all being impacted, although we’re going to continue to invest in them going forward because we believe that there is still opportunity for us to convert more of our players to monetizers and extract more value out of the people that are monetizing. So we believe in the growth potential of that core portfolio.

There’s then a collection of four or five other games within the social casino category that we’re going to continue to sustain, albeit at more modest rates of investment. So our classic game that’s on the web, our Blackjack product, our Bingo product will be in a mode that we refer to as a sustained mode. So in each case we’ll be restructuring those products and pulling out cost structure. And there’s one product that we’re going to cancel altogether. Within the casual portfolio, we’ve had a number of Tetris initiatives that we’re advancing. One that is the primary product that’s live and in production, Tetris Prime. And then we have three that have been in development, two Block Puzzle products, our Tetris Block Puzzle and our product that we’re doing with Pixode.

And then there’s Tetris World Tour. We’re actually suspending and canceling the World Tour initiative and advancing the two Block Puzzle initiatives. And then within the Brainium portfolio, we are actually going through an evolution of their core titles where we’re updating the technologies that we use to execute those products so that we can more easily extend them and incorporate things like the new ad units I alluded to earlier. But even more importantly, new features and capabilities that allow us to operate those products with a higher level of sophistication. So, as I just touched on, there isn’t really an area of the portfolio wasn’t critically assessed, either refactored, canceled or reduced into some form of a maintenance or sustain mode in order to optimize the overall financial performance of [indiscernible].

Martin Yang: Thank you, Andrew. I appreciate the detailed rundown. My next question is about your plan to introduce new state games and how do you think about leveraging your existing IP or existing audience? How much synergy do you expect to have in early space of launching those games?

Andrew Pascal: We think that our existing audience is certainly curious about and actively playing the existing collection of sweeps enabled products. So we think that our existing audience has a very strong interest in this promotional opportunity. And so for that that’s the reason why it’s obviously gotten a lot of our attention recently. As far as how relevant are our capabilities and our content and our tools we think vary. We think we’ve got incredible brands, franchise products that we’ve invested in quite a bit, and we have a sizable audience. We have a lot of content, really unique slot games and experiences and features that we believe will translate well and be relevant here. And we believe that there’s also the capacity to not only offer a sweepstakes solution as a discrete and separate complement to our existing portfolio, but to actually enable our existing products with sweeps capabilities.

So we think that we actually have a pretty interesting opportunity to leverage this new promotional mechanic to reinvigorate our social casino offering. So that’s our focus.

Martin Yang: Got it. Thank you. That’s it for me.

Operator: Thank you. We’ve reached the end of our question-and-answer session. I’d like to turn the floor back over for any further closing comments.

Andrew Pascal: I appreciate everybody’s continued interest. Obviously, we’ve just gone through a pretty dramatic kind of refactoring and reinvention of our business. So we look forward to seeing how the results translate and to speaking to that more directly in our next call. So again, thanks for your time and energy and look forward to our next call.

Operator: Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.