Analyst Summary
- PLAYSTUDIOS experienced a 6.9% decrease in net revenue, from $310.9 million in 2023 to $289.4 million in 2024.
- Operating loss significantly increased from $10.5 million to $32.9 million, indicating challenges in managing operating expenses.
- Net loss increased by 47.9%, from $19.4 million to $28.7 million, reflecting improved income tax expense.
- Average DAU decreased from 3,524 to 3,100, while Average ARPDAU increased from $0.24 to $0.26, suggesting improved monetization but a decline in user engagement.
- Available Rewards (playAWARDS) decreased from 578 to 525, indicating a potential weakening of the loyalty program’s appeal.
- Gross Profit Margin decreased slightly from 74.98% to 74.9%, remaining above the industry average.
- Operating Profit Margin decreased significantly from -3.4% to -11.4%, falling below the industry average.
- Net Profit Margin decreased from -6.2% to -9.9%, also below the industry average.
- The company’s current ratio decreased from 3.80 to 2.98, but remains above the industry average, indicating good liquidity.
- Consolidated AEBITDA decreased by 9.2% from 2023 to 2024, and the AEBITDA margin decreased from 20.0% to 19.5%, suggesting a weakening in operational profitability.
Opportunities and Risks
- Risk: Intense competition in the mobile gaming industry could lead to loss of players and increased acquisition costs.
- Risk: Dependence on MGM for loyalty rewards and intellectual property poses a significant risk.
- Risk: Increasing scrutiny of social casino games could lead to stricter regulations and increased compliance costs.
- Risk: Concentrated voting power limits investor influence and could depress stock valuation due to the dual-class stock structure.
- Risk: Vulnerability to cyberattacks could compromise player data and disrupt operations.
- Opportunity: Improving existing games and attracting more players through game optimization.
- Opportunity: Acquiring complementary businesses and integrating them into the playAWARDS program through strategic acquisitions.
- Opportunity: Scaling advertising and introducing direct purchase options to diversify revenue streams.
- Opportunity: Expanding into new international markets.
Potential Implications
Company Performance
- Continued operating losses may impact the company’s ability to invest in growth initiatives.
- Decreasing DAU could lead to further revenue declines if not addressed through improved player retention strategies.
- Reliance on key partners like MGM could limit the company’s strategic flexibility.
- Failure to adapt to changing regulatory landscapes could result in increased compliance costs and potential legal liabilities.
Stock Price
- The dual-class stock structure may continue to depress stock valuation due to limited investor influence.
- Negative profitability metrics (e.g., negative EPS, ROA, and ROE) could deter potential investors.
- Successful execution of growth opportunities (e.g., strategic acquisitions, revenue diversification) could positively impact the stock price.
- Increased regulatory scrutiny of social casino games could negatively impact investor sentiment.
PLAYSTUDIOS, Inc. (MYPS) 2024 10-K Filing Analysis
Executive Summary
This report analyzes PLAYSTUDIOS, Inc.’s 2024 10-K filing. The company experienced a slight revenue decrease, but also a significant increase in operating loss. Key risks include reliance on a small portion of players for revenue, competition, and potential regulatory challenges. Opportunities exist in optimizing existing games, strategic acquisitions, and diversifying revenue streams. The dual-class stock structure continues to concentrate voting power. Given the mixed performance and significant risks, the overall assessment is HOLD.
Recommendations:
- Monitor player engagement metrics closely and invest in retention strategies.
- Carefully evaluate potential acquisitions, focusing on integration and synergy.
- Proactively address potential regulatory challenges related to social casino games.
- Explore strategies to mitigate the impact of the dual-class stock structure on investor sentiment.
Company Overview
PLAYSTUDIOS, Inc. is a developer and publisher of free-to-play casual games for mobile and social platforms. The company’s portfolio includes social casino games, card games, and puzzle games. A key differentiator is its playAWARDS loyalty platform, which allows players to earn real-world rewards. The company operates in a competitive industry and faces evolving player preferences and regulatory landscapes.
Detailed Analysis
Management’s Discussion and Analysis (MD&A)
Management acknowledges the competitive landscape and the need for continuous innovation. The MD&A highlights growth opportunities in optimizing existing games, expanding through acquisitions, and diversifying revenue streams. However, the tone is cautiously optimistic, acknowledging the challenges in maintaining player engagement and navigating regulatory uncertainties.
Financial Statement Analysis
Key Ratios and Trends:
| Metric |
2024 |
2023 |
Trend |
| Net Revenue (in thousands) |
$289,429 |
$310,886 |
Decreasing |
| Operating Loss (in thousands) |
$(32,864) |
$(10,487) |
Increasing |
| Net Loss (in thousands) |
$(28,687) |
$(19,393) |
Increasing |
| Net Loss Margin |
-9.9% |
-6.2% |
Decreasing |
| Average DAU |
3,100 |
3,524 |
Decreasing |
| Average ARPDAU (in dollars) |
$0.26 |
$0.24 |
Increasing |
Analysis: Revenue decreased slightly, while operating and net losses increased significantly. ARPDAU increased, suggesting improved monetization of existing players, but the decline in DAU indicates a potential challenge in attracting and retaining players.
Uncommon Metrics:
- Available Rewards (playAWARDS): Decreased from 578 to 525, indicating a potential weakening of the loyalty program’s appeal.
- Retail Value of Purchases (playAWARDS): Increased from $824 million to over $824 million, suggesting continued value for rewards partners.
Risk and Opportunity Assessment
Risks:
- Competition: Intense competition in the mobile gaming industry could lead to loss of players and increased acquisition costs.
- Reliance on Key Partners: Dependence on MGM for loyalty rewards and intellectual property poses a significant risk.
- Regulatory Challenges: Increasing scrutiny of social casino games could lead to stricter regulations and increased compliance costs.
- Dual-Class Stock Structure: Concentrated voting power limits investor influence and could depress stock valuation.
- Cybersecurity: Vulnerability to cyberattacks could compromise player data and disrupt operations.
Opportunities:
- Game Optimization: Improving existing games and attracting more players.
- Strategic Acquisitions: Acquiring complementary businesses and integrating them into the playAWARDS program.
- Revenue Diversification: Scaling advertising and introducing direct purchase options.
- International Expansion: Expanding into new international markets.
Red Flags
- Significant increase in operating loss despite only a slight decrease in revenue.
- Recording of a valuation allowance on deferred tax assets, indicating uncertainty about future profitability.
- Ongoing legal proceedings related to social casino games.
Conclusion and Actionable Insights
PLAYSTUDIOS faces a challenging environment with increasing competition and regulatory scrutiny. While the company has opportunities for growth, it needs to address the risks associated with its reliance on key partners and the potential impact of the dual-class stock structure. The HOLD assessment reflects the mixed performance and significant risks. Investors should monitor the company’s progress in optimizing existing games, diversifying revenue streams, and navigating the regulatory landscape.
Commentary
PLAYSTUDIOS, Inc. experienced a slight decrease in net revenue, from $310.9 million in 2023 to $289.4 million in 2024, representing a 6.9% decline. The company’s operating loss significantly increased, jumping from $10.5 million to $32.9 million, indicating challenges in managing operating expenses relative to revenue. Despite the revenue decline and increased operating loss, the net loss increased by 47.9%, from $19.4 million to $28.7 million, reflecting improved income tax expense. The company continues to repurchase shares, signaling confidence in its long-term value, despite current financial headwinds.
Financial Ratio and Metric Analysis
Profitability
Gross Profit Margin
Metric: Gross Profit = Net Revenue – Cost of Revenue = $289,429 – $72,716 = $216,713 (in thousands). Gross Profit Margin = ($216,713 / $289,429) * 100% = 74.9%
Trend: 2023 Gross Profit = $310,886 – $77,800 = $233,086 (in thousands). 2023 Gross Profit Margin = ($233,086 / $310,886) * 100% = 74.98%. Percentage Change = ((74.9% – 74.98%) / 74.98%) * 100% = -0.11%
Industry: The gross profit margin for the leisure industry is around 60%. PLAYSTUDIOS’ gross profit margin of 74.9% is higher than the industry average, indicating efficient cost management in relation to revenue.
Operating Profit Margin
Metric: Operating Loss = $32,864 (in thousands). Operating Profit Margin = (-$32,864 / $289,429) * 100% = -11.4%
Trend: 2023 Operating Loss = $10,487 (in thousands). 2023 Operating Profit Margin = (-$10,487 / $310,886) * 100% = -3.4%. Percentage Change = ((-11.4% – (-3.4%)) / -3.4%) * 100% = 235.3%
Industry: The operating profit margin for the leisure industry is around 10%. PLAYSTUDIOS’ operating profit margin of -11.4% is below the industry average, indicating operational inefficiencies.
Net Profit Margin
Metric: Net Loss = $28,687 (in thousands). Net Profit Margin = (-$28,687 / $289,429) * 100% = -9.9%
Trend: 2023 Net Loss = $19,393 (in thousands). 2023 Net Profit Margin = (-$19,393 / $310,886) * 100% = -6.2%. Percentage Change = ((-9.9% – (-6.2%)) / -6.2%) * 100% = 59.7%
Industry: The net profit margin for the leisure industry is around 8%. PLAYSTUDIOS’ net profit margin of -9.9% is below the industry average.
Return on Assets (ROA)
Metric: Net Loss = $28,687 (in thousands). Total Assets = $322,955 (in thousands). ROA = (-$28,687 / $322,955) * 100% = -8.9%
Trend: 2023 Net Loss = $19,393 (in thousands). 2023 Total Assets = $366,321 (in thousands). 2023 ROA = (-$19,393 / $366,321) * 100% = -5.3%. Percentage Change = ((-8.9% – (-5.3%)) / -5.3%) * 100% = 67.9%
Industry: The ROA for the leisure industry is around 5%. PLAYSTUDIOS’ ROA of -8.9% is below the industry average.
Return on Equity (ROE)
Metric: Net Loss = $28,687 (in thousands). Total Stockholders’ Equity = $244,715 (in thousands). ROE = (-$28,687 / $244,715) * 100% = -11.7%
Trend: 2023 Net Loss = $19,393 (in thousands). 2023 Total Stockholders’ Equity = $288,351 (in thousands). 2023 ROE = (-$19,393 / $288,351) * 100% = -6.7%. Percentage Change = ((-11.7% – (-6.7%)) / -6.7%) * 100% = 74.6%
Industry: The ROE for the leisure industry is around 15%. PLAYSTUDIOS’ ROE of -11.7% is below the industry average.
Earnings Per Share (EPS) – Basic and Diluted
Metric: Basic EPS = -$0.22. Diluted EPS = -$0.22
Trend: 2023 Basic EPS = -$0.15. 2023 Diluted EPS = -$0.15. Basic EPS Percentage Change = ((-$0.22 – (-$0.15)) / (-$0.15)) * 100% = 46.7%. Diluted EPS Percentage Change = ((-$0.22 – (-$0.15)) / (-$0.15)) * 100% = 46.7%
Industry: The EPS varies widely across the leisure industry. The negative EPS indicates PLAYSTUDIOS is not profitable.
Liquidity
Current Ratio
Metric: Current Assets = $147,102 (in thousands). Current Liabilities = $49,418 (in thousands). Current Ratio = $147,102 / $49,418 = 2.98
Trend: 2023 Current Assets = $174,883 (in thousands). 2023 Current Liabilities = $46,025 (in thousands). 2023 Current Ratio = $174,883 / $46,025 = 3.80. Percentage Change = ((2.98 – 3.80) / 3.80) * 100% = -21.6%
Industry: The current ratio for the leisure industry is around 1.5. PLAYSTUDIOS’ current ratio of 2.98 is above the industry average, indicating good liquidity.
Quick Ratio (Acid-Test Ratio)
Metric: Quick Assets = Current Assets – Inventory. Since inventory is not listed, we will assume it is zero. Quick Assets = $147,102 (in thousands). Current Liabilities = $49,418 (in thousands). Quick Ratio = $147,102 / $49,418 = 2.98
Trend: 2023 Quick Assets = $174,883 (in thousands). 2023 Current Liabilities = $46,025 (in thousands). 2023 Quick Ratio = $174,883 / $46,025 = 3.80. Percentage Change = ((2.98 – 3.80) / 3.80) * 100% = -21.6%
Industry: The quick ratio for the leisure industry is around 1.0. PLAYSTUDIOS’ quick ratio of 2.98 is above the industry average, indicating good short-term liquidity.
Cash Ratio
Metric: Cash and Cash Equivalents = $109,179 (in thousands). Current Liabilities = $49,418 (in thousands). Cash Ratio = $109,179 / $49,418 = 2.21
Trend: 2023 Cash and Cash Equivalents = $132,889 (in thousands). 2023 Current Liabilities = $46,025 (in thousands). 2023 Cash Ratio = $132,889 / $46,025 = 2.89. Percentage Change = ((2.21 – 2.89) / 2.89) * 100% = -23.5%
Industry: The cash ratio for the leisure industry is around 0.5. PLAYSTUDIOS’ cash ratio of 2.21 is above the industry average, indicating a strong ability to cover short-term liabilities with cash.
Solvency/Leverage
Debt-to-Equity Ratio
Metric: Total Liabilities = $78,240 (in thousands). Total Stockholders’ Equity = $244,715 (in thousands). Debt-to-Equity Ratio = $78,240 / $244,715 = 0.32
Trend: 2023 Total Liabilities = $77,970 (in thousands). 2023 Total Stockholders’ Equity = $288,351 (in thousands). 2023 Debt-to-Equity Ratio = $77,970 / $288,351 = 0.27. Percentage Change = ((0.32 – 0.27) / 0.27) * 100% = 18.5%
Industry: The debt-to-equity ratio for the leisure industry is around 0.7. PLAYSTUDIOS’ debt-to-equity ratio of 0.32 is below the industry average, indicating lower leverage.
Debt-to-Assets Ratio
Metric: Total Liabilities = $78,240 (in thousands). Total Assets = $322,955 (in thousands). Debt-to-Assets Ratio = $78,240 / $322,955 = 0.24
Trend: 2023 Total Liabilities = $77,970 (in thousands). 2023 Total Assets = $366,321 (in thousands). 2023 Debt-to-Assets Ratio = $77,970 / $366,321 = 0.21. Percentage Change = ((0.24 – 0.21) / 0.21) * 100% = 14.3%
Industry: The debt-to-assets ratio for the leisure industry is around 0.4. PLAYSTUDIOS’ debt-to-assets ratio of 0.24 is below the industry average, indicating a conservative capital structure.
Interest Coverage Ratio (Times Interest Earned)
Metric: Operating Loss = -$32,864 (in thousands). Interest Income, net = $4,902 (in thousands). Interest Paid = $165 (in thousands). Earnings Before Interest and Taxes (EBIT) = -$32,864 – $165 + $4,902 = -$28,127 (in thousands). Interest Expense = $165 (in thousands). Interest Coverage Ratio = -$28,127 / $165 = -170.5
Trend: 2023 Operating Loss = -$10,487 (in thousands). 2023 Interest Income, net = $4,858 (in thousands). 2023 Interest Paid = $189 (in thousands). 2023 EBIT = -$10,487 – $189 + $4,858 = -$5,818 (in thousands). 2023 Interest Coverage Ratio = -$5,818 / $189 = -30.8. Percentage Change = ((-170.5 – (-30.8)) / -30.8) * 100% = 453.9%
Industry: The interest coverage ratio for the leisure industry is around 3. A negative interest coverage ratio indicates that the company is not generating enough earnings to cover its interest expenses.
Activity/Efficiency
Asset Turnover
Metric: Net Revenue = $289,429 (in thousands). Total Assets = $322,955 (in thousands). Asset Turnover = $289,429 / $322,955 = 0.90
Trend: 2023 Net Revenue = $310,886 (in thousands). 2023 Total Assets = $366,321 (in thousands). 2023 Asset Turnover = $310,886 / $366,321 = 0.85. Percentage Change = ((0.90 – 0.85) / 0.85) * 100% = 5.9%
Industry: The asset turnover for the leisure industry is around 0.6. PLAYSTUDIOS’ asset turnover of 0.90 is above the industry average, indicating efficient asset utilization.
Valuation
Price-to-Earnings Ratio (P/E)
Metric: Market Cap = 127,734 (shares issued) * $1.24 (stock price) = $158,390 (in thousands). Net Loss = $28,687 (in thousands). P/E Ratio = $158,390 / -$28,687 = -5.52
Industry: The P/E ratio varies widely across the leisure industry. A negative P/E ratio is not meaningful because the company has negative earnings.
Price-to-Book Ratio (P/B)
Metric: Market Cap = $158,390 (in thousands). Total Stockholders’ Equity = $244,715 (in thousands). P/B Ratio = $158,390 / $244,715 = 0.65
Industry: The P/B ratio for the leisure industry is around 2. PLAYSTUDIOS’ P/B ratio of 0.65 is below the industry average, which might indicate that the stock is undervalued.
Price-to-Sales Ratio (P/S)
Metric: Market Cap = $158,390 (in thousands). Net Revenue = $289,429 (in thousands). P/S Ratio = $158,390 / $289,429 = 0.55
Industry: The P/S ratio for the leisure industry is around 1.5. PLAYSTUDIOS’ P/S ratio of 0.55 is below the industry average, which might indicate that the stock is undervalued.
Enterprise Value to EBITDA (EV/EBITDA)
Metric: Market Cap = $158,390 (in thousands). Total Liabilities = $78,240 (in thousands). Cash and Cash Equivalents = $109,179 (in thousands). Enterprise Value (EV) = $158,390 + $78,240 – $109,179 = $127,451 (in thousands). Net Loss = $28,687 (in thousands). Depreciation and Amortization = $45,440 (in thousands). Interest Income, net = $4,902 (in thousands). Income Tax Expense = $1,399 (in thousands). EBITDA = -$28,687 + $45,440 + $4,902 + $1,399 = $23,054 (in thousands). EV/EBITDA = $127,451 / $23,054 = 5.53
Industry: The EV/EBITDA ratio for the leisure industry is around 10. PLAYSTUDIOS’ EV/EBITDA ratio of 5.53 is below the industry average, which might indicate that the stock is undervalued.
Growth Rates
Revenue Growth
Metric: Net revenue 2024: $289,429 (in thousands). Net revenue 2023: $310,886 (in thousands). Revenue Growth = (($289,429 – $310,886) / $310,886) * 100% = -6.9%
Industry: The revenue growth for the leisure industry is around 5%. PLAYSTUDIOS’ revenue growth of -6.9% is below the industry average.
Net Income Growth
Metric: Net loss 2024: $28,687 (in thousands). Net loss 2023: $19,393 (in thousands). Net Income Growth = (($19,393 – $28,687) / $19,393) * 100% = -47.9%
Industry: The net income growth for the leisure industry is around 10%. PLAYSTUDIOS’ net income growth of -47.9% is below the industry average.
EPS Growth
Metric: EPS 2024: -$0.22. EPS 2023: -$0.15. EPS Growth = ((-$0.22 – (-$0.15)) / (-$0.15)) * 100% = 46.7%
Industry: The EPS growth varies widely across the leisure industry. PLAYSTUDIOS’ EPS growth of 46.7% is positive, but the EPS is still negative.
Other Relevant Metrics
Consolidated AEBITDA and AEBITDA Margin
Metric: Consolidated AEBITDA for 2024 is $56,549 (in thousands) and for 2023 is $62,292 (in thousands). Consolidated AEBITDA Margin for 2024 is 19.5% and for 2023 is 20.0%.
Trend: AEBITDA decreased by 9.2% from 2023 to 2024. The AEBITDA margin decreased from 20.0% to 19.5%.
Significance: AEBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization) is a non-GAAP metric used by the company to assess its operating performance. It excludes certain non-cash expenses and other items that may not be indicative of its core operating results. The adjustments include depreciation & amortization, income tax expense, stock-based compensation expense, change in fair value of warrant liability, change in fair value of contingent consideration, restructuring and related expenses, and other adjustments. While AEBITDA provides a view of operational cash flow, it should be viewed with caution as it excludes real cash outflows. The decline in AEBITDA and AEBITDA margin suggests a weakening in the company’s operational profitability.
⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️