PLAYSTUDIOS, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter report. PLAYSTUDIOS completed its business combination with Acies Acquisition Corp. on June 21, 2021; historical financial statements are presented as a continuation of Old PLAYSTUDIOS under reverse-recapitalization accounting.
Business context
PLAYSTUDIOS develops free-to-play mobile and social games, primarily social casino titles, supported by its playAWARDS loyalty program. Revenue comes mainly from virtual-currency purchases, with a smaller advertising contribution. The company reported 4.1 million average monthly active users in 2021 and more than 100 million cumulative game downloads. Its rewards network included 95 partners and over 265 brands.
Financial and operating metrics
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $287.4 million | $269.9 million | +6.5% |
| Virtual-currency revenue | $280.1 million | $268.1 million | +4.5% |
| Advertising revenue | $7.0 million | $1.7 million | +$5.2 million |
| Operating income (loss) | $(3.0) million | $10.3 million | Declined $13.3 million |
| Net income | $10.7 million | $12.8 million | −16.2% |
| Net income margin | 3.7% | 4.7% | −1.0 percentage point |
| Adjusted EBITDA (non-GAAP) | $39.5 million | $58.0 million | −31.8% |
| Adjusted EBITDA margin (non-GAAP) | 13.8% | 21.5% | −7.7 percentage points |
| Operating cash flow | $33.9 million | $48.4 million | Declined $14.5 million |
| Cash and cash equivalents at year-end | $213.5 million | $48.9 million | Increased $164.6 million |
Cost of revenue was $91.6 million, or 31.9% of revenue, versus 33.9% in 2020; this implies a 68.1% gross margin before separately reported depreciation and amortization. Selling and marketing rose 38.4% to $79.0 million, largely from higher user-acquisition spending; research and development rose 18.7% to $61.3 million; and general and administrative expense rose 64.5% to $27.9 million. The company recorded $27.4 million of depreciation and amortization. The filing does not provide a clear standalone quarterly Q4 financial comparison.
Average DAU fell 14.7% to 1.244 million and average MAU fell 3.3% to 4.111 million, while average daily payer conversion increased from 2.3% to 2.7% and ARPDAU rose from $0.51 to $0.63. Revenue growth was attributed to improved conversion and spending per player, new game launches, and increased advertising, despite fewer active users.
Liquidity, debt and cash flow
Year-end cash and cash equivalents were $213.5 million. The company had a $75 million five-year revolving credit facility, with no borrowings outstanding at year-end. The facility includes a maximum net leverage covenant of 3.50:1.00 (potentially 4.00:1.00 after qualifying acquisitions) and a minimum fixed-charge coverage covenant of 1.25:1.00. Investing activities used $56.9 million, including licensing payments, investments and capitalized game development. Financing activities provided $186.9 million, primarily from $185.2 million of net business-combination and PIPE proceeds. Year-end total liabilities were $31.4 million and stockholders’ equity was $303.5 million.
Material changes, outlook and notable items
- The June 2021 business combination and PIPE financing materially increased cash and equity. MGM’s $20 million profit-share buyout liability was settled through the transaction; the company is no longer obligated to make those profit-share payments, while other MGM agreement rights and obligations continue.
- A $13.9 million noncash gain from the change in fair value of warrant liabilities supported reported net income. Excluding this item, operating results weakened: the company reported an operating loss of $3.0 million.
- Management’s stated growth priorities include improving existing games, launching and acquiring games, expanding advertising, developing direct-purchase features, and potentially offering playAWARDS as a loyalty-as-a-service product. The filing provides no formal numeric revenue or earnings guidance.
- PLAYSTUDIOS launched myVEGAS Bingo and MGM Slots Live in 2021 and obtained rights to develop and operate Tetris-branded mobile games. The Tetris agreements include $13 million paid upfront, up to $34 million of additional conditional payments, an $8 million advance, and royalties. The company stated that failure by a counterparty to perform could expose it to a loss of up to approximately $9.7 million.
- After year-end, management adopted a plan to suspend further Kingdom Boss development in Q1 2022 and expected a noncash impairment charge. The game’s related software had $8.7 million gross carrying value and $0.1 million accumulated amortization at year-end.
- COVID-19 continued to create uncertainty around player spending, rewards redemption, advertising, staffing and partner operations. Other principal risks include dependence on Apple, Google and other distribution platforms; reliance on MGM for a substantial portion of redeemed rewards; intense competition; privacy and cybersecurity regulation; licensed intellectual property; and player concentration in a small paying-user base.
- TeamSava litigation in Israel seeks 27.3 million NIS (approximately $8.8 million at year-end exchange rates). The company disputes the claims, could not reasonably estimate the probability or amount of loss, and recorded no accrual. A separate lawsuit related to the business combination was voluntarily dismissed in August 2021.
- The auditor issued an unqualified opinion on the financial statements. Management said disclosure controls were effective and that the prior material weakness concerning warrant accounting was remediated. However, management did not assess internal control over financial reporting as of year-end, citing unreasonable effort or expense; the auditor did not audit or opine on ICFR.
Most important facts for investors to verify
- Whether improved payer conversion and ARPDAU can offset continued declines in DAU and MAU, and whether new games generate durable returns on acquisition and development spending.
- How much earnings and future reported volatility are affected by noncash warrant fair-value changes, and how operating profitability develops excluding such items.
- Whether cash generation remains adequate as licensing commitments, game investment and acquisition plans proceed; confirm compliance with the revolving-credit covenants.
- The terms, performance milestones and remaining obligations under the Tetris and MGM agreements, including the dependence of rewards redemption on MGM.
- The eventual outcome and any change in estimated exposure from the TeamSava claim, and the amount and timing of the anticipated Kingdom Boss impairment.
- Progress in maintaining financial-reporting controls as a newly public company, including the planned management ICFR assessment and the effect of dilution from options, warrants and potential earnout shares.