Digital casino game platform PlayStudios (NASDAQ: MYPS) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 19.4% year on year to $62.71 million. On the other hand, the company’s full-year revenue guidance of $260 million at the midpoint came in 1% above analysts’ estimates. Its non-GAAP profit of $0.02 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

PLAYSTUDIOS’ first quarter performance reflected continued headwinds in the social casino and casual gaming segments, with management citing ongoing industry softness and heightened competition from sweepstakes-based offerings. CEO Andrew Pascal explained that lower user acquisition and engagement, especially in key titles like Tetris and Brainium, weighed on results, though efforts to optimize monetization in core titles and direct-to-consumer channels showed progress. Pascal noted the company’s reinvention plan delivered early cost savings, which partially offset revenue pressures.

Looking ahead, management reaffirmed its full-year revenue guidance and highlighted several strategic initiatives expected to influence results. Pascal emphasized the upcoming launch of a new sweepstakes promotional platform and the development of the Tetris Block Party title as foundational to future growth. CFO Scott Peterson clarified that while costs for these projects are included in current guidance, their potential revenue has not yet been factored in. Management remains focused on executing these product launches and leveraging cost efficiencies to support profitability in a challenging market environment.

Key Insights from Management’s Remarks

PLAYSTUDIOS’ leadership attributed the quarter’s revenue decline to industry-wide softness and evolving player preferences, while outlining ongoing efforts to reposition the business through new product development and operational discipline.

• Sweepstakes Solution Progress: Management identified the growing popularity of sweepstakes-style casino offerings as a primary driver for declining engagement, noting PLAYSTUDIOS does not yet offer a competitive product in this category. Development of a proprietary sweepstakes platform reached internal alpha testing in Q1, with limited rollout expected in Q2 and broader scaling planned for later in the year. Compliance and transparency were highlighted as key design priorities.

• Direct-to-Consumer Channel Expansion: The direct-to-consumer (DTC) initiative showed strong momentum, with in-app purchase revenue from this channel more than doubling year-over-year. Leadership cited incentives, bonus loyalty points, and the benefits of recent legal changes (such as the Apple-Epic ruling) as drivers, suggesting further DTC gains as friction in the purchasing process is reduced.

• Cost Savings from Reinvention Plan: Early impacts from PLAYSTUDIOS’ cost savings program contributed to improved adjusted EBITDA margins despite lower revenue. Management indicated these savings would be reinvested in strategic growth areas, particularly sweepstakes and new game development.

• Loyalty and Rewards Integration: The playAWARDS loyalty program completed integration across major titles, and new premium reward partnerships were added to enhance player engagement. While total purchases and redemptions declined, the company is prioritizing high-quality, experiential rewards over scale.

• Tetris Block Party Development: A new casual game, Tetris Block Party, advanced through technical validation in select markets. Management expects a full launch in Q4, with the product informed by player feedback and genre learnings.

Drivers of Future Performance

Management’s outlook for the remainder of the year centers on executing new product launches and expanding direct monetization channels, while managing ongoing pressure from declining user engagement.

• Sweepstakes Launch Execution: The company’s ability to successfully introduce and scale its sweepstakes platform is expected to be a key determinant of user activity and future revenue, especially as sweepstakes mechanics gain traction industry-wide.

• Direct-to-Consumer Growth: Management expects continued growth in DTC sales, aided by changes in app marketplace rules and loyalty program enhancements, to support margin improvement and reduce reliance on third-party platforms.

• Casual Game Portfolio Stabilization: Efforts to launch and promote new titles, such as Tetris Block Party, alongside ongoing user acquisition and product optimization, are intended to offset declines in legacy titles and diversify the company’s growth drivers.

Top Analyst Questions

• Michael Hickey (Benchmark): Asked about confidence in the Q2 rollout of the sweepstakes platform and plans for geographic testing. Management confirmed a measured, phased launch, with initial deployment in select jurisdictions and broader scaling in the second half of the year.

• Michael Hickey (Benchmark): Inquired about drivers of DTC revenue growth and long-term targets. Management credited incentives and loyalty integration, citing legal changes as a tailwind, but did not provide specific targets for DTC as a share of revenue.

• Will Yager (Craig-Hallum): Sought insights on learnings from sweepstakes development and technical validation. Management emphasized that early testing focused on stability and integration, with consumer feedback to shape scaling decisions post-launch.

• Will Yager (Craig-Hallum): Asked about benefits from the Apple-Epic legal ruling. Leadership highlighted potential for higher DTC adoption and margin improvement as users shift to direct purchases, though broader strategic impacts are still being assessed.

• Aaron Lee (Macquarie): Queried how playAWARDS loyalty integration aligns with the sweepstakes strategy. Management stated both initiatives are complementary, with loyalty expected to amplify player engagement and retention within the new sweepstakes model.

Catalysts in Upcoming Quarters

Our analysts will monitor (1) the phased rollout and user adoption rates for the new sweepstakes platform, (2) sustained growth and margin contribution from the direct-to-consumer channel, and (3) progress toward the planned Q4 launch of Tetris Block Party. Additionally, developments in loyalty partnership expansion and the ongoing effectiveness of cost savings initiatives will be important indicators of PLAYSTUDIOS’ ability to stabilize and grow its business.

PlayStudios currently trades at a forward EV-to-EBITDA ratio of 3.7×. Should you load up, cash out, or stay put? Find out in our free research report.

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