myps-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 001-39652

PLAYSTUDIOS, Inc.

(Exact name of registrant as specified in its charter)


Delaware						88-1802794
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

10150 Covington Cross Drive

Las Vegas, NV 89144

(725) 877-7000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A common stock

MYPS

The Nasdaq Stock Market LLC

Redeemable warrants exercisable for one Class A common stock at an exercise price of $11.50

MYPSW

The Nasdaq Stock Market LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of November 4, 2022, there were 113,427,253 shares of Class A common stock, $0.0001 par value per share, and 16,457,769 shares of Class B common stock, $0.0001 par value per share, issued and outstanding.

TABLE OF CONTENTS

Table of Contents


			Page
Cautionary Note Regarding Forward-Looking Statements			3
Part I - Financial Information			5
Item 1. Financial Statements (Unaudited)			5
Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021			5
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and September 30, 2021			6
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2022 and September 30, 2021			7
Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2022 and September 30, 2021			8
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and September 30, 2021			10
Notes to Unaudited Condensed Consolidated Financial Statements			12
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			31
Item 3. Quantitative and Qualitative Disclosures About Market Risk			41
Item 4. Controls and Procedures			42
Part II - Other Information			43
Item 1. Legal Proceedings			43
Item 1A. Risk Factors			43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			75
Item 3. Defaults Upon Senior Securities			75
Item 4. Mine Safety Disclosures			75
Item 5. Other Information			75
Item 6. Exhibits			76
Signatures			77

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of present or historical fact included in this Quarterly Report on Form 10-Q, about our future financial performance, strategy, expansion plans, future operations, future operating results, estimated revenues, losses, projected costs, prospects, plans and objectives of management are forward-looking statements. Any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “continue,” “goal,” “project” or the negative of such terms or other similar expressions.

Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our business strategy and market opportunity;

•our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, or gross margin, operating expenses (including changes in sales and marketing, research and development, and general and administrative expenses), and profitability;

•market acceptance of our games;

•our ability to raise financing in the future and the global credit and financial markets;

•factors relating to our business, operations, financial performance, and our subsidiaries, including:

◦changes in the competitive and regulated industries in which we operate, variations in operating performance across competitors, and changes in laws and regulations affecting our business;

◦our ability to implement business plans, forecasts, and other expectations, and identify and realize additional opportunities; and

◦the impact of the COVID-19 pandemic (including existing and possible future variants as well as vaccinations).

•our ability to maintain relationships with our platforms, such as the Apple App Store, Google Play Store, Amazon Appstore, and Facebook;

•the accounting for our outstanding warrants to purchase shares of Class A common stock;

•our ability to develop, maintain, and improve our internal control over financial reporting;

•our ability to maintain, protect, and enhance our intellectual property rights;

•our ability to successfully defend litigation brought against us;

•our ability to successfully close and integrate acquisitions to contribute to our growth objectives; and

•our success in retaining or recruiting, or changes required in, our officers, key employees or directors.

These forward-looking statements are based on our current plans, estimates and projections in light of information currently available to us, and are subject to known and unknown risks, uncertainties and assumptions about us, including those described under the heading “Risk Factors” in this Quarterly Report on Form 10-Q, and in other filings that we make with the Securities and Exchange Commission (the “SEC”) from time to time, that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In addition, the risks described under the heading “Risk Factors” are not exhaustive. New risk factors emerge from time to time, and it is not possible to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any risk factor or combination of risk factors may cause actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements are also not guarantees of performance. You should not put undue reliance on any

TABLE OF CONTENTS

forward-looking statements, which speak only as of the date hereof. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q whether as a result of new information, future events or otherwise.

We intend to announce material information to the public through our Investor Relations website, ir.playstudios.com, SEC filings, press releases, public conference calls and public webcasts. We use these channels, as well as social media, to communicate with our investors, customers, and the public about our company, our offerings, and other issues. It is possible that the information we post on our website or social media could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above, including our website and the social media channels listed on our Investor Relations website, and to review the information disclosed through such channels. Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.

TABLE OF CONTENTS

PART I. Financial Information

Item 1. Financial Statements

PLAYSTUDIOS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except par value amounts)


	September 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	212,069	$	213,502
Receivables	19,214		20,693
Prepaid expenses	2,675		5,059
Income tax receivable	1,801		2,117
Other current assets	977		413
Total current assets	236,736		241,784
Property and equipment, net	13,930		5,289
Internal-use software, net	35,418		43,267
Goodwill	6,235		5,059
Intangibles, net	16,018		18,755
Deferred income taxes	13,186		6,282
Other long-term assets	12,422		14,408
Total non-current assets	97,209		93,060
Total assets	$	333,945	$	334,844
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	5,320		7,793
Warrant liabilities	3,590		6,521
Accrued liabilities	18,442		15,599
Total current liabilities	27,352		29,913


Other long-term liabilities	3,090		1,464

Total liabilities	$	30,442	$	31,377
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value (100,000 shares authorized, no shares issued and outstanding as of September 30, 2022 and December 31, 2021)	—		—
Class A common stock, $0.0001 par value (2,000,000 shares authorized, 113,407 and 110,066 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively)	11		11
Class B common stock, $0.0001 par value (25,000 shares authorized, 16,457 and 16,130 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively).	2		2
Additional paid-in capital	285,199		268,522
Retained earnings	18,459		34,539
Accumulated other comprehensive (loss) income	(168)		393
Total stockholders’ equity	303,503		303,467
Total liabilities and stockholders’ equity	$	333,945	$	334,844

The accompanying notes are an integral part of these condensed consolidated financial statements.

TABLE OF CONTENTS

PLAYSTUDIOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net revenues	$	72,127	$	70,571	$	210,931	$	215,490
Operating expenses:
Cost of revenue(1)	21,703		22,282		63,657		69,802
Selling and marketing	19,249		19,274		59,336		60,461
Research and development	15,110		14,509		46,561		46,551
General and administrative	9,864		5,789		28,763		22,390
Depreciation and amortization	8,583		7,213		25,265		20,145
Restructuring and related	796		2,303		10,968		2,379
Total operating costs and expenses	75,305		71,370		234,550		221,728
Loss from operations	(3,178)		(799)		(23,619)		(6,238)
Other (expense) income, net:
Change in fair value of warrant liabilities	4,676		11,876		1,139		11,986
Interest income (expense), net	843		(57)		1,050		(206)
Other expense, net	(475)		(113)		(836)		(242)
Total other income, net	5,044		11,706		1,353		11,538
Income (loss) before income taxes	1,866		10,907		(22,266)		5,300
Income tax benefit	1,763		329		6,186		4,819
Net income (loss)	$	3,629	$	11,236	$	(16,080)	$	10,119
Net income (loss) per share attributable to Class A and Class B common stockholders:
Basic	$	0.03	$	0.09	$	(0.13)	$	0.09
Diluted	$	0.02	$	0.08	$	(0.13)	$	0.08
Weighted average shares of common stock outstanding:
Basic	129,032		125,823		127,529		106,880
Diluted	146,920		138,795		127,529		120,516

(1)Amounts exclude depreciation and amortization.

The accompanying notes are an integral part of these condensed consolidated financial statements.

TABLE OF CONTENTS

PLAYSTUDIOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	3,629	$	11,236	$	(16,080)	$	10,119
Other comprehensive income (loss):
Change in foreign currency translation adjustment(1)	(159)		(5)		(561)		(92)
Total other comprehensive loss	(159)		(5)		(561)		(92)
Comprehensive income (loss)	$	3,470	$	11,231	$	(16,641)	$	10,027

(1)These amounts are presented gross of the effect of income taxes. The total change in foreign currency translation adjustment and the corresponding effect of income taxes are immaterial.

The accompanying notes are an integral part of these condensed consolidated financial statements.

TABLE OF CONTENTS

PLAYSTUDIOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited, in thousands)


	Preferred Stock			Common Stock			Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income				Total Stockholders' Equity
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount						Retained Earnings
Balance as of June 30, 2021	—	$	—	—	$	—	109,623	$	11	16,130	$	2	$	262,931	$	394	$	22,685	$	286,023
Net income	—	—		—	—		—	—		—	—		—		—		11,236		11,236
Acies Merger & PIPE Financing	—	—		—	—		—	—		—	—		(73)		—		—		(73)
Exercise of stock options	—	—		—	—		207	—		—	—		192		—		—		192
Stock-based compensation	—	—		—	—		—	—		—	—		1,017		—		—		1,017
Other comprehensive loss	—	—		—	—		—	—		—	—		—		(5)		—		(5)
Balance as of September 30, 2021	—	$	—	—	$	—	109,830	$	11	16,130	$	2	$	264,067	$	389	$	33,921	$	298,390

Balance as of December 31, 2020	162,596	$	8	238,186	$	12	—	$	—	—	$	—	$	71,776	$	481	$	23,802	96,079
Retroactive application of reverse recapitalization	(162,596)	(8)		(238,186)	(12)		74,422	8		18,977	2		10		—		—		—
Adjusted balance as of December 31, 2020	—	$	—	—	$	—	74,422	$	8	18,977	$	2	$	71,786	$	481	$	23,802	96,079
Net income	—	—		—	—		—	—		—	—		—		—		10,119		10,119
Acies Merger & PIPE Financing	—	—		—	—		32,968	3		(2,847)	—		186,008		—		—		186,011
Exercise of stock options	—	—		—	—		2,440	—		—	—		2,091		—		—		2,091
Stock-based compensation expense	—	—		—	—		—	—		—	—		4,182		—		—		4,182

Other comprehensive loss	—	—		—	—		—	—		—	—		—		(92)		—		(92)
Balance as of September 30, 2021	—	$	—	—	$	—	109,830	$	11	16,130	$	2	$	264,067	$	389	$	33,921	$	298,390

TABLE OF CONTENTS

PLAYSTUDIOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited, in thousands)


	Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)				Total Stockholders' Equity
	Shares	Amount		Shares	Amount						Retained Earnings
Balance as of June 30, 2022	111,883	$	11	16,130	$	2	$	280,756	$	(9)	$	14,830	295,590
Net income	—	—		—	—		—		—		3,629		3,629
Exercise of stock options	1,037	—		327	—		459		—		—		459
Issuance of vested restricted stock units	487	—		—	—		—		—		—		—
Stock-based compensation	—	—		—	—		3,984		—		—		3,984

Other comprehensive loss	—	—		—	—		—		(159)		—		(159)
Balance as of September 30, 2022	113,407	$	11	16,457	$	2	$	285,199	$	(168)	$	18,459	$	303,503

Balance as of December 31, 2021	110,066	$	11	16,130	$	2	$	268,522	$	393	$	34,539	303,467
Net loss	—	—		—	—		—		—		(16,080)		(16,080)
Exercise of stock options	1,823	—		327	—		1,148		—		—		1,148
Issuance of vested restricted stock units	1,518	—		—	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		15,529		—		—		15,529

Other comprehensive loss	—	—		—	—		—		(561)		—		(561)
Balance as of September 30, 2022	113,407	$	11	16,457	$	2	$	285,199	$	(168)	$	18,459	$	303,503

TABLE OF CONTENTS

PLAYSTUDIOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net (loss) income	$	(16,080)	$	10,119
Adjustments:
Depreciation and amortization	25,265		20,145
Amortization of loan costs	106		295
Stock-based compensation expense	13,563		3,680
Change in fair value of warrant liabilities	(1,139)		(11,986)
Asset impairments	8,353		—
Deferred income tax expense	(6,601)		(3,070)
Other	14		1,517
Changes in operating assets and liabilities
Receivables	1,777		(1,588)
Prepaid expenses and other current assets	1,948		(3,679)
Income tax receivable	190		(3,512)
Accounts payable & accrued liabilities	4,430		5,684
Other	(595)		3,158
Net cash provided by operating activities	31,231		20,763
Cash flows from investing activities:
Purchase of property and equipment	(10,852)		(1,241)
Additions to internal-use software	(15,597)		(19,540)
Additions to notes receivable and other investments	(1,042)		(9,533)
Acquisition of subsidiary, net of cash acquired	(960)		—
Proceeds from notes receivable	2,348		—
Net cash used in investing activities	(26,103)		(30,314)
Cash flows from financing activities:
Proceeds from stock option exercises	1,144		2,091
Payment for tender offer of warrants	(1,792)		—
Payment for minimum guarantee obligations	(5,000)		—
Net proceeds from Acies Merger	—		185,311
Other	—		(690)
Net cash (used in) provided by financing activities	(5,648)		186,712
Foreign currency translation	(913)		(113)
Net change in cash and cash equivalents	(1,433)		177,048
Cash and cash equivalents at beginning of period	213,502		48,927
Cash and cash equivalents at end of period	$	212,069	$	225,975
Supplemental cash flow disclosures:
Interest paid	$	150	$	53
Income taxes paid, net of refunds	411		818

TABLE OF CONTENTS


	Nine Months Ended September 30,
	2022		2021
Non-cash investing and financing activities:
Capitalization of stock-based compensation	$	1,966	$	502

Increase in property and equipment included in accounts payable and other long-term liabilities	824		—
Reduction of notes receivable in exchange for internal-use software	—		1,754
Settlement of MGM Profit Share liability through the issuance of shares of Class A common stock	—		20,000
Exchange of notes receivable as consideration related to the WonderBlocks Acquisition	1,055		—
Contingent consideration related to the WonderBlocks Acquisition	1,564		—

The accompanying notes are an integral part of these condensed consolidated financial statements.

TABLE OF CONTENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited, in thousands, unless otherwise noted)

NOTE 1—BACKGROUND AND BASIS OF PRESENTATION

Organization and Description of Business

PLAYSTUDIOS, Inc., formerly known as Acies Acquisition Corp. (the "Company" or "PLAYSTUDIOS"), was incorporated on August 14, 2020 as a Cayman Islands exempted company, and domesticated into a Delaware corporation on June 21, 2021. The Company's legal name became PLAYSTUDIOS, Inc. following the closing of the Acies Merger (as defined in Note 3—Business Combinations). The prior period financial information represents the financial results and conditions of Old PLAYSTUDIOS (as defined in Note 3—Business Combinations).

The Company develops and operates online and mobile social gaming applications (“games” or “game”) each of which incorporate a unique loyalty program offering “real world” rewards provided by a collection of awards partners. The Company’s games are free-to-play and available via the Apple App Store, Google Play Store, Amazon Appstore, and Facebook (collectively, “platforms” or “platform operators”). The Company creates games based on its own original content as well as third-party licensed brands. The Company generates revenue through the in-game sale of virtual currency and through advertising. The Company has one operating segment with one business activity, developing and monetizing games.

Unless the context indicates otherwise, all references herein to “PLAYSTUDIOS,” the “Company,” “we,” “us,” and “our” are used to refer collectively to PLAYSTUDIOS, Inc. and its subsidiaries.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of PLAYSTUDIOS, Inc. and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. Certain reclassifications in these financial statements have been made to comply with US GAAP applicable to public companies and SEC Regulation S-X.

The significant accounting policies referenced in the annual consolidated financial statements of the Company as of December 31, 2021 have been applied consistently in these unaudited interim consolidated financial statements. In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of its financial position as of September 30, 2022, and its results of operations for the three and nine months ended September 30, 2022, and 2021, and cash flows for the nine months ended September 30, 2022, and 2021. The Consolidated Balance Sheet as of December 31, 2021 was derived from the audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The Company made certain reclassifications to the comparative balances in the condensed consolidated financial statements to conform with current year presentation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with US GAAP requires us to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and notes thereto. Significant estimates and assumptions reflected in the Company’s condensed consolidated financial statements include the estimated consumption rate of virtual goods that is used in the determination of revenue recognition, useful lives of property and equipment and definite-lived intangible assets, the expensing and capitalization of research and development costs for internal-use software, assumptions used in accounting for income taxes, stock-based compensation and the evaluation of goodwill and long-lived assets for impairment. The Company believes the accounting estimates are appropriate and reasonably determined. Due to the inherent uncertainties in making these estimates, actual amounts could differ materially.

Emerging Growth Company

At September 30, 2022, the Company qualified as an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and the Company has taken and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of

TABLE OF CONTENTS

holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has opted to take advantage of such extended transition period available to emerging growth companies which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company can adopt the new or revised standard at the time private companies adopt the new or revised standard. The Company did not lose its emerging growth company status on December 31, 2021. As a result, the Company does not expect to adopt any accounting pronouncements currently deferred based on private company standards until a year subsequent to 2022. The Company will reevaluate its eligibility to retain emerging growth company status at the end of its second quarter of 2023, and otherwise as required.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

For a discussion of our significant accounting policies and estimates, please refer to our 2021 Annual Report on Form 10-K filed on March 3, 2022.

Share-Based Compensation

The Company has a stock-based compensation program which provides for equity awards including time-based stock options and restricted stock units (“RSUs”). Stock-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period for the award. The Company records forfeitures as a reduction of stock-based compensation expense as those forfeitures occur.

The Company uses the Black-Scholes-Merton option-pricing model to determine the fair value for option awards. In valuing our option awards, the Company makes assumptions about risk-free interest rates, dividend yields, volatility and weighted-average expected lives. The Company accounts for forfeitures as they occur. Risk-free interest rates are derived from United States Treasury securities as of the option award grant date. Expected dividend yield is based on our historical cash dividend payments, which have been zero to date. The expected volatility for shares of the Company's Class A common stock is estimated using our historical volatility. The weighted-average expected life of the option awards is estimated based on our historical exercise data.

The Company's dual class structure was created upon the Domestication (as defined in Note 3—Business Combinations). The Class B common stock, including Class B common stock underlying vested stock options, held by Mr. Andrew Pascal, the Company's Chairman and Chief Executive Officer, or his affiliates (the "Founder Group") carry a super vote premium. As the Founder Group did not have control of Old PLAYSTUDIOS prior to the Acies Merger, and Mr. Pascal is an employee of the Company, the incremental value resulting from the super vote premium is accounted for as incremental compensation costs.

The Company utilized the market approach by observing other market participants with (i) dual class structures, (ii) super vote premiums for a single class and (iii) both classes trading on a national exchange. Based on the observed data, management selected a premium for the Class B common stock and the stock options held by members of the Founder Group.

The Company uses the estimated fair value of equity and associated per-share value at the time of grant to determine the compensation cost to be recognized associated with RSUs granted.

Recently Issued Accounting Pronouncements Not Yet Adopted

In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases (Topic 842). The amended guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities in the Consolidated Balance Sheets and disclosing key information about leasing arrangements. The adoption of this guidance is expected to result in a significant portion of the Company’s operating leases, where the Company is the lessee, to be recognized in the Company’s Consolidated Balance Sheets. The guidance requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This guidance is effective for the Company for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with earlier adoption permitted. The Company intends to first present the

TABLE OF CONTENTS

application of this guidance in its Annual Report on Form 10-K for the year ending December 31, 2022 with an effective date of January 1, 2022. The Company is currently evaluating the impact of adopting this guidance.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). The new guidance replaces the incurred loss impairment methodology in current guidance with a current expected credit loss model (“CECL”) that incorporates a broader range of reasonable and supportable information including the forward-looking information. This guidance is effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within that annual reporting period, with early adoption permitted. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. The Company is currently evaluating the impact of adopting this guidance.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The Company adopted this guidance prospectively on January 1, 2022 and the adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

NOTE 3—BUSINESS COMBINATIONS

Merger with Acies Acquisition Corp.

On June 21, 2021 (the “Closing Date”), Acies Acquisition Corp., a Cayman Islands exempted company (prior to the Closing Date, “Acies”), consummated the previously announced business combination (“Acies Merger”) with PlayStudios, Inc., a Delaware corporation (“Old PLAYSTUDIOS”) pursuant to the Agreement and Plan of Merger, dated as of February 1, 2021 (the “Merger Agreement”), by and among Acies, Catalyst Merger Sub I, Inc., a Delaware corporation and a direct wholly owned subsidiary of Acies (“First Merger Sub”), Catalyst Merger Sub II, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Acies (“Second Merger Sub”), and Old PLAYSTUDIOS.

In connection with the closing of the Acies Merger, Acies filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation (the “Certificate of Incorporation”) and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which Acies was domesticated and continues as a Delaware corporation, changing its name to PLAYSTUDIOS, Inc. (the “Domestication”). As a consequence of filing the Certificate of Incorporation, the Company adopted a dual class structure, comprised of the Company’s Class A common stock, which is entitled to one vote per share, and the Company’s Class B common stock, which is entitled to 20 votes per share. See Note 16—Stockholders' Equity for further discussion on the dual class structure.

In connection with the Acies Merger, Acies entered into subscription agreements with certain investors ("PIPE Investors"), whereby it issued 25.0 million shares of Class A common stock at $10.00 per share (the "PIPE Shares") for an aggregate purchase price of $250.0 million (the "PIPE Financing"), which closed simultaneously with the consummation of the Acies Merger. The Company used $20.0 million of the PIPE Financing to terminate the profit share provision of an agreement with MGM Resorts International, one of the PIPE Investors.

In connection with the Acies Merger, the Company incurred direct and incremental costs of $32.8 million related to the equity issuance, consisting primarily of investment banking and other professional fees, which were recorded to additional paid-in capital as a reduction of proceeds.

The Company incurred approximately $1.4 million of expenses primarily related to advisory, legal and accounting fees in conjunction with the Acies Merger. Of this, $0.1 million and $1.3 million were recorded in general and administrative expenses on the consolidated statements of operations for the three and nine months ended September 30, 2021, respectively.

The aggregate consideration for the Acies Merger was approximately $1,041.0 million, payable in the form of the Company's Class A and Class B common stock and cash. The following table summarizes the merger consideration (in thousands, except per share information).

TABLE OF CONTENTS


	Consideration
Cash consideration	$	102,020
Shares transferred at closing(1)	86,838
Value per share	$	10.00
Share consideration	$	868,380
Total consideration	$	970,400
Shares of common stock underlying vested options	7,060
Value per share	$	10.00
	70,600
Aggregate consideration	$	1,041,000

(1)Excludes shares of common stock underlying stock options that are vested but unexercised as of the Closing Date of the Acies Merger. As the shares do not represent legally outstanding shares of common stock at Closing, they are excluded from the total consideration amount.

The following table reconciles the elements of the Acies Merger to the condensed consolidated statements of cash flows for the nine months ended September 30, 2021:


Cash - Acies Trust and cash (net of redemptions)	$	101,965
Cash - PIPE	230,000
Less: Cash consideration	(102,020)
Less: Transaction costs	(44,775)
Net Acies Merger and PIPE Financing	$	185,170

The Acies Merger was accounted for as a reverse recapitalization and Acies was treated as the “acquired” company for accounting purposes. The Acies Merger was accounted as the equivalent of Old PLAYSTUDIOS issuing stock for the net assets of Acies, accompanied by a recapitalization. Accordingly, all historical financial information presented in these condensed consolidated interim financial statements represents the accounts of Old PLAYSTUDIOS “as if” Old PLAYSTUDIOS is the predecessor to the Company. The common stock and net income per share, prior to the Acies Merger, have been adjusted to share amounts reflecting the recapitalization exchange ratio of approximately 0.233 for Old PLAYSTUDIOS common stock.

WonderBlocks Acquisition

On August 2, 2022, playBLOCKS, Inc., a newly formed wholly-owned subsidiary of the Company ("playBLOCKS") entered into an agreement with WonderBlocks Labs, Inc. (“WonderBlocks"), which provides tools for the development of a play-to-earn loyalty platform for digital entertainment on the Ethereum blockchain, pursuant to which playBLOCKS acquired substantially all of the assets of WonderBlocks. playBLOCKS paid WonderBlocks $2.0 million less Indebtedness (borrowed money and accrued interest, including debt to the Company) at closing and agreed to pay between zero and $3 million subject to the satisfaction of certain product and financial milestones. We believe this acquisition will allow us to enhance our playAWARDS model with new Web3 features and capabilities.

The Company recorded the excess of the fair value of the consideration transferred in the acquisition over the fair value of net assets acquired as goodwill. The goodwill reflects our expectations of favorable future growth opportunities and anticipated synergies through the scale of our operations. The Company expects that substantially all of the goodwill will be deductible for federal income tax purposes. The following table summarizes the consideration paid for WonderBlocks and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date:

TABLE OF CONTENTS


Consideration:
Cash consideration	$	945
Note receivable plus accrued interest conversion	1,055
Contingent consideration	1,564
Total consideration transferred	$	3,564

Identifiable assets acquired and liabilities assumed:
Developed technology	2,403
Other liabilities	$	(15)
Total identifiable net assets	$	2,388

Goodwill	$	1,176

Brainium Studios Acquisition

On October 7, 2022, PLAYSTUDIOS US, LLC, a direct wholly-owned subsidiary of the Company entered into a membership interest purchase agreement with Brainium Studios LLC (“Brainium"), a mobile game publisher, Farhad Shakiba, and Jake Brownson (together, the "Seller Members"), and Farhad Shakiba as the Sellers' Representative, pursuant to which PLAYSTUDIOS US, LLC acquired all of the issued and outstanding membership interests in Brainium from the Seller Members. The closing of the acquisition occurred on October 12, 2022, and Brainium became an indirect wholly-owned subsidiary of the Company. The purchase price for the membership interests was $70.0 million at closing, as adjusted for cash, indebtedness, and working capital, and between zero and $27.3 million following the closing subject to the satisfaction of certain financial milestones for the fiscal year ending December 31, 2022. The Company is currently in the process of finalizing the accounting for this transaction and the Company expects to complete the preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed by the end of the fourth quarter of 2022.

NOTE 4—RELATED PARTY TRANSACTIONS

The following table is a summary of balance sheet assets and liabilities from related parties:


	September 30, 2022		December 31, 2021		Financial Statement Line Item
Marketing Agreement	$	1,000	$	1,000	Intangibles, net

The Company did not have any revenues recognized from related parties during the three and nine months ended September 30, 2022 and 2021.

In connection with the Acies Merger and in accordance with the Merger Agreement, during the nine months ended September 30, 2021, the Company paid $2.5 million to PLAYSTUDIOS Impact Fund, formerly known as myCause Charitable Foundation, a 501(c)(3) foundation established and administered by certain members of management of the Company.

The Company’s expenses recognized from related parties were immaterial during the three and nine months ended September 30, 2022 and 2021.

MGM Resorts International (“MGM”)

MGM is a stockholder and MGM's Chief Commercial Officer also serves on the Company’s Board of Directors. MGM owned approximately 16.6 million and 16.6 million shares of the Company's outstanding Class A common stock as of September 30, 2022 and December 31, 2021, respectively.

Marketing Agreement

In April 2011, the Company entered into a joint marketing agreement with MGM (as amended, the “Marketing Agreement”) in exchange for assistance with marketing campaigns and the exclusive right to utilize MGM’s licensed marks and licensed copyrights for the development of certain of the Company’s social casino games. The initial term was for one year from the go-live date of the first such game in July 2012, with an automatic renewal provision for successive two-year terms based on the games meeting certain performance criteria. If the games do not achieve the specified performance

TABLE OF CONTENTS

criteria, the term will be automatically renewed for a one-year period and the right to utilize MGM’s licensed marks and copyrights will become non-exclusive. The non-exclusive term will be automatically renewed for successive one-year periods so long as the games meet certain other performance criteria. As consideration for the use of MGM’s intellectual property, the Company issued 19.2 million shares of its common stock representing 10% of its then-outstanding common stock; and in lieu of royalty payments, the Company agreed to pay MGM a profit share of: (i) during the exclusive term, a mid- to high-single digit percentage of cumulative net operating income, as defined in the Marketing Agreement, and (ii) during the non-exclusive term, a low- to mid-single digit percentage of cumulative net operating income. As further described in Note 9—Goodwill and Intangible Assets, the Marketing Agreement was recorded as an indefinite-lived intangible asset.

On October 30, 2020, the Company and MGM agreed to amend the Marketing Agreement (the “MGM Amendment”), under which the Company and MGM agreed to terminate the profit share provision. In exchange, the Company agreed to remit to MGM a one-time payment of $20.0 million, payable on the earliest to occur of (i) the PIPE Financing, (ii) the date that the Company waives MGM’s commitment to participate in the PIPE Financing, or (iii) two years from the date of the MGM Amendment. In addition, MGM agreed to reinvest in the Company at a minimum amount of $20.0 million by participating in the PIPE Financing or a private placement of equity offering to third party investors for minimum gross proceeds to the Company of $50.0 million. As a result of the termination, the Company is no longer obligated to make profit share payments, but the other rights and obligations under the Marketing Agreement continue in full force and effect.

On June 21, 2021, the Company consummated the Acies Merger and MGM participated in the PIPE Financing. In connection with the PIPE Financing, the Company recorded an equity contribution from MGM as a settlement of the $20.0 million liability.

NOTE 5—RECEIVABLES

Receivables consist of the following:


	September 30, 2022		December 31, 2021
Trade receivables	$	18,825	$	20,540
Other receivables	389		153
Total receivables	$	19,214	$	20,693

Trade receivables generally represent amounts due to the Company from social and mobile platform operators, including Apple, Google, Amazon and Facebook. Trade receivables are recorded when the right to consideration becomes unconditional. No allowance for doubtful accounts was considered necessary as of September 30, 2022 and December 31, 2021.

Concentration of Credit Risk

As of September 30, 2022, Apple, Inc. and Google, Inc. accounted for 46.2% and 32.0% of the Company’s total receivables, respectively, while as of December 31, 2021, Apple, Inc. and Google, Inc. accounted for 43.0% and 34.6% of the Company’s total receivables, respectively. As of September 30, 2022 and December 31, 2021, the Company did not have any additional counterparties that exceeded 10% of the Company’s accounts receivable.

During the year ended December 31, 2021, the Company entered into agreements pursuant to which the Company acquired the rights to develop and operate Tetris®-branded mobile games. As contemplated in the agreements, the Company agreed to an $8.0 million Advance Payment (as defined in Note 15—Commitments and Contingencies), which is reported within the "Other long-term assets" line item on the Consolidated Balance Sheets. If the Company and the counterparty fail to perform according to the terms of the agreements, the maximum amount of loss which the Company would be expected to incur is approximately $8.1 million, which includes the failure to recoup any portion of the $8.0 million Advance Payment to which the Company may become entitled under the terms of the agreements.

TABLE OF CONTENTS

NOTE 6—FAIR VALUE MEASUREMENT

The carrying values of the Company’s cash and cash equivalents, trade receivables and accounts payable approximate fair value due to their short maturities.

The following tables present the financial assets not measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021:


	September 30, 2022
	Carrying Value		Estimated Fair Value		Fair Value Hierarchy	Financial Statement Line Item
Financial assets:
Notes receivable - current	$	102	$	102	Level 3	Receivables
Notes receivable - non-current	192		192		Level 3	Other long-term assets
Prepaid expenses - non-current	8,000		8,000		Level 3	Other long-term assets
Total financial assets	$	8,294	$	8,294


	December 31, 2021
	Carrying Value		Estimated Fair Value		Fair Value Hierarchy	Financial Statement Line Item
Financial assets:
Notes receivable - current	$	8	$	8	Level 3	Receivables
Notes receivable - non-current	3,391		3,391		Level 3	Other long-term assets
Prepaid expenses - non-current	8,000		8,000		Level 3	Other long-term assets
Total financial assets	$	11,399	$	11,399

The notes receivable are fixed-rate investments, are not traded and do not have observable market inputs, therefore, the fair value is estimated to be equal to the carrying value. The Advance Payment is not a traded asset and does not have observable market inputs, therefore, the fair value is estimated to be equal to the carrying value.

The following tables present the liabilities measured at fair value on a recurring basis, by input level, in the Consolidated Balance Sheets at September 30, 2022 and December 31, 2021:


	September 30, 2022
	Level 1		Level 2		Level 3		Total
Financial liabilities:
Public Warrants	$	2,099	—		—		2,099
Private Warrants	—		1,491		—		1,491
Total financial liabilities	$	2,099	$	1,491	$	—	$	3,590


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Financial liabilities:
Public Warrants	$	4,255	—		—		4,255
Private Warrants	—		2,266		—		2,266
Total financial liabilities	$	4,255	$	2,266	$	—	$	6,521

TABLE OF CONTENTS

NOTE 7—PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:


	September 30, 2022		December 31, 2021
Land and buildings	$	5,087	$	—
Computer equipment	8,599		8,819
Leasehold improvements	6,530		6,310
Purchased software	4,320		542
Furniture and fixtures	2,715		2,125
Construction in progress	995		721
Total property and equipment	28,246		18,517
Less: accumulated depreciation	(14,316)		(13,228)
Total property and equipment, net	$	13,930	$	5,289

The aggregate depreciation expense for property and equipment, net is reflected in “Depreciation and amortization” in the Consolidated Statements of Operations. During the three months ended September 30, 2022 and 2021, depreciation expense was $1.2 million and $0.7 million, respectively, and during the nine months ended September 30, 2022 and 2021, depreciation expense was $3.1 million and $2.1 million, respectively. No impairment charges or material write-offs were recorded for the three and nine months ended September 30, 2022 and 2021.

On July 29, 2022, the Company purchased the real property located at 10150 Covington Cross Drive, Las Vegas, Nevada, 89144 for approximately $5 million. The property was previously leased by the Company and has been the location of the U.S. headquarters of the Company since March of 2017. The property is held in a newly formed subsidiary of the Company, PLAYPROPERTIES, LLC. The lease on the property was terminated upon the closing of the purchase.

Property and equipment, net by region consists of the following:


	September 30, 2022		December 31, 2021
United States	$	9,064	$	1,672
EMEA(1)	3,431		2,813
All other countries	1,435		804
Total property and equipment, net	$	13,930	$	5,289

(1)Europe, Middle East, and Africa (“EMEA”). Amounts primarily represent leasehold improvements of local office space and computer equipment.

NOTE 8—INTERNAL-USE SOFTWARE, NET

Internal-use software, net consists of the following:


	September 30, 2022		December 31, 2021
Internal-use software	$	139,430	$	130,942
Less: accumulated amortization	(104,012)		(87,675)
Total internal-use software, net	$	35,418	$	43,267

The aggregate amortization expense for internal-use software, net is reflected in "Depreciation and amortization" in the Consolidated Statements of Operations. During the three months ended September 30, 2022 and 2021, the Company capitalized internal-use software development costs of $5.6 million and $6.8 million, and during the nine months ended September 30, 2022 and 2021, the Company capitalized internal-use software development costs of $17.6 million and $21.8 million, respectively. Total amortization expense associated with its capitalized internal-use software development costs for the three months ended September 30, 2022 and 2021 was $5.6 million and $6.5 million, and for the nine months ended September 30, 2022 and 2021 was $17.1 million and $17.7 million, respectively.