Hey guys, I have a bit of a long DD on ACAC / Playstudios. You can read the text below. If you want to see the full post with all the nice pictures, you can check it out
here. I was too lazy to upload each picture individually to Imgur. Apologies in advance.
I've seen numerous people on Reddit compare the ACAC / Playstudios SPAC to Skillz, and some even to Draftkings. I think this is mainly because they're all in the online gaming / gambling industry, but aside from that, the companies themselves are quite different.
I think a more apt comparison should be between Playstudios and Playtika (Ticker: PLTK), since they operate in the same vertical, compete against one another in mobile slots games, and Playtika has publicly available financial data in which I will be making comparisons against.
Playtika Analysis You can find Playtika's prospectus
here First and foremost, Playtika is one of the leaders in the mobile casino space. They have an assortment of games, and they themselves are diversifying into more casual games (similar to what Playstudios says they are trying to do), but their bread and butter are casino games, and the ones that make the most money for them are slots.
Slotomania, House of Fun, and Caesars Slots are all mobile slots games, and as you can see from the above, they generate a significant portion of Playtika's revenues (roughly 50% of their 2020 revenues).
OK, so why do I keep bringing up Playtika? Well, they had a very interesting graph that shows how much of their revenues come from different segments of their user base, based on when they acquired those users.
What this chart is saying is that 45% of their revenues came from users acquired from 2013 and earlier!
This is insane! They have such high user retention and user LTVs, that they're still monetizing a portion of their users that they acquired from 7 years ago.
If we go up to 2017, then roughly 75% of their revenues come from users acquired 2017 and earlier!
This is important because Playtika's oldest games are all slots games. So this is telling us that users that play mobile slots games, they tend to stay with those games for extremely long periods of time, and if they do stick with them, they spend a lot of money! This is great news since the vast majority of Playstudio's revenues come from mobile slots games.
If you look at Playtika's financials, you'll notice pretty nice revenue growth. However, a lot of that is non-organic, and was accomplished through M&A. This was because in 2016, Playtika was acquired by a consortium of Chinese game companies for $4.4 billion (including Giant Network, a well known gaming company in China), and they need to make revenue numbers higher to have a better story to sell for the IPO.
And part of their strategy was to diversify into casual games, and they did so by acquiring about 15 companies since 2016, including Wooga (developer of June's Journey, a very profitable find hidden objects mobile game) and Supertreat (developer of Solitaire Grand Harvest, a profitable card game).
However, one of the caveats of casual games is that the ARPPU (average revenue per paying user) is lower, and retention is lower than casino games. I did my own calculations on Playtika's ARPPU for 2018, 2019, and 2020, and you can see the noticeable downtrend. This was obviously not disclosed in the prospectus. Only ARPDAU (average revenue per daily active user) was disclosed.
My belief is that even though ARPPU and retention are lower, maybe the market is giving a higher multiple to casual games. I believe that even though online gambling is beginning to see legalization in many states, and more and more people are starting to be open to it, there is still a bit of a social stigma associated with it, and certain investors may be wary to investing in a pure "casino" play. That's why Playtika is making such a concerted effort to move away from purely casino games, and positioning itself as an mobile entertainment company. Another reason is also the immense competition and high user acquisition costs, but Playtika has shown that they are more than able to execute on a long term strategy here.
Playstudios Analysis Before jumping into anything else, I want to go straight to Playstudio's financials.
The reason is because I think there's a lot of fluff here, and I want people to know the bullshit. But even when you see through the bullshit, the downside is still mitigated enough to warrant this play.
So first off, take any numbers you see from 2022 with a grain of salt. No one knows what's going to happen this year, let alone two years in the future, and in my eyes, those 2022 numbers look extremely unrealistic. Revenue growth will probably not be that high, unless they make some big acquisitions, and EBITDA margin expansion probably won't be that fast.
Revenue Growth Playstudios is planning on launching a Bingo and an RPG game, and their plan is to aggressively spend on UA (User Acqusition) in 2021. Their hope is that revenues will scale up with their UA, and by 2022, they can lower their UA spend a bit, and continue to monetize the new games exceptionally well, maybe at an even better rate than 2021.
I think this is a bit farfetched, especially in such a competitive space as Bingo. I've done analysis on Bingo games before, and some of those games have also been around for 8 to 10 years, and they can't expect to just launch a game and have it ramped up to their expected revenue in a year's time. Development for those games requires game designers, people who are very good at math, product designers, and a many other people, which can make the development timeline quite long (at least a few months, for a more finished product, I think at least half a year for these guys). I think a more plausible scenario is that they acquire a smaller Bingo player, and then begin optimizing that game, and add in their own loyalty rewards, as that's the quickest way to ramp up revenues post IPO.
My guess is revenues are not going to ramp up as quickly as they expect, and they'll see limited revenue growth here, and still mainly see some growth from better monetizing their slots players. I think by 2022, somewhere between $350 million to $400 million in revenues is more reasonable, and I'd probably lean towards the lower end of that range.
Margin Expansion In terms of margin expansion, I think the decrease in cost of sales is doable. It seems like there is some extra fat there that they can trim as they scale. The cost of sales is mainly the tax that Apple and Google charges when users make a purchase through their respective stores, and this is a flat 30%. I doubt they'll get it less than 30% any time soon, but that will probably be through getting their whales to make purchases outside of the Google Play Store or App Store, and using a much cheaper payment processor.
I think a long term goal of 20 - 25% for UA spend is reasonable. I'm OK with these numbers, though they may need to spend more initially to ramp up new games. One of the benefits of their loyalty rewards program is that they can have higher retention, and this might be a way for them to lower their UA spend, since people may be more willing to tell their friends about a free trip or prize they won through a mobile game.
Another reason I'm OK with the UA spend is because it seems like they have a pretty knowledgeable UA team. I have access to App Annie, a data analytics company that tracks mobile apps, and I checked out the download history for POP! Slots, one of Playstudio's mobile games.
You'll notice that US downloads spiked quite a bit in March. This is right when COVID-19 was beginning to spike in the US, and people began working from home. In the mobile app world, many apps had spikes in downloads in March and April 2020 because there was a much larger pool of users looking to download apps. CPAs came down, and companies that had strong UA teams were able to capture a lot of these new users. Thus, this tells me that Playstudios UA team was at least aware of ongoing trends in the mobile app space, and they were able to capitalize by gaining more users during that period of time.
The biggest issue I have is with the "All Other Expenses." I don't know why it's this high (R&D and G&A shouldn't be that high), and Playstudios definitely needs to do some expense cutting here. While this has the most room to cut, it may be the hardest since I'm guessing a lot of that cost is from legacy employees. But if they can get this to around 30% by 2022, I'll be happy.
Playstudios Has No Daily Active Users (DAU) Growth This is a common issue I see raised on Reddit and I want to address it here. Below is another chart from App Annie, which has DAU estimates.
As you can see, DAU has remained pretty flat for the past 2 years, roughly between 150K and 200K users.
But have you considered that revenues were actually
increasing during this time? This means that Playstudios is becoming more efficient at monetizing their current users (getting more money out of older players), or their user acquisition team is targeting more profitable users.
And this is just how the game is played in the mobile apps world.
Users will eventually get sick of a game and stop playing. Not many games can count on users organically finding their game, and continuing to play indefinitely. To maintain a certain DAU, companies generally have to spend money on UA to maintain that user base. It becomes a business where you are calculating how much you are spending on UA, and whether the LTV and retention are good enough that you can make money in the long run from those users. You can think of it as an ROI on your marketing spend.
And this is especially true for mobile game apps. If it were a social app, then yes, something like the network effect can come into play, and UA spend would be much lower. But for Playstudios, maintaining a steady DAU is actually a sign that their UA team knows what they're doing, and they're able to maintain a profitable and highly efficient business. It's actually a positive that they can maintain their DAU, and even
INCREASE their revenues during that period.
End Game? I don't actually know how this will end up. I don't give price targets cause I have no idea how the markets will value this company. But I can provide a few data points so that you can make your own decisions.
From a multiples standpoint, Playstudios is cheap on a revenue multiple basis compared to Playtika, and is about the same from an EBITDA multiple basis.
I personally don't think that Playstudios is a play that's going to 5X. Hell, even 3X I think will be a stretch. But, they do have a loyalty program that will help lower their UA costs, and extend the lifespan of their users. And they are moving into more types of games to diversify their revenue source.
The reason I like this play is because I think the downside is heavily limited. The lifespan of casino slots players are so long, and the revenues are pretty stable (even growing), that there isn't an immediate risk that revenues will all of a sudden drop 30%, as is the case with lots of other mobile game companies. Add on top of this the potential for new revenue growth drivers from Bingo and RPG games, and the potential for margin expansion, that this is an easy 30-50% upside from current prices with almost minimal downside.
One last minor bit, is that I'm sure lots of people missed out on the hype surrounding Draftkings and Skillz, and I'm sure there are some retail investors that will look for any type of casino / mobile gaming / gambling deals, and may jump on this as well. My feeling is that there is also a potential upside from the hype or FOMO factor.
Anyway, this is my analysis on Playstudios / ACAC, hope you guys enjoy.
Disclaimer: I am not a financial advisor. These are my personal views and analysis on Playstudios. Please do your own due diligence.
Disclosure: I own 400 shares of ACAC.
Hey. I'm a member of a pretty cool DND server where we host one shots, campaigns, and boss battles. In hopes of recruiting new members I'm going to be running a short 1 shot for groups of 2 all week.
**Story**
Your home country is embroiled in a brutal war against the mighty Baruli empire. Your mission is to infiltrate the Silvercrest Inn and Casino and find the Prince of Baruli, Sooraj Kayal, and convince him to end the war by any means.
----------------------------------------
It will be roleplay heavy with just a bit of combat. And it will be very silly.
**Character Building**
You will be level 3. You can choose any class and UA is allowed. Point buy to determine stats, and average health per level.
**Type of player**
Please be 18+. Please come with a sense of humor. And if you would like to be active on the server afterwards that would be great.
This one shot is great for new players and couples/friends!
submitted by Please, whenever possible, link this post to help out your fellow players.
This is best with 2 players, if possible, to maximize profits.
You'll need an Arcade,
here's a list of all of them.
I prefer the Eight Bit Arcade because of its location and accessibility to the Garage, as well as the fact that it makes most preps spawn in the same locations for easier completion of preps.
Here's a list if guides that'll help with getting started with the Diamond Casino Heist:
Scoping Out
Scope Out Guide [Skip to 4:36] All Access Points All Points Of Interest / POI Tip 1:
While doing Casino Heist preps, you can make Lester shut up and show the mission objective faster by giving one of your contacts (Mechanic, Assistant, hell even Brucie) a call, as long as you know the contact you call will pick up the phone and not just leave you ringing.
Tip 2:
[Make sure to call Simeon or Martin and request a job before you start a prep, as you cannot request a job while doing Casino Preps]
In some missions you are unable to call Lester and call the cops off of you. During these missions, you can get the cops off of you for free by calling Simeon or Martin and request a job. Once you get the job, join it.
AS SOON AS YOU JOIN THE JOB, LEAVE AS SOON AS POSSIBLE. If you don't quit, you run the risk of the Host starting the job and therefore cancelling the heist prep.
Once you leave the job, you'll be back in Freemode with no cops on you, and you'll still have your heist prep equipment.
Note:
There are two Access Points that are required for the way I run the heist, in Aggressive and The Big Con (Gruupe Sechs), being the sewer entrance on the right side wall in the first opening, and the tunnel entrance leading into the center of the track. Scope out the Casino
Look for Artwork and Gold, as they are the best (unless Diamonds are available in the vault. In that case, Diamonds are the best)
Changing vault contents
If you've completed all three approaches (Silent & Sneaky, Aggressive & The Big Con), you'll have unlocked the ability to cancel the Casino Heist by calling Lester. You can use this to cancel the heist if you get Cash, or any Vault Content item you don't want.
If you find the Vault contents and get something you don't want, like Cash, you can call Lester while still in the Casino and cancel the heist. Go back to the Arcade and pay the 25k to start the heist again, and you should have a different item for your Vault Contents.
This will essentially allow you to get a second Vault Content item by trading 25k to start the heist a second time with about 8 minutes of finding and hacking / killing the Casino Security guy and going to the Casino.
If, once again, you get a Vault Content item you don't want, exit the arcade, call Lester & cancel the heist, enter your Arcade, rinse and repeat.
Personally, I cycle between Aggressive and The Big Con (Gruupe Sechs).
Now, because I prefer doing the heist through the Aggressive and The Big Con (Gruupe Sechs) approaches, I have little to no experience doing the Silent & Sneaky approach, and thus will be basing this post off of my personal experience in the other two approaches.
Note I'm not going to go into every single prep mission, mandatory or optional as that would take too much time for me. You can look up the rest of the preps on YouTube or Google. I'm only going over my preferred Gunman, Driver, Hacker, the preps that I prefer to do / prefer not to complete, and how I complete the heist.
Aggressive
Gunman: I prefer Patrick MacReary, 8%. I can't remember the other weapon available, but I know he allows you to choose an LMG with 100 round mags. I prefer to use the LMG. You can unlock by finding him in the back of a police van. Take the van to the objective area by following the yellow marker and you'll unlock him.
Driver: I prefer Karim Denz, 5%, which has decent vehicles. I prefer the Sentinel Classic.
Hacker: I prefer Paige Harris, 9%, which you can unlock by owning a Terrorbyte (which you can unlock by owning a Nightclub).
The preps I prefer to do are:
Unmarked Weapons, Getaway Vehicles, Hacking Device, Thermal Charges, Vault Explosives (I prefer to use a Stromberg while doing this mission), Reinforced Armor, Vault Keycards, Patrol Routes, Duggan Shipments, Security Intel (unlock by owning a penthouse and completing the penthouse missions), and Security Pass.
For the Reinforced Armor, I only do this if I have Gold or Diamonds as it slows you down. I also only do this if I am a low level or if I have low level teammates, because low level = low health. If I have Artwork or Cash I don't do this.
As for the Boring Machine prep, you don't need to have the Boring Machine to access the sewer. All you need to do is have took a picture of it and sent it to Lester during the Scope Out prep.
The Big Con
Gunman: I prefer Karl Abolaji, 5%. He has access to the Mini Uzi (I forget the in-game name) and the double barrel shotgun. I prefer the Mini Uzi. *You're going to be mostly going up to people and meleeing them / knocking them out instead of shooting them, unless you get caught, then you'll be shooting them.
Driver: I prefer Karim Denz, 5%, which has decent vehicles. I prefer the Sentinel Classic.
Hacker: I prefer Paige Harris, 9%, which you can unlock by owning a Terrorbyte (which you can unlock by owning a Nightclub).
The preps I prefer to do are:
Unmarked Weapons, Getaway vehicles, Hacking Device, Entry Disguises (2 preps), Vault Drills, Exit Disguise, Vault Keycards, Patrol Routes, Security Intel, and Security Pass.
I don't do Duggan Shipments as usually use my weapon to melee / knock out the security guards at the Casino, and since a melee is a one hit one kill, regardless of level of armor they're wearing, I don't usually do this mission.
Completing the Yung Ancestor missions allow you to have the Grotti Furia, a supercar, as an extra getaway vehicle, although it spawns in the parking lot which is surrounded by cops. I would not recommend doing this.
Again, 2 players are recommended. Start the Heist, get to the Vault. One of you work on the first main room with the big circle table in the centre while the other one will start hacking whichever doors lead to 2 or 3 Artwork or Gold / Diamond / Cash tables. Always go for the rooms that have more than one cart.
Tip: With Gold / Diamonds, you cannot sprint / run, you can however trot. If you go into First Person and tap / press and hold whatever your sprint / run button is, you'll see your character's weapon / screen shake, indicating that you're trotting. Doing this in First Person is actually faster than Third Person.
There are two was I like to lose the cops
1,
through the sewer, and 2, by helicopter
(Helicopter Route) [Disclaimer: This strategy is not recommended if you're trying to get the Elite Challenge, as this will most likely take more than 15 minutes, or however long the given time is.]
Once you are out of the Casino, make it to the road. Drive to the sewer opening by the Casino, and if you don't have a car, just run to said sewer opening.
Note:
If you go back the way you came, or anywhere close to the Casino after you lose the cops, you will gain a wanted level again. Proceed through the tunnel. You'll find a metal gate that you have to pass under, a small vent on the right side, and another vent on the left.
You'll come across 2 paths. Go up the metal ramp on the left. Proceed all the way down the tunnel and down the escalators and ramp downwards. Cross diagonally over the 2 train tracks into the next tunnel with a dirt floor.
You'll find 2 tunnels, left and right. Take either one. You'll find construction, go straight. After this, you'll see a big room. Go straight, take the immediate right and go up the ramps leading to the opening to the highway. If you dont have a car, get one or two and drive to the Buyer.
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