Playtika Holding Corp. (PLTK) Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the Second Quarter 2026 Earnings Call for Playtika. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker for today, Elad Amit, Senior Vice President, Corporate Finance and Investor Relations. Please go ahead.

Welcome, everyone, and thank you for joining us today for the Second Quarter 2026 Earnings Call for Playtika Holding Corp. Joining me on the call today is Robert Antokol, Co-Founder, President and CEO; and Tae Lee, Chief Financial Officer. I would like to remind you that today's discussion may contain forward-looking statements, including, but not limited to, the company's anticipated future revenue and operating performance, including expected marketing investment activity and the impact of AI on the company's business and industry. These statements and other comments are not a guarantee of future performance, but rather are subject to risks and uncertainty, some which are beyond our control. These forward-looking statements apply as of today, and you should not rely on them as representing our view in the future. We undertake no obligation to update these statements after this call. We have posted an accompanying slide deck to our Investor Relations website, which contain information on forward-looking statements and non-GAAP measures, and we will also post our prepared remarks immediately following the call. For a more complete discussion of the risks and uncertainties, please see our filings with the SEC. As a reminder, we will not be taking questions related to the strategic alternatives review. With that, I will now turn the call over to Robert.

Good morning, and thank you for joining us. I want to speak directly today. There are a few questions we know are on your mind about Playtika. Can we grow? Can we launch a new hit? And when we invest to grow, does it last? These are the right questions to ask. And today, I want to answer them with results, no words. Let's start with what matters most. Our business model works. When we bring players into our games, the goal is to have them stay, not for a quarter, but for years. They keep playing, they keep spending long after we first bring them in. This is the heart of Playtika. It is what we have built since I have started this company 16 years ago. And this quarter, we clearly saw it again. Look at Disney Solitaire. In the first quarter, we increased our investment to grow this game. And you ask a fair question, what happens when you spend less? Do the player leave? How sustainable is the growth? This quarter, we have a clear answer. We brought our marketing spending down and the game still grew. This only happens when the players you have added continue to stay with you when they keep playing and they keep spending. And this is how we ask you to judge this business. This is the right way to judge a live game. It's over its full life, how long the players stay and how much they are worth over that lifetime? What matters is a long-term engagement. The players will stay for years. By this standard, Disney Solitaire has the potential to be one of the best games we have ever built. Our older game make the same point. Slotomania started this company 16 years ago, and it is still one of the most important games we have in our portfolio, not because of its size today, but because of what it proves 16 years on, it is still here, stable performance for 3 quarters and still supported by community of players who have stayed within 4 years. When a game holds its players for that long, that is not a luck. That is the model working. We told you the last quarter that our marketing spending would come down as the year went on. It did. And as it came down, our margin moved up. Our adjusted EBITDA margin this quarter was 28.2%, up from 16.8% in the first quarter. D2C is another area where we did what we said. We told you we would grow this channel and use it to protect our margins. That is exactly what we did. This quarter, D2C reached to 39.3% of revenue. This channel is the key part of our future. Let me close with this. Trust is earned. It is earned by saying what we will do and then doing it. We said the players will invest, will stay and keep spending. And this quarter, they did. We said our margin would rise and they did. We said we would grow D2C to protect margin, and we did. This is a company that does what it says. And that is how we will keep earning your trust. With that, let me hand it over to Tae to take you through the numbers. Thank you.

Thank you, Robert, and good morning. In the second quarter, we saw the dynamics we described last quarter play out. Our marketing expenditure stepped down materially as the year progressed. Margins increased and Super Play became a positive adjusted EBITDA contributor beginning in the second quarter. Before I walk through the numbers, I want to give you 3 points to keep in mind as you interpret our results and think about the rest of the year. First, the margin recovery this quarter was not an accident. It was the plan. We front-loaded user acquisition spend into the first half and especially the first quarter. And as that spend came down in the second quarter, the profitability of the business came through. This front-loading was driven largely by our Super Play titles, where the structure of the earnout incentivizes concentrating investment early in the year. The result this quarter is the operating model working as designed, invest to grow and then let the profitability follow. Second, and closely related, the cadence of our marketing spend will shape the revenue trajectory for the rest of the year. Because so much of our user acquisition spend was concentrated in the first half, we expect revenue in our Super Play studio to decline on a sequential basis in the second half versus the first half, even as these titles grow year-over-year. I want to be clear about what this is. It is not a loss of momentum, and it is not the game is weakening. It is a direct result of a deliberate choice in the timing of our spend made in the context of the Super Play earnout. We would encourage you to judge these titles on their full year growth and their lifetime economics, not on the movement from one quarter to the next. Third, we saw the consumer sentiment softened as the quarter went on in Q2, and we are watching it closely. We started to observe a slowdown in the industry mid-quarter, which we attribute to weakening consumer confidence. Inflation has been a persistent pressure on the consumer this year, and we believe it weighed on discretionary spending, including our category. We think this impacted our second quarter results, and it is a key reason we're taking a measured view of the second half, which I will come back to when we discuss guidance. With that framing, let us go through the financial results. In the second quarter, we delivered total revenue of $731.1 million, down 1.8% sequentially and up 5.0% year-over-year. Adjusted EBITDA was $206.1 million, representing a margin of 28.2%. Net income was $48 million and adjusted net income was $53.6 million. We delivered DTC revenue of $286.9 million, down 1.7% sequentially and up 63.1% year-over-year. Now let's turn to the portfolio, starting with the performance in our top 3 revenue titles for the quarter, Bingo Blitz, Disney Solitaire and June's Journey. Bingo Blitz delivered $145.1 million of revenue this quarter, down 5.6% sequentially and 9.5% year-over-year. The revenue decline looks steeper than last quarter, but let me explain what's driving it because the composition here matters. The majority of the year-over-year decline is concentrated in players acquired within the last 12 months as we moved away from acquisition channels that brought in high volumes of short-lived incentive-driven users and toward investing in our existing long-term players, the community that's always been the foundation of this franchise. Our long-tenured players who have been with Bingo Blitz for more than 1 year generate most of the games revenue and remain the foundation of this franchise. DTC continues to support the games economics and Bingo Blitz remains the #1 Bingo title worldwide. Disney Solitaire generated $142.4 million of revenue this quarter, up 15.5% sequentially and 288.6% year-over-year. I want to spend a moment on Disney Solitaire, both on what the results tell you about the business and how you should model it for the rest of the year. The key point is this, we grew Disney Solitaire revenue this quarter while bringing our marketing spend on the title down meaningfully from the first quarter. Growing revenue on lower acquisition spend is only possible when the players you've already brought in stay and continue to engage. Now how to model it from here? Our user acquisition investment in Disney Solitaire is unusually front-loaded this year, more so than we would run a new title in the normal course. This reflects the structure of the Super Play earnout, where the studio is incentivized to grow revenue year-over-year while increasing EBITDA margins. Having concentrated that investment in the first half, we are reducing Disney Solitaire spend significantly in the back half, and that step down converts into higher EBITDA margins as the year progresses. The direct consequence is that Disney Solitaire revenue is likely to decline on a sequential basis in the second half even as it grows year-over-year. This is a function of the spend timing that I just described, not of the title's health or long-term potential. Disney Solitaire is early in its life, and we believe it will continue to scale. When our investment in the game normalizes, we would expect this trajectory to reflect that. The right way to judge this game is on its full year growth and its lifetime economics, not on the sequential movement that our spending timing creates. June's Journey revenue for the quarter was $74.7 million, down 1.7% sequentially and up 8.1% year-over-year. We continue to see strong trends in monetization driven by improvement in our events, segmentation and campaign tools. Engagement among our long-tenured players remains at elevated levels. And this past quarter, we launched a successful new IP collaboration with Agatha Christie, which was well received by the June's Journey community. June's Journey remains one of our strongest and most durable casual titles and a top revenue contributor to the portfolio. Let's turn to specific line items in our P&L. Cost of revenue was $192.9 million, down 1.5% year-over-year. Like the first quarter, the decline was primarily driven by lower platform fees resulting from the continued growth of our DTC business, partially offset by higher royalty expenses. R&D was $96.4 million, down 15.8% year-over-year. The steeper decline this quarter reflects the full quarter benefit of the cost actions we began earlier in the year on lower headcount and reduced outsourcing expenses, now without the severance costs that partially offset the savings in the first quarter. This is a good example of the discipline we brought to our cost structure carrying through the bottom line. Sales and marketing was $252.6 million, down 2% year-over-year and down 30% sequentially, reflecting the significant step down in marketing spend we told you to expect after our front-loaded first quarter, and we expect spend to step down further in the second half. G&A was $54.1 million, up 202.2% year-over-year. The reported year-over-year increase is not meaningful on its own because the prior year quarter included a onetime benefit from the revaluation of contingent consideration, which reduced G&A in that period. Adjusting for that item, G&A was up 2.3% year-over-year. There were no significant onetime items in the second quarter. Average daily paying users was 367,000, down 5.2% sequentially and down 2.9% year-over-year. Average daily active users was 8 million, down 7.0% sequentially and down 9.1% year-over-year. ARPDAU was up 7.4% sequentially and 16.1% year-over-year. Turning to the balance sheet. As of June 30, we had approximately $438.5 million in cash, cash equivalents and short-term investments. Turning to guidance. We are maintaining our full year revenue and adjusted EBITDA ranges. That said, based on what we see today, we expect to finish the year towards the lower end of both ranges. There are 2 factors driving this. The first is deliberate and within our control. As I described, we front-loaded our marketing investment into the first half, and we're stepping that expenditure down meaningfully in the back half. That reduces revenue in the second half by design, while supporting the margin expansion you saw this quarter. The second factor is the consumer. As I noted earlier, we saw demand soften across the industry mid-quarter, which we believe reflects the pressure that persistent inflation has placed on discretionary spending. We are taking a prudent view of how that carries into the second half. Taken together, our investment cadence decision and our measured read of the consumer are the primary drivers why we expect to land towards the lower end of our ranges for the full year. We'd be happy to take your questions.

[Operator Instructions] Your first question comes from the line of Aaron Lee with Macquarie.

I appreciate all the color on the call about guidance and the games. Maybe just starting with guidance. So I understand why revenue cut up in the lower end of the range just given the factors that you've laid out, the planned marketing spend reduction and consumer softening. But if the marketing spend is coming down, wouldn't that imply a benefit to EBITDA? So it's winding up in the lower end of the range. Is that just cost deleverage? Or can you help me understand that?

Yes, Aaron, thanks for the question. Listen, on the range, we reaffirmed it. Q2 came in ahead of consensus on revenue and adjusted EBITDA. You saw the margin uplift versus the first quarter, and you also saw Super Play turning EBITDA positive as we said it would. What we're doing is guiding you where inside the range we currently expect to land because we want to find alignment in the shape of the remaining second half of the year versus how the street may be modeling the business. Our first half came in above where the street had it, and the full year range hasn't moved since we updated the range in the past call. And we want to close that gap, and we prefer to do it now versus later in the year after the third quarter. There's a couple of different things driving the second half. The first, as we just mentioned, is sort of the biggest and it's entirely ours. We front-loaded user acquisition into the first half, especially into the first quarter, and that's largely driven by the structure of the earn-out. That spend steps down in the second half. The revenue follows spend with a lag. So second half revenue steps down sequentially from the first half. One thing to note for everyone as you model the back half of the year, that reduction is also weighted towards the third quarter. That's where the largest single step down sits and then you see more sort of even spend in the last quarter versus the third. So the second half sequential pattern, it's not linear. It's timing. It's not trajectory. The titles that we will see the biggest change in marketing spend in the first half versus second half, we expect those titles to still grow year-over-year. Now coming back to your question around some of the cost leverage, one aspect of it is also within Bingo. The decline that we reported this quarter is concentrated in players we acquired within the last 12 months following some of the mix change in marketing that we made in Q4 of last year. Now that change annualizes through the back half. So the year-over-year comparisons do get a little bit harder in the second half, not easier. And so I'd underline the other side of that, which is that our players who've been with the game for over a year were essentially flat, and they do generate the majority of the gaming revenue today. And that is part of the franchise we're managing to. But again, some of the portfolio mix shift does impact EBITDA. And in addition to that, you kind of heard us say this before, which is we reserve the right to think about how spending -- incremental spend also as the year sort of ends in order for giving us sort of that strong start heading into the year after. So some of it is flexibility, some of it is the portfolio mix shift. And then the last point that I'll just emphasize, which we spoke about on the call, is around the consumer. And again, this is specifically why we're pointing to the lower end of the ranges. And just to give a little more color, in our own portfolio, we saw that step down from May to June. And we have that level of seasonality every year. It's just that this year, we saw a step down that was greater than what's typical. So it's a seasonal pattern. It was a little bit steeper this year, and that's consistent with also what we're seeing for external data, whether it's consumer sentiment, just the consumer reacting to a lot of volatility as they assess the impact of inflation on what they have with discretionary spending. And so we're not going to over attribute our quarter to it, but we do think it's real and our prudence on the back half is the right posture is our point of view.

Great. That's helpful color. And then, yes, I appreciate all the color you guys also gave on the call about the different game performance. Just want to dig a little deeper into Slotomania. I believe you guys mentioned it's been 3 quarters of stable performance there. Can you just update us on -- I believe in the past, you've said that once you kind of get this in a stabilization area, then you could perhaps start leaning more into marketing. Like is that still in the cards given the planned step down in marketing? And how are trends within your other social casino titles?