DoubleDown Interactive Co., Ltd. American Depository Shares 2026 Q2 Earnings Call

Mr. Jaffoni. Thank you, Liz.

Before management begins their formal remarks, we need to remind everyone that some of management's comments today will be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We hereby claim the protection of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements about future events, and include expectations and projections, not present or historical facts, and can be identified by the use of words such as may, might, will, expect, assume, believe, intend, estimate, continue, should, anticipate, or other such similar terms. Forward-looking statements include, and are not limited to, those regarding the company's future plans, mergers and acquisition strategy, strategic and financial objectives, expected performance, and financial outlook.

Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially and adversely from what the company expects. Therefore, you should exercise caution in interpreting and relying on them. We refer you to DoubleDown's annual report on Form 20-F filed with the SEC on March 31, 2026, and other SEC filings, for a more detailed discussion of the risks that could impact future operating results and financial condition. These forward-looking statements are made only as of the date of this call. The company does not undertake and expressly disclaims any obligation to update or alter the forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During today's call, management will discuss non-IFRS financial measures, which management believes to be useful in evaluating the company's operating performance.

These measures should not be considered superior to, in isolation, or as a substitute for the financial results prepared in accordance with IFRS. A full reconciliation of these measures to the most directly comparable IFRS measure is available in the earnings release issued this afternoon. In addition, on April 29, 2026, DoubleDown issued a press release acknowledging the receipt of a non-binding expression of interest from DoubleU Games, its controlling shareholder, to acquire all the outstanding DoubleDown common shares, including ADRs not currently owned by them, at a price of $11.25 per ADS in cash. As noted in that press release, the company has formed a special committee to evaluate and negotiate with the controlling shareholder and determine the next steps that would be in the best interest of the company and its unaffiliated shareholders.

As a result of this ongoing process, the company has no additional updates or further comments to discuss on today's call. I would like to remind everyone that today's call is being recorded and will be made available for replay via a link in the investor relations section of DoubleDown's website. Thank you for your patience with that, and it is now my pleasure to turn the call over to DoubleDown's CEO, IK Kim. Please go ahead. Thank you, Joe.

Good afternoon, everyone. We are delighted to be with you today to discuss DoubleDown Interactive's second quarter 2026 results. Key highlights include delivering revenue consistency and resiliency as we cut on our growth and geographical diversification strategies marked by solid contributions across both social casino and iGaming. Delivering a record contribution of over 50% of our total social casino revenue from direct-to-consumer payer activity, and delivering another quarter of strong profitability and significant free cash flow generation. These results further reinforce our confidence in our business model as we drive operational excellence across our portfolio. Let's start with the financial results. This afternoon, we reported second quarter consolidated revenue of $94.3 million, up approximately 11% year-over-year. This top-line growth helped drive second-quarter adjusted EBITDA of $39.3 million, marking 17% year-over-year growth.

In Q2, we extended our track record of driving a high conversion of revenue to profit and cash flow. Net cash flow from operations was $24.6 million in the quarter, up 25% from the same period one year ago. As a result, we generated a total of $71 million in net cash flow from operations for the first half of 2026. Our social casino segment remains the primary engine of DoubleDown's profit and cash flow generation. In the second quarter, social casino revenue grew 11.5% year-over-year to $77.3 million, driven by the contribution from WHOW Games, as well as the strong performance of DoubleDown's traditional social casino business. A key highlight this quarter is the continued growth of our direct-to-consumer, or DTC component, a major contributor to our strong growth in profitability.

In the second quarter, DTC accounted for 52% of total social casino revenue, compared to just over 15% in second quarter of 2025, and 44% in the first quarter of 2026. At the same time, industry analysts at Eilers & Krejcik recently forecast that the global social casino market will decline over 5% in 2026. That said, our focus continues to be on outperforming the overall market through precise execution of our product development initiatives around player and payer retention, optimization of marketing and live ops activities to maximize payer conversion and purchasing activity, and continued maximization of the direct-to-consumer opportunity. Turning to our iGaming business, SuprNation's Q2 2026 revenue was $17 million, an increase of 10% year-over-year. Our newest iGaming casino title, Los Vegas, again contributed to the strong SuprNation result in the quarter.

During the second quarter, the SuprNation team did an excellent job in managing around the recently introduced higher U.K. gambling tax rate through a combination of product changes, marketing adjustments, and expense controls. This allowed our iGaming business to effectively mitigate much of the impact of tax increase. Our second quarter results highlight how prudent targeted investments are uncovering growth opportunities, which is enabling DoubleDown to extend our long-term record, our strong profitability, and cash flow generation. We are successfully integrating previous acquisitions while optimizing our core DoubleDown business. M&A remains a strategic priority as we continue to evaluate opportunities in online gaming and mobile entertainment that meet our criteria to enhance long-term shareholder value. Now, I turn the call over to our CFO, Joe Sigrist, to walk us through the financials before providing my closing remarks.

Joe? Thank you, IK, and good afternoon, everyone.

To review, revenues for the second quarter of 2026 were $94.3 million. This compares to total company revenues of $84.8 million in the second quarter of 2025, and $94.1 million in Q1 of 2026. Our social casino segment grew 11.5% from the second quarter of 2025 to $77.3 million, reflecting the inclusion of revenue from WHOW Games, which we acquired in July of last year. iGaming revenues grew by $1.5 million or 10% year-over-year to $17 million. Regarding our overall social casino KPIs, we previously mentioned that the metrics from WHOW Games are somewhat different from those of DoubleDown Casino. Specifically, WHOW Games experiences a higher payer conversion rate and lower average monthly revenue per payer.

With this in mind, overall social casino KPI highlights for the second quarter include the payer conversion rate, which is the percentage of players who pay within the social casino apps, increased to 9.4% in Q2 2026, compared to 7.0% in Q2 2025. The average revenue per daily active user, or ARPDAU, of $1.42, up from $1.33 in Q2 2025. An average monthly revenue per payer at $218 in Q2 2026, down from $286 in the prior year period. In the second quarter of 2026, operating expenses were $57.8 million, compared to $52.4 million in the second quarter of 2025. The increase primarily reflects the inclusion of WHOW Games expenses. Sales and marketing expenses for the second quarter of 2026 were $13.9 million, compared to $13.1 million in the second quarter of 2025, which again, did not include WHOW Games.

Conversely, sales and marketing expenses in the second quarter were down from Q1 2026, primarily due to a reduction in player acquisition spending at SuprNation in light of the revised iGaming tax rate in the U.K. Profit excluding non-controlling interests for the second quarter of 2026 increased 50% to $32.9 million, or earnings per fully diluted common share of $13.27, or $0.66 per ADS in the second quarter of 2026. Compared to profit for the interim period of $21.8 million, or earnings per fully diluted common share of $8.82 or $0.44 per ADS in Q2 2025. The increase primarily reflects higher revenue, the lower cost of revenue attributable to a higher proportion of DTC revenue, and a higher unrealized gain on foreign currency, partially offset by higher overall operating expenses, primarily due to the inclusion of WHOW Games and increased costs associated with revenue growth from SuprNation.