Greetings everyone. I am Young-Joo Shin, the Head of IR Team at DoubleUGames. I would like to thank all analysts and investors from home and abroad for attending the DoubleUGames 2026 Q2 earnings conference call. This earnings presentation has been prepared for the convenience of investors based on the provisional financial statements for Q2 of 2026. Although this material has been prepared with reference to objective standards and other relevant criteria, it may contain certain statements based on estimates, forecasts, or subjective judgment. Please note that due to future changes in the business environment or differences in data aggregation standards, figures and interpretations may be derived that differ from those presented in this material. Today's earnings presentation will proceed as follows. We will first walk you through our Q2 financial results and key business overview in the order presented in the materials, followed by a Q&A session.
[Non-English content] Greetings. This is Jae-Yeong Choi from DoubleUGames. Thank you once again for taking time out of your busy schedule to be here today. Today's presentation will proceed in accordance with the order of the materials provided to you, and it will cover Q2 highlights, our consolidated performance, revenues for different businesses, consolidated COGS, social casino overview, and then casual overview. Please go to page three. [Non-English content]. Let's go to page three. I will cover Q2 highlights. The major achievements in this quarter were seven straight quarters of operating revenue growth, record high quarterly results, DTC contribution 47.5% continuing upward, and casual segment profit stabilization. 2026 Q2 consolidated operating revenue posted KRW 210.6 billion, and operating profit reported KRW 70.1 billion, making another record quarterly high following the previous quarter. Operating revenue and operating profit increased by 22.5% and 29% YoY respectively.
On a cumulative basis for the first half of the year, operating revenue amounted to KRW 415.6 billion, and EBITDA posted KRW 151.9 billion, and it grew 24.5% and 30.5% YOY respectively. Let me highlight three points in more detail. First, social casino continues to maintain its record high performance momentum. Social casino revenue reached KRW 158 billion, up 14.3% YoY. The geographically diversified portfolio across North America and Europe following the WHOW acquisition is stably performing. In addition, with DTC share of revenue reaching an all-time high, the structure supporting both revenue growth and improved profitability has become even more firmly established. Second, casual has become our second largest revenue contributor after social casino. Casual revenue reached KRW 27.1 billion, up 126.3% YoY, and for the first time this quarter surpassed revenue from iGaming. Making it the company's second largest business segment by revenue.
This represents more than a twofold increase from KRW 12 billion in the same period last year in just four quarters, and IAA share of revenue also increased to 81%. Third, we are continuing profitability improvement. The expansion of DTC and IAA or in-app ads have structurally reduced our platform fee burden, while both the absolute amount of marketing expenses and marketing expenses as a percentage of revenue have declined. With operating expense growth being kept below the pace of revenue growth, we are seeing a continuation of economy of scale effects in which top line growth is continuing to translate into stronger profit growth. That concludes the key highlights for Q2, and let me now walk you through our financial results in greater detail.
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Let's go to page four. Consolidated results for Q2. First, I will cover operating revenue. Q2 consolidated operating revenue posted KRW 210.6 billion, up 2.8% QoQ and 22.5% YoY, and this marked our seventh consecutive quarter of growth and another record high in quarterly revenue. This was a result driven by accelerating growth in the casual business on top of the stable revenue base provided by social casino. Next, on profitability. Q2 operating profit posted KRW 70.1 billion, a 29% increase YoY, marking another record high operating profit. Operating margin is maintaining the 33% range. This was a result of continued platform and marketing expense efficiency.
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Let me now go to page five. I will cover the operating revenue trends by business segment. All three business segments posted both QoQ and YoY growth in this quarter. Social casino revenue posted KRW 158 billion, up 1.9% QoQ and 14.3% YoY. Stable operations centered on North America and Europe continued to support the business, lifting its revenue base to a higher level. iGaming revenue posted KRW 25.5 billion, a 1.5% QoQ and 17.3% YoY increase. SuprNation continues to operate its four multi-brand portfolio safely. Casual revenue posted KRW 27.1 billion, up 9.4% QoQ and 126.3% YoY, marking the growth of five consecutive quarters after acquisition. It recorded the highest growth rate among the three business segments. For the first time this quarter, it surpassed iGaming revenue to become the company's second largest business segment after social casino.
As a result, Q2 revenue contribution was 75% social casino, 13% casual, and 12% iGaming respectively, while the combined contribution from casual and iGaming expanded to 25%. With growth in these two businesses complementing the stable revenue base of social casino, we are establishing a more balanced portfolio with reduced reliance on any single business segment.
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Let's go to page six, Q2 consolidated operating expenses. Q2 operating expenses posted KRW 140.6 billion, a 3% QoQ and 19.5% YoY increase. Given that revenue increased by 22.5% over the same period, expense growth remained below revenue growth, demonstrating operating leverage. First on variable costs. Variable costs or expenses recorded KRW 55.5 billion, representing 26% of revenue, an improvement of 4% from 30% in the same period last year. Of this, platform fees came in at KRW 34.8 billion, down 4.7% QoQ and 15.2% YoY, with platform fees as a share of revenue declining to 16.5%. Considering that platform fees accounted for about 24% of revenue in the same period last year, we could confirm that according to DTC and IAA revenue expansion, platform fee burden is being structurally being reduced. Next, on fixed costs.
Fixed costs came in at KRW 85.1 billion, increasing by only 0.4% QoQ, and that accounted for 40% of revenue. Of this, marketing expenses amounted to KRW 45.3 billion, down 4% QoQ, while as a percentage of revenue declined by 2 percentage points from the previous quarter to 21%. We believe the fact that both the absolute amount of marketing spend and its share of revenue declining despite increased UA investment in the casual segment and continued revenue growth, is an indicator that our more sophisticated data driven approach to UA spending is leading to tangible efficiency gains. Labor expenses recorded KRW 23.4 billion, down 3.3% QoQ and is being managed stably. Other operating expenses amounted to KRW 9.7 billion, while depreciation and amortization expenses were KRW 6.8 billion, both similar to the previous quarter.
Depreciation and amortization are non-cash expenses and include depreciation of lease and right-of-use assets, as well as PPA amortization related to acquired companies.
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Let's go to page seven, Social Casino Overview. Q2 social casino revenue posted KRW 158 billion and supported by stable operations across North America and Europe, the business maintained revenue at the KRW 150 billion level and continued its record performance trajectory. Marketing expenses are also being efficiently managed at around 11% of revenue. In particular, synergies following the acquisition of WHOW Games are now being more tangible. As the user base previously concentrated in North America has expanded into Europe, our exposure has become more diversified across geographies, currencies, and user profiles. At the same time, the two companies are sharing their live operations know-how, leading to improved operating efficiency across individual games. The most notable achievement this quarter was the increase in the share of DTC revenue. In Q2, social casino DTC revenue share accounted for 47.5%, up 8.8% QoQ and 34.7% YoY, reaching an all-time high.
This represents an approximately 3.7 fold increase from 12.8% in the same period last year and already exceeds around 30% level seen among leading global top social casino companies. The expansion of DTC is not simply the result of adding another payment option. Rather, it is driven by a sophisticated data-driven conversion strategy tailored to individual user segments. We segment users based on factors such as payment frequency, spending level, retention period, and churn risk, and apply differentiated conversion offers and promotions to each segment. As we accumulate more data on conversion and retention rates by user segment, our targeting becomes increasingly precise, and this in turn drives higher conversion rates and a greater revenue contribution, creating a virtuous cycle. In addition, once users adopt the DTC payment method, they tend to continue using it, demonstrating the characteristic that the share we have already secured tends to stably accumulate.
Given the structure, we believe there remains significant room for further expansion in the share of DTC.
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Let's go to page eight, and I will touch upon Casual overview. Q2 Casual revenue posted KRW 27.1 billion, slightly surpassing iGaming KRW 25.5 billion of revenue, making Casual our second largest business segment by revenue after Social Casino. New games developed through AI Lab accounted for 81% of segment revenue, up one notch from 70% in the previous quarter, and has now established itself as the key growth driver for the Casual segment. The user base also continues to expand at a solid pace. Casual Games segment cumulative downloads surpassed 60 million as of the end of the first half and reached 61.49 million as of the end of July. This represents an increase of approximately 21.5% in just seven months, from 50.6 million in January this year. The genre mix of the portfolio continues to broaden. We are continuing diverse Casual game genre expansion including Merge, Puzzle, and Sort.
The key value of this multi-genre strategy lies not simply in expanding our lineup, but in the data accumulated throughout the process. We collect standardized performance metrics across genres, countries, and individual creatives, including cost per install, early stage retention, revenue per user, and investment payback periods. This data is then utilized in two key ways. First, it enables us to assess the potential success of new titles at an early stage. As we accumulate data on the relationship between early performance indicators and the eventual outcomes of previously launched titles, we are increasingly able to predict a game's likelihood of success based on metrics observed shortly after the launch. Second, the data supports our UA investment decisions. New titles initially go through small-scale test marketing, and then we scale up UA investment only for titles that exceed predetermined performance thresholds.
While investments in titles that fall short are discontinued at an early stage. As the number of launches increases and our genre coverage broadens, the accuracy of the screening model continues to improve. In addition, our AI-driven development framework enables us to launch and test a greater number of titles, further accelerating the learning cycle of the model. The effectiveness of this model is also reflected in the cost structure I discussed earlier. Despite declines in both the absolute amount of marketing expenses and marketing expenses as a share of revenue, casual segment revenue grew 9.4% QoQ, indicating an improvement in the return efficiency of our investment. We believe the casual segment in Q2 has now entered a phase of stable profit contribution.
Following the initial investment phase in the first half of 2025, the AI Lab will scale up in Q4 and the achievement of profitability in Q1 of 2026. This concludes our presentation of our company's second quarter 2026 results through page 8. We will now move on to a Q&A session.
[Non-English content] Now Q&A session will begin. Please press star one, that is star and one, if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and two on your phone. [Non-English content] The first question will be provided by Dong kyun Kim from Kiwoom Securities. Please go ahead with your question.
Thank you for the opportunity. I see that following Q1, you also saw growth in your revenue for Q2 as well. I am curious about your prospects for the second half of this year for casual iGaming. Do you think there will also be quarterly growth? Thank you very much. Thank you very much for your question. To answer your question, I believe that, to put it simply, I think we are expecting great things from casual games more for the second half of this year. I believe that we are going to look for more stabilization for our social casino and iGaming for the second half of this year.
For our social casino, we are going to see the high season that is coming with Halloween, Thanksgiving, Christmas, and we are going to see the high season, and we are going to expect, I think, more stable revenues from DoubleDown Casino, DoubleU Casino, Jackpot Ya, WHOW Games, and Jackpot.de as well. We are also going to see, like we have seen in the first half for iGaming, the four in the portfolio that is going to be stabilized as well. We are going to also see the long success of Merge and Wiggle Escape that is going to continue as well. In the U.S., we are seeing great results with Knock Fever as well. We are expecting additional profitability for this sector as well. We will take the next question.
[Non-English content] The following question will be presented by Dong-hwan Oh from Samsung Securities. Please go ahead with your question.
[Non-English content] Paxie Games [Non-English content] Paxie Games [Non-English content]
Thank you for the opportunity. I would like to have some updates on Paxie Games. I think that with a $1 of FX rate that has actually changed of looking at the average balance for the value, I think there was about a 3% change. I believe that looking at the Paxie Games fact sheet on a QoQ basis, I think there was a 9% increase for revenues. I think there was another effect that actually came into being. Can you tell us about any reason why we had seen that discrepancy in their fact sheet?
[Non-English content] Paxie Games [Non-English content] cannon shooter [Non-English content]
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Yes, thank you for your question. Let me first answer your question about Paxie Games development overview. It is true that based on its existing know-how for Merge, we are seeing additional games that are being launched. We are of course going to see more market share in the Merge, and we are going to also concentrate our efforts on increasing market share for that genre as well. However, apart from a specific genre like Merge, we are focusing on seeing what is rising in the market, trying to discover it early on to develop the game as quickly as possible and to test it. Knock Fever was a game that I mentioned previously, and it is similar a little bit to Angry Birds because it is a cannon shooter game. From last month, we are seeing more and more downloads and the ranking going up.
Likewise, we are trying to catch what is rising in the market. When the CPI is low, we are trying to have more marketing done and have advertisement costs that are recovered at this stage. We are also going to focus on Merge, but also we are going to see what is actually buzzing in the market, like in the Puzzle. We are seeing it very frequently on a monthly basis, even on a two-week basis, so that we are going to see what will actually be successful in the long run.
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It is true that as you had mentioned, with the USD and seeing the appreciation, depreciation changes with the FX fluctuations, we had seen about a 3% benefit from the KRW effect. For Paxie Games, it seems that just not even looking at compared to the social game, we are seeing more revenues in non-U.S. areas as well. We have seen more benefits because we are seeing the continuation of the weakening of the KRW for Q2.
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We will take the next question.
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The following question will be presented by Jin-woo Kim from CGSI. Please go ahead with your question.
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[Non-English content] DoubleDown [Non-English content]
Thank you for the opportunity. I have three questions. First, I think for the quarterly consolidated marketing expenses, it has gone down on the whole, but I think individually for the marketing expenses it has gone up. I think for casual, there has been a steep impact. Can you tell us about the subsidiaries margins for casual and what can we expect from this genre going forward? Second related question is that because the individual marketing, I think expenses have gone up, can you tell us about any changes to your company's settlement amount, the business traffic, the different indicators updates for the second half of this year? Can you give us some more information? Third question is about the acquisition of remaining shares of DoubleDown. Can you tell us about any updates that have been made so far for this deal?
Can you tell us about what will be the shareholder return policy you believe after the deal is completed? Thank you.
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Thank you for your questions. Yes, it is true that on an individual level for DoubleU Casino, we have seen a slight increase in marketing expenses for Q2. It is because during the past four quarters, we have seen more focus on retargeting rather than on new marketing for this game. We believe that if we have these marketing costs that are a little bit higher than our revenues, then we are going to have a positive effect for our second half. That is why we made that investment beforehand. In the second half, we also believe that we are going to gain more experience and know-how from WHOW Games and from our know-how as well. So we are going to see more optimization and we are going to have a good portion of DTC, like in DoubleDown Casino, and we are going to invest more in content.
That is why going forward, we are going to have better results and that is why we have made the investment into a little bit of more marketing for DoubleU Casino. We are going to expect it to translate to growth in our revenue.
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I would also like to answer your second question, and I would like to give you some more color about our casual game OP margin. For Q2, for PACI and Casual, it has been about 10% operating profit margin or operating margin. We believe that with more long-term game stabilized operations, our target is going to be about 10%-15%.
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Thank you very much for the third question as well. It is about the DoubleDown Interactive delisting that you asked about. In the U.S. market for the delisting currently, what is going on is there is an external valuation organization that is currently seeing the fair value of DoubleDown Interactive. We also see the DoubleDown Interactive special committee, which is an independent committee made of outside directors that have actually asked the external organization to engage in the valuation of the company. Currently that is ongoing, and after we see the fair value result that is assessed, we are going to have a process in which our company and DoubleDown Interactive will have a consultation about what will be the best way going forward.
After Q3, our goal is to have a new filing at SEC so that we are going to have a goal to have the DoubleDown Interactive take private after this period of time. After that happens, we believe that regarding our shareholder return policy, it is going to be a bit different from now. We will communicate more with the market about what our thoughts are after the process for DoubleDown Interactive taking private is completed.
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We will take the next question.
[Non-English content] The following question will be presented by Hye-young Kim from Daol Investment & Securities. Please go ahead with your question.
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Thank you very much for the opportunity. We see that your social casino DTC percentage that you have actually made early this year of 40% has been surpassed earlier than you had mentioned. Can you tell us about the major background behind this fast growth? Do you think that this can grow even more? What are your plans to actually manage this going forward?
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Thank you for your question. It is true that we have achieved earlier than schedule our DTC share of 40%. I believe the reason we had that early success was because we had thinly sliced our settlement user segments into 10, even 15 different levels. We have been offering different optimized offers to them according to the different characteristics of the target. We have been accumulating data, we have been working hard to see which offers would work the best for different segments of users. We believe that is the reason why we had the fast success from 26.6% in Q4 to 47.5%, a very fast paced growth. Our goal this year is to have a mid 50% level by the end of this year.
Because these settlement or buying patterns, well, they are not quickly changing, we are going to see the different data that is aggregated, we are going to have better results with this going forward.
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Once again, thank you very much for taking part in our Q2 earnings conference call. Please feel free to contact our IR team if you have any additional questions or even comments. With this, we will conclude our 2026 Q2 earnings presentation. Thank you for your participation.