Good morning and good evening. Thank you all for joining the conference call for the DoubleU Games earnings results. This conference will start with a presentation followed by a Q&A session. If you have a question, please press star and one on your phone during the Q&A. Now we will begin the presentation on DoubleU Games' first quarter of fiscal year 2026 earnings results.
Greetings, everyone. I would like to thank all analysts and investors from home and abroad for attending the DoubleU Games 2026 Q1 earnings conference call. This earnings presentation has been prepared for the convenience of investors based on provisional financial statements for Q1 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 assessments. Please note that due to future changes in the business environment or differences in data aggregation standards, figures and interpretations may be provided that differ from those presented in this material. Today's earnings presentation will be led by Mr. Jaeyoung Choi, CFO, who will cover our Q1 highlights and then the Q&A session, while the main presentation will be delivered by Mr. Youngju Shin, the Head of the IR Team.
Greetings. I am Jaeyoung Choi from DoubleU Games.
Today's presentation will cover Q1 highlights, Q1 performance, revenue for different businesses, consolidated costs, social casino status, and then casual iGaming updates. After the presentation, we will hold a Q&A session. Let me begin with the highlights for Q1 2026. 2026 Q1 marked the first time in our company's history that quarterly revenue exceeded KRW 200 billion. KRW 205 billion of consolidated revenue, KRW 75.1 billion of EBITDA, and KRW 68.5 billion of operating profit all reached record high quarterly levels. There are two key factors behind our record high revenue and operating profit this quarter. First is the qualitative transformation of our revenue structure through increased share of DTC. The share of social casino DTC revenue expanded to 38.7%, increasing by approximately 4x over the past year, with the adoption of in-app alternative payment serving as the key driver.
Platform fees were structurally reduced and the variable cost ratio improved by 6 percentage points from 31% in the same period last year to 25%. We believe that a highly profitable structure has now taken hold where margins expand in tandem with revenue growth. Second is that all business segments achieve profitability. With our core business social casino continually generating a stable cash flow, casual and iGaming show revenue growth and they all turned profitable at the operating profit level this quarter. As a result, we have completed a structure in which all three of our business segments independently contribute to profitability. As a result, we believe that now we have established a portfolio where there is a balance between the stability of social casino, growth of casual, and market expansion of iGaming.
In addition, on April 28th, we submitted a non-binding offer for DoubleDown Interactive or DDI, thereby initiating the process to resolve the issue of duplicate listings. Our objective is to simplify the group's governance structure and enhance the efficiency of capital allocation and we will provide transparent updates on the progress through public disclosures. This concludes the key highlights for Q1, and now we will share a more detailed presentation of our financial results.
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Greetings. I am Youngju Shin, Head of the IR Team. Let me now walk you through Q1 consolidated results. First, our consolidated operating revenue for Q1 reached KRW 205 billion, marking the highest quarterly revenue in our history. This represents an increase of 2.6% QoQ and 26.6% YoY growth respectively. On the stable revenue base of our social casino, growth was driven by casual and iGaming, while the revenue contribution from casual and iGaming expanded to 24.3%. Second, in terms of profitability, EBITDA reached KRW 75.1 billion, also a record high on a quarterly basis. While the EBITDA margin posted 36.6%, a 1.3 percentage point QoQ increase. The key drivers of margin improvement were the enhanced variable cost structure resulting from the increased contribution of DTC, as well as the turnaround of casual and iGaming to profitability.
Operating profit posted KRW 68.5 billion, a 7.1% QoQ and 25.1% growth YoY respectively, reaching a quarterly record high. Operating profit margin reported approximately 33.4% and net profit posted KRW 73.5 billion with a net profit margin of 35.9% and it exceeded operating profit, reflecting foreign currency translation gains resulting from the rise in the $1 exchange rate.
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Next, let me walk you through our revenue trends by business segment. Social casino revenue posted KRW 155.1 billion, a 1.4% drop QoQ, but increased 8.6% YoY, maintaining a stable basis of mid KRW 150 billion level. We believe that the acquisition effect from WHOW Games is steadily being reflected in this portfolio. iGaming revenue posted KRW 25.2 billion, a 8.1% QoQ and 31.1% YoY increase respectively. SuprNation successfully established their fourth brand, Los Vegas, and the multi-brand strategy is translating into revenue growth. Casual game revenue posted KRW 24.7 billion, a 28.8% increase QoQ, recording the highest growth trend. A major key success factor was our expansion from the existing merge genre focused portfolio into a broader range of casual genres, including puzzles by utilizing AI Lab. With the revenue contribution from AI-based games expanding to 70%, AI Lab game development capabilities are being validated through financial performance.
As of Q1, the revenue contribution from casual and iGaming increased to 24.3%, and we believe that a revenue structure has now been established in which the stability of social casino is complemented by growth from the two business divisions.
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Next, let me cover consolidated expenses for Q1. The most noteworthy aspect of the cost structure of this quarter is the structural improvement in variable costs. Variable costs amounted to KRW 51.8 billion, a 5.4% drop QoQ, and the ratio to revenue improved by 6 percentage points to 25%, compared with 31% in the same period last year. Platform fees were KRW 36.5 billion, decreasing 11.0% QoQ and 10.8% YoY respectively. This reflects a structural easing of the platform fee burden, driven by the increased revenue contribution from DTC and IAA. Marketing expenses were KRW 46.2 billion, a 3.3% increase QoQ, and it accounted for 23% of revenue, and we are managing profitability while continuing growth investments in the casual segment.
The structure in which investment costs are rapidly recovered is now being validated in our results, as demonstrated by the fact that Wiggle Escape, which we made concentrated investments in Q4, reached cumulative BEP this quarter and turned profitable, and labor costs amounted to KRW 24.1 billion, a 14.8% increase QoQ and 2% increase YoY. This was attributable to the reduction effect from a one-off valuation of share-based compensation expenses in Q4, and is similar to the same period last year. As of the end of Q1, the consolidated headcount stood at approximately 685. Depreciation and amortization expenses of tangible and intangible assets were KRW 6.6 billion, remaining at a similar level to the previous quarter. This is a non-cash expense that includes depreciation of leased assets and PPA amortization related to acquired companies.
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Next, I will walk you through our status of Social Casino. In Q1, Social Casino revenue posted KRW 155.1 billion, declining slightly QoQ but growing 8.6% YoY, confirming its stabilization at the KRW 150 billion level. The effect of the acquisition of WHOW Games is being steadily reflected, while the marketing expense ratio also remains efficiently managed at 11.1%. The most notable achievement this quarter was the sharp increase in the revenue contribution from DTC. Q1 Social Casino DTC revenue ratio posted 38.7%, a 12.1 percentage point QoQ and 28.3% increase YoY. This is approximately a fourfold increase in just one year and shows that there was rapid acceleration of profit structure improvement. The main background of DTC ratio expansion is the adoption of in-app alternative payment.
Starting in January this year, we began applying third-party in-app payment options on Google and Apple platforms. Once users select a payment method, it is automatically applied going forward, resulting in a very high retention rate after the conversion. Considering that the share of DTC among leading global social casino companies is around 40%, we believe that we have also entered a similar range with ample room for further expansion. I will now update you on Casual and iGaming. First, let me discuss the Casual segment. Casual revenue centered on Paxie Games posted KRW 24.7 billion, increasing by 28.8% QoQ, and is continuing its high growth trajectory. The revenue contribution from AI-based games expanded to 70%, confirming that AI games have become fully established as the core revenue driver of the Casual segment.
What is particularly notable is that through AI Lab, we successfully expanded from our previous focus on the existing merge genre into a wide range of casual puzzle genres. By establishing an AI-based development framework, we have secured a structure that enables the development of multiple titles, achieving both genre diversification and faster launch execution. Marketing investments made in the games launched in Q4 of 2025 were recovered through the revenue this quarter, leading to profit generation and confirming our structure in which investment to recovery cycle is operating very quickly. The Casual segment went through its initial investment phase in the first half of 2025, followed by an AI-based scale-up in Q4 of 2025. In Q1 of 2026, it even achieved a turnaround to profitability, demonstrating that we have executed our planned growth roadmap without any disruption. Next is iGaming.
SuprNation recorded revenue of KRW 25.2 billion, up 8.1% QoQ. As our fourth brand, Los Vegas, has been successfully established, the revenue contribution from our multi-brand strategy is expanding. In addition, economies of scale from operating four brands enabled the segment to turn around and be profitable this quarter. With both business divisions achieving a turnaround to profitability, we have secured not only growth potential, but also profitability. Last but not least, I will cover our Casual games. As of the end of April 2026, Paxie Games' Casual game portfolio secured more than 55 game lineup with cumulative downloads reaching 57.1 million. It represents an increase of 35% in approximately seven months compared to October 2025, indicating continued solid growth. In terms of major titles by downloads, Merge Studio recorded the highest number of downloads at 38.7 million.
Notably, downloads are evenly distributed across various genres, including merge and puzzle games, helping reduce dependence on any single title while building a more stable portfolio structure. Meanwhile, the new games currently being developed by AI Lab are being designed to reflect the latest market trends and user preferences. In addition, through an AI -based development process, we are improving development timelines and cost efficiency while establishing a structure that enables rapid market validation.
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That is our covering of our financial results for Q1. Now I would like to invite you to a Q&A session.
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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.
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The first question will be provided by So-Hye Kim from Hanwha Investment & Securities. Please go ahead with your question.
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Thank you very much for this opportunity. I have actually one question related to the steep increase and growth of your casual games. Can you give us some color on the direction for casual games going forward and also your AI strategy?
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Yes. Thank you very much for your question. I would like to cover what we have been doing so far. After we acquired Paxie Games in April of 2025 last year, it is true that casual games has been working as our main driver and has been actually working to increase our top line. We are seeing AI development, which is actually giving birth to multi titles. We are seeing a very fast validation as well. We are able to have selective investment and recovery. So there is a very positive cycle as well. For our casual games as well, as I have mentioned of KRW 24.7 billion, which was a QoQ of 28.8% increase. In Merge, we are seeing many titles. We are seeing Arrow, and we are also seeing Tap Shift and Wiggle Escape as well as other Glow Tales.
We are seeing an expansion into puzzle games as well. Even within the genre, we are seeing different types such as Sort and Arrow that are increasing as well. We are putting more focus on these type of puzzle games because I think that things have changed. In the past, we had the users that actually played one game for 30 minutes or for a longer period of time and had very high loyalty to a single title. However, it seems that we are seeing more users who are now used to more Shorts or TikTok. Although they tend to play the game for a shorter amount of time, what is becoming more important is their frequency into playing games for different cycles.
This has become a very important factor, and we are utilizing AI in a very important way. In the past, we had to have more than 10 people that were invested into making a game. We had the producers, the designers, and QA staff. We had more than 10 people who needed to communicate well to make the game. However, now we have these producers who know A to Z and who can actually quickly test to see what will be catching on in the market and what will not. That is why we had more than 40 titles by Paxie Games 2026 and DoubleU Games, more, 10 or so. We are seeing more synergy between Paxie Games through this AI as well.
Also, we are seeing a very fast increase in the revenue from casual games as well, and we are now being able to recover a lot of the investment and it is leading to our profits as well. With our AI Lab, we are seeing a very fast launching expansion monetization. All of this is leading to more of our revenues and our profits.
Okay.
The following question will be presented by Joon-Hyuk Lee from Hana Securities. Please go ahead with your question.
Yes. Thank you for the opportunity. I have two questions. First, I would like to know what is the background behind casual and iGaming all becoming profitable. Do you think this will be sustainable in the next quarter as well? My second is with the DDI going private with the cash, what do you have planned going forward with it when it becomes different from the current structure?
Yes, thank you for your questions. Let me answer the first question and then quickly answer the second one. The reason why casual and iGaming all turned profitable this quarter is because of the following. As you probably know, in both casual and iGaming, economy of scale is very important to secure a margin. So for both of them, we had about KRW 25 billion that was actually generated this quarter, and this led to operating profit as well.
We believe that this will also be possible for Q2 of 2026 as well. So our goal is to actually, of course, maintain, improve and also to make both of these predictable going forward .
Let me answer the second question as well. Regarding the taking private of DDI, I think we just started our first step and there need to be different processes that need to be undertaken. For example, there needs to be reviews, negotiations, review by the U.S. SEC. All of this needs to be completed for us to have the taking private or the delisting. So, we will need to actually go through those processes going forward. Regarding the cash that is actually held by DoubleU Games and DDI, it is about KRW 900 billion in total and about KRW 600 billion is with the U.S. So with the taking private of DDI, we believe that we can resolve the dual listing issue and also utilize the cash in DDI U.S. for different purposes.
They can be used for M&A purposes to grow, and also we believe flexibly utilized to give more back to our shareholders in terms of shareholder return. However, this all has the assumption that the DDI taking private will be completed. So we will need to keep an eye on what is ongoing, and we will of course make sure to let the market know upon the completion of this so that we can give you our plans going forward at that juncture as well. We will take the next question.
The following question will be presented by Eui- Hoon Jung from Eugene Investment & Securities. Please go ahead with your question.
Thank you very much for the opportunity. I have a question about your DTC because it seems that it really went up this quarter. Does your company have a particular strategy that made this possible? Can you give us your target DTC if you do have a goal going forward?
Let me answer the first part of your question. Regarding our DTC, well, I think this is what the company basically thinks. First, we are seeing more flexibility in the U.S. market that is actually allowing this type of in-app alternative payment. We are actually in line with this atmosphere. Secondly, we are doing a lot to optimize because with the VIP users and to have more clear-cut focus on different players, especially VIP users, so they can gain more trust in DTC.
We are doing our best to optimize UI and UX so that they can absolutely feel that it is an entrusted method. We believe that through this, we will be able to have more DTC conversion and maintenance. I think that regarding our target DTC going forward, let's look at our current status. For DoubleDown Casino, it is already surpassing 40%. For WHOW, we started off with the rest, so it is about 50%, but for DUC it is about 25%. It seems that compared to others, DUC is a little bit behind. We are currently utilizing the different DTC know how that we have gained in DDC and WHOW so that it can be implemented for DUC as well. Our short -term goal is to have about a 10% increase in this number for that as well.
We believe if we see more IAP revenue going up for casual as well, we believe that we are going to have more opportunities to have increase in DTC in that area as well. We will take the next question.
The following question will be presented by Hye young Kim from DAOL Investment & Securities . Please go ahead with your question.
Thank you very much for the opportunity. My first question is about your record high revenues for Q1. Can you give us what was your growth driver behind that? Secondly, can you also give us a take, more color on what were the changes in your cost structure as well?
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Let me answer the first question. Regarding our highest ever record top line for this quarter. When we look at that, it seems that for social games, we have been maintaining about KRW 150 billion -KRW 155 billion or so. But with the acquisition of WHOW, we were able to add to the top line as well. Casual games also worked as a great driver as well, because in 2025 Q2, it was about KRW 12 billion. But in this quarter, we had more than double of that increase to KRW 24.7 billion. In casual games, now we have a structure in which we can have recovery in just two to three months. We believe that continuously we will have opportunities to grow our top line.
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Yes. Let me answer your question regarding the different costs. I think that we can actually divide the different costs into variable costs and fixed costs. For variable costs for DTC, you can see that we are seeing more of the casual and we are seeing more the revenues in -app advertisements or IAP, as well as the in-app payments that we have mentioned. Compared to revenues, we have seen a 6% improvement from 31% to 25%. For fixed costs, well, it's a quite simple fixed cost structure that we have. I think we can look at both marketing and labor costs. For marketing for social casino, although there has been long term loyalty, well, after the investment, it took more time for us to have recovery. Compared to casual games, it had a longer time period.
But I think that with more of the casual games going forward, it can be reflected in our revenues. Even sometimes in the same quarter or in the first part of next quarter. This refers, of course, marketing. If we do not see the ROI in a certain area, then we will not make further investments. We are paying very much attention to conversion and seeing its relationship to revenues as well. This can add to this as well. Regarding our headcount and our labor costs for Q1 on a consolidated basis for this quarter is about 670 - 680.
We are seeing AI tools such as Claude that are adding not only to the productivity of our work, but also are playing a big role even working as we can actually consider them as sometimes our work colleagues, and we are seeing more of their roles like AI agents that are going up. We believe that actually this can be improved and this can play a bigger role going forward.
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It seems that we have no further questions in the queue, and I believe that we can conclude our earnings conference call on this note. Once again, thank you for your attention despite your very busy schedule.