Greetings, everyone. I would like to thank all analysts and investors from home and abroad for attending the DoubleUGames 2025 Q3 earnings conference call. Before elaborating on today's business results, I would like to ask for your kind understanding regarding the following. The materials presented today are based on preliminary financial statements for Q3 2025 and are prepared solely for the convenience of our investors. While every effort has been made to ensure objectivity, some of the information may include forecasts, forward-looking statements, or subjective interpretations.
Please note that due to future environmental changes or different data aggregation standards, figures and interpretations presented here may not exactly match the final results. Today's earnings presentation will be led by Mr. Jae-young Choi, CFO, who will cover the Q3 highlights, and we will have the Q&A session with him. The main presentation will be delivered by Mr. Young-Joo Shin, the Head of the IR team.
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Greetings. Thank you very much for participating in our earnings call today. This is Jae-young Choi from DoubleUGames, and I will cover, through today's presentation, Q3 highlights, consolidated results, consolidated costs, and then business updates in this order. We will hold a Q&A session after the presentation. Let's begin with the highlights for Q3. It is on page three. Q3 consolidated revenue posted KRW 186.2 billion, a 20.8% growth YoY, marking the fourth consecutive quarterly growth. We have expanded our top-line growth near the highest ever KRW 188.7 billion level in Q2 of 2020, which was during the pandemic. In particular, our core business, Social Casino, driven by the Whow consolidated effect and outperformance compared to our existing DTC and DUC channels led overall growth.
I will first cover Social Casino. Quarterly revenue on the back of Whow consolidating effect and the growth of existing DTC and DUC reported KRW 161.2 billion, a QoQ 9.4% increase. In addition, for profitability, Q3 DTC revenue share was 17.6%, a YoY 9.4 percentage point increase. Whow Games' consolidated effect, the trend toward allowing third-party external payments on iOS and Android in the U.S., and web payment channels' UX/UI optimization all comprehensively contributed to this growth. I will now walk you through iGaming. SuprNation currently is generating stable revenues from three brands. New brand Los Vegas is preparing to launch in major markets, including the U.K. and Sweden. It is the first joint development title between our company and SuprNation. Reflecting our Social Casino operating experience, we designed event-type content to extend play times, and our goal is top-line growth through brand diversification.
I will lastly cover Casual Games. Paxie Games is generating revenues centering on its main title, Merge Studio, and expanded our portfolio. In Q3, Merge follow-up title, Party Project technical beta took place, and new titles, Wiggle Escape and Color Slide Jam, were consecutively released. In particular, as of November 8, Wiggle Escape ranked number five in downloads in the puzzle genre on Android in the U.S., and we confirmed its hit possibility. In the Casual Game, through IP diversification and sophisticated live operation, we plan to secure mid to long-term growth momentum. With this, I have covered the major highlights of Q3, and now we will hear about the detailed earnings results.
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Greetings. I am Young-Joo Shin, Head of the IR team. Let me now walk you through Q3 consolidated results. Q3 consolidated operating revenue posted KRW 186.2 billion, an 8.3% increase QoQ and a 20.8% increase YoY. In this quarter, all categories, Social Casino, iGaming, and Casual Games grew. I will go over the businesses one by one, starting off with Social Casino, revenue posted KRW 151.2 billion, a 9.4% QoQ and 6.2% YoY increase. iGaming revenue recorded KRW 22.5 billion, a 3.3% QoQ and 111.8% YoY increase.
Casual Game revenues posted KRW 12.4 billion, a 4.0% increase QoQ. Operating income posted KRW 59.2 billion, an 8.9% QoQ increase, and the operating margin recorded 32%. EBITDA recorded KRW 65.3 billion, an 11.5% QoQ and 4.6% YoY increase. EBITDA margin stood at 35%, recording the highest quarterly profitability since Q1 of 2024. Net income posted KRW 56.4 billion with a 30% net profit margin. The $1 FX rate in late September was KRW 1,402, which was a 3.4% increase compared to KRW 1,356 in late June. The FX valuation gains were reflected, increasing our non-operating income.
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Let me now cover our Q3 consolidated costs. Variable costs maintained the 30% range compared to our revenue. In particular, the share of platform fees on the back of expansion of our DTC revenue fell from the 30% range in the past to 23% level in Q3, improving our cost efficiency. Marketing expenses posted KRW 33.4 billion, a 4.7% increase QoQ. It was 18% compared to revenue, a 1 percentage point drop. Social Casino maintained efficiency and iGaming and Casual Game increased expanded execution within the range of secured profitability, pursuing growth investments while managing profitability. Personnel expenses posted KRW 23.5 billion, a 5.0% QoQ increase. As of end September, our consolidated headcount stood at 700 with 480 in Korea, 50 in the U.S., 80 in Malta, 50 in Germany, and 40 in Turkey. Despite the Whow consolidation effect, personnel expenses are being stably managed.
Depreciation and amortization expenses totaled KRW 6.2 billion. It includes lease-related amortization and acquisition company PPA amortization, and the increased quarter-over-quarter was due to the reflection of PPA amortization from Whow Games acquisition.
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Let me now turn to Social Casino current status. Q3 is seasonally a low season, but we were able to achieve solid results on the back of the strong momentum from DoubleU Casino and DoubleDown Casino. Revenue posted KRW 151.2 billion , a 9.4% growth QoQ, and surpassed quarterly KRW 150 billion for the first time ever. In addition, it grew 6.2% YoY, and the portfolio consolidating effect is stably being reflected on our revenue. Next is DTC. Q3 DTC revenue share was 17.6%, a 9.4 percentage point increase YoY. There were two reasons behind this. First, with the optimization on UI, UX of our web channel payment, conversion increased. Second, with the Whow consolidation effect, there was DTC friendly revenue share increase. We have a positive outlook for the future as well.
First, with the continuing trend of Google and Apple allowing external payment, there will be an expansion in channel selection. In addition, Social Casino, compared to other genres, has higher mobile web play convenience and has more advantages in the DTC conversion. We will increase our DTC share through web store funnel advancement and marketing ROI management.
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Page seven. I will now cover Social Casino growth strategy. First, we are focusing on Q4 peak season app performance. Keeping in step with seasonal events including Halloween, Thanksgiving, and Christmas, we are operating loading screens and season slot themes, and we are managing conversion rate with limited packages and limited time offers to maximize our revenues. Second is our synergy strategy with Whow Games. We will consecutively provide about 400 types of our in-house slots to Whow Games to decrease external IP dependency and to improve royalty fee efficiency. This in-house conversion model already has been proven in DoubleDown Interactive. Last is European revenue expansion channel. We are pursuing the launch of DoubleU Casino on the RTL game portal, which is the biggest in Europe, and we are applying local language and UX optimized for European users.
As soon as the results are proven, we will expand this to DoubleDown Casino to pursue channel diversification. To sum up, we will pursue a three-pronged strategy where through focused operation in the peak season, we will increase short-term performance, improve efficiency through contents and cost synergy with Whow Games, and widen our midterm foundation through European channel expansion.
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Next is page eight, iGaming. SuprNation grew 112% YoY and posted KRW 22.5 billion of revenues. Three brands all grew evenly, and we monitor the payback period of each campaign on a weekly basis and flexibly adjusted execution intensity to maintain stable marketing efficiency. Despite the seasonal downturn caused by the European summer holidays in July and August, we minimized the decline in revenue through brand portfolio diversification and channel optimization. In order for additional growth, we need brand diversification. Accordingly, we are preparing to launch our fourth brand, Los Vegas. The brand features drawer function, which displays real-time promotions during gameplay, and the network jackpot function, which pins large jackpot games at the top of the screen.
Both features are designed to expose offers tailored to each segment and to generate jackpot expectations, which will enhance player immersion and session duration while simultaneously boosting revisit rates and payment conversions. During the initial launch phase, the campaign will be focused on mostly U.K. and Sweden, and after confirming the performance results, the budget will be gradually expanded to increase the proportion of loyal customers.
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Lastly, I will cover page nine, Casual Games. Our Casual Game business centering on Paxie Games is focusing on pursuing portfolio diversification in the proven Merge-2 market and implementing a fast launch strategy through Time to Market. Q3 revenue posted KRW 12.4 billion , a 91% growth YoY. The core title Merge Studio is currently transitioning its business model from IAA, in-app advertisement, to IAP, in-app payment method, and we are strengthening our mid to long term profit base by transitioning to the same structural model as the global top-tier Merge title. Next, I will elaborate on our new lineup. Party Project, a follow-up title to Merge-2, is a casual merge game which integrates building elements and is currently in technical beta on iOS and Android.
Wiggle Escape reached U.S. Android puzzle genre top five, showing the best initial performance out of all the casual games that DoubleUGames has served so far. Color Slide Jam recorded meaningful efficiency through collaboration with DoubleUGames for development and Paxie Games for publishing, and this is making the synergy model between the two companies increasingly visible. To sum up, our strategy is to diversify our portfolio on top of proven Merge-2 center demand and to accelerate product launches to secure market timing. We will escape entry into the top ranking and the successful collaboration results with Color Slide Jam is supporting this.
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Next, we will have our 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 Dong-woo Kim from Kyobo Securities. Please go ahead with your question.
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Thank you very much for this opportunity. I have two questions. First, I see that your DTC revenues have greatly gone up. Was this a result of structural changes? If you can give more color to this, I would greatly appreciate it. I would also like to know about the Apple and Google platform company's regulatory trend. Can you tell us about how you are going to respond to these trends?
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Thank you very much for the opportunity. I would like to answer the first question about our expansion of DTC and the structural changes.
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Yes. As you mentioned, in Q3, regarding our Social Casino DTC revenue share, it recorded 17.6%. This is not something that is a one-off phenomenon, but it is derived from our structural changes. You can probably know that centering on U.S. and Europe, there have been a movement toward allowing third-party payments for global platforms, and we believe that since we have our web store optimization that can deal with this, we can have advantages.
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Regarding Whow Games, as you probably know, in Europe, compared to mobile, they have a higher share of web revenues, so that helps us increasing the DTC share of the total group. You might probably know that for Whow Games as well. Well, in Social Casino, you probably know that it is very easy to play for the web. That is why we believe that going forward with our optimization and playtime extension and customer value strengthening, we will have more advantages in this environment.
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I will answer the second question related to DTC -related global platform regulatory trends.
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You will probably know that in answering the second question, it was allowed for Apple to have the direct link to the external web store in May and in October, it was deemed so by the court for Google. It was ordered, but you probably know that the suit is ongoing.
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You also might know that in Europe, regarding Google and Apple, there is increasing pressure by the government to reduce fees and commissions because Google and Apple have their own dominant market position and to have allowance of third-party linkage.
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In the past, we had a lot of our revenues centering on the U.S. However, we are increasingly having more revenues being generated in Europe. We believe that based on these policy benefits, we have our long-term plan to increase the share of DTC to 30%.
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I will take the next question.
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The following question will be presented by So-hye Kim from Hanwha Investment & Securities. Please go ahead with your question.
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Thank you very much for the opportunity. I have two questions. The first is regarding your marketing cost execution and your M&A direction going forward. Do you have any plans to change this in the future? My second question is about what you expect through acquisition of Whow Games, and what kind of a detailed synergy do you think you can generate from this acquisition?
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Yes. Thank you for the question. I will first answer the question about marketing. Regarding our Whow Games, we have been actually concentrating on performance marketing so far. Regarding the recent increase of our marketing costs, it was mostly a growth pre-investment for new businesses in iGaming and Casual Games. However, going forward, you can see that for our efficiency, all the campaigns have a process of pre-hypothesis, execution, and post-verification. We have the detailed plans for channels and segments. Regarding payback and ROAS, we have optimization plans so that we can have the best level of marketing. In Q3, regarding what will not be paid back, and when we think the payback possibility is low, we will of course reduce our ROI. Going forward, I think that for iGaming and Casual Games, it can slightly decrease.
But if it falls within the ROI, and if we believe that it can help us, we believe that we will have some changes to marketing and have more top-line growth. Of course, profitability is very important too. We plan to increase this through DTC share increase in Social Casino. You probably know that for Social Casino, we have a very stable execution of about 8% of our revenues.
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Regarding our M&A plans going forward, I don't think there are many changes to our plans going forward. I think our M&A plans are always focused on four keywords. Firstly, with closing two M&A deals this year, we were able to have deal sourcing from diverse channels.
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The four keywords are U.S. revenue market, and second, having synergy with our existing businesses, which will include our revenues and costs. Thirdly, whether it can have market optimization, post-acquisition, and fourthly, whether it can be an asset that can help us in our consolidated operating income.
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That is why regarding Social Casino, Casual Game, and iGaming, we plan to look at all of these four important keywords and see whether it can generate synergy. We are reviewing many deals, and for next year, we do hope that we can have a meaningful deal which can uplift DUG's consolidated revenues and profits, and improve our performance compared to the previous year.
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I will take the next question.
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The following question will be presented by Donghwan Oh from Samsung Securities. Please go ahead with your question.
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Thank you very much for the opportunity. My question is also related to marketing costs. I would like to know about the detailed revenue breakdown for SuprNation and Paxie Games for Q3, as well as marketing costs, and would like to know when they can add to your operating income.
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Thank you very much for, once again, your question. For iGaming, SuprNation, I would like to start off. Our marketing is about 30%-40% compared to our revenue, and our target is to have payback within four to five months.
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We are actually stacking up our revenues, and you can see that currently it is about the early one digit operating margin as of now as of BEP level. Going forward, we plan to have about 10% of profitability for iGaming next year.
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For Paxie Games, its marketing is about 70%-80% of our revenues. It is because in the casual game genre, we normally have more IAA revenues rather than IAP. Our goal is to have about a 10% net margin.
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On a monthly basis, you can see that we have seen a 10%-20% operating income minus. However, we have had very steep growth in downloads of Wiggle Escape, having 1 million downloads in just one month. We were able to have marketing cost payback within one month as well. If we accumulate all of this, I believe that we can actually turn into black in December in Q4.
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I will take the next question.
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The following question will be presented by Ui-hoon Jeong from Eugene Investment & Securities. Please go ahead with your question.
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Thank you for the opportunity. I think you just mentioned Casual Game in your previous answer, and I would like to know about the results for Q3 and Q4, and I would also like to know about the outlook for Q4 as well as next year.
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Thank you for your question. I would like to answer my question in two parts, first for Q3 and next for next year.
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Well, actually, after closing Paxie deal in late March and after operating, we found out that the Social Casino category is very profitable, but it is a little challenging for it to grow.
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However, for Casual Games, we found that with the marketing costs, there was a low level for CPI. So we saw that the revenue conversion rate was very quick.
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We needed to take into consideration, however, the operating income. So that is why we had the ROAS and profit that we try to guard as much as possible and also have additional growth of Merge. For ROI, we also had the optimization of marketing expenses. In Casual Games, we find that having quick payback and having a diversified portfolio is important. So this IP area is quite important.
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We are living in an environment filled with YouTube Shorts and TikTok. So we see a lot of people that actually log on to games, but their playtime tends not to be very long. So we are trying to concentrate on content that make this possible. We think we saw some results through Wiggle Escape and Color Slide Jam.
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We have one more thing to add. For example, for Wiggle Escape, you might think that it is like the Snake.io. However, it has differentiating factors like, for example, having the parallel parking as a parking game. We had updates to 800 stage, but last month we had updated it to 1,600 stage. So it can be a simple game, but people tend to come in 6x - 7 x a day and continue game playing for about 4 to 5 minutes. So this actually increases retention time and play time as well, which actually led to more advertising revenues coming in. In one month, we were able to have a payback. So we were able to have a very virtual cycle.
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I would like to continue this by answering three factors that will be important for our casual strategy in Q4 and in next year as well.
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Regarding what they are, first is for our Paxie Games. For our core Merge-2, we plan to increase our market competitiveness. For Merge-2 market, we have seen growth of 50% YoY. Going forward, it is not just about simple ad revenue, but we are seeing a lot of revenues coming in from IAPs, in-app payments. We see that if it has a longer life cycle and proven IP, it is very important. We plan to utilize this as well. In the past, our games were mostly about makeovers, so having people made over into a new person. For Party Project, it incorporates a lot of the building elements, so we believe that male users will also be attracted to this game. Going forward, we are going to do our best so that we can have more IPs in this area.
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Secondly, I believe that in the U.S. casual game market, we are seeing a trend where some games can seem very simple, like alignment or finding hidden pictures. It may seem like very simple games, but we see a lot of these games being a hit for more than a year. Then, I believe that the differentiating factor would be who would be the fastest in coming up with content that can very quickly respond to the user behavior, and those that can provide differentiation in these types of content. I think it was well demonstrated with our Wiggle Escape game because in the beginning it was developed as a prototype used by one person AI, and we had seen the market response. Paxie uploaded those contents, and I believe that type of development strategy is appropriate.
It is because with this type of AI-focused one person game development, within a week you can have 100, 200 stages that are very easily developed. In this way, regarding our core group, we can see that if we have a very good depth and diversity to the game by having good design beforehand, and if we are able to gauge the market response, I believe that this will be a very positive policy going forward.
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Last but not least, we must never lose sight of profitability management. We believe in our marketing execution, we need to have investment that is not just blindly for growth. We need to actually know when we will have payback, and we need to actually know whether we can actually assess the lifetime value. We are holding marketing meetings each week. In the beginning, when we first started to work with Paxie, it took some time for us to reach a consensus. However, as time has passed, I think that we have reached a relatively good consensus so far, and I believe that at the end of the day, our principle is to make games that are profitable. That is why from next year we will drive our growth and profits together and have this category or this genre that can help us in both aspects.
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I think that concludes our Q&A session, and if you have any additional questions, please contact our IR team and we will do our best to faithfully answer those questions. Before I conclude, I want to emphasize that with this year, with Paxie and Whow , SuprNation, we have about twice of their revenues after the acquisition. Regarding Paxie and Whow Games as well, we will pursue revenue and profit growth so that regarding our Social Casino business and new businesses, we will have both cash and growth so that we will provide to be a better investment for our investors in 2026. Please keep an eye on our improvements going forward. Thank you very much.