DoubleDown (DDI) Q3 2026 Earnings Call Transcript

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DATE

Wed, Nov. 11, 2026

CALL PARTICIPANTS

• Chief Executive Officer - In Keuk Kim
• Chief Financial Officer - Joe Sigrist

TAKEAWAYS

• Revenue -- $94.3 million, representing a 1.6% decrease year over year as gains in iGaming were offset by social casino market contraction.
• Adjusted EBITDA -- $40.2 million, an increase of 7.2% year over year driven by the successful shift toward direct-to-consumer revenue channels.
• Social Casino Revenue -- $76.8 million, a 3.5% decline year over year reflecting broader maturation and decline in the global social casino segment.
• iGaming Revenue -- $17.4 million, representing 7.4% growth year over year primarily driven by the performance of the Los Vegas brand.
• Direct-to-Consumer Revenue -- 58% of total social casino revenue, rising from 21% in the prior year period due to messaging and promotion initiatives within the flagship DoubleDown Casino application.
• Payer Conversion Rate -- 9.5%, increasing from 7.8% in the third quarter of 2025 following the inclusion of WHOW Games metrics.
• ARPDAU -- $1.44, up from $1.39 in the third quarter of 2025, indicating higher monetization levels per daily active user.
• Average Monthly Revenue Per Payer -- $216, a decrease from $272 in the prior year period due to the integration of the WHOW Games portfolio which typically features lower average spend per payer.
• Operating Expenses -- $56.8 million, a decrease from $60.9 million in the third quarter of 2025.
• Sales and Marketing Expenses -- $15.1 million, decreasing from $15.7 million year over year but increasing $1.2 million from the second quarter of 2026.
• Net Profit -- $18.4 million, representing a 43.9% year-over-year decrease primarily due to unrealized and realized foreign currency losses on U.S. dollar-denominated assets.
• Earnings Per ADS -- $0.37, compared to $0.66 in the third quarter of 2025.
• Operating Profit -- $37.5 million, an increase from $35.0 million year over year due to lower costs of revenue associated with direct-to-consumer platforms.
• Adjusted EBITDA Margin -- 42.7%, rising from 39.1% in the prior year period.
• Net Cash Flow from Operations -- $23.6 million, a decrease from $33.4 million year over year reflecting higher income taxes paid during the quarter.
• Nine-month Operating Cash Flow -- $94.7 million, comparing favorably to the $94.1 million generated during the same period in 2025.
• Cash and Investments -- $582.1 million, including cash, cash equivalents, and short-term investments as of Sept. 30, 2026.
• Net Cash Position -- $545.3 million, after accounting for $36.8 million in borrowings from the controlling shareholder.
• Tender Offer Price -- $16.25 per ADS, established in a cash offer by DoubleU Games Co., Limited to acquire all outstanding ADSs not already held by the parent company.

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RISKS

• Kim stated, "industry analysts at Eilers & Krejcik recently forecast that the global social casino market will decline almost 7% in 2026," citing the ongoing maturation of the segment as a challenge.
• Sigrist warned that "we have fewer players today than we've had in the past," requiring the company to focus on maximizing monetization and retention for its remaining user base.
• Kim noted the company remains "mindful of the evolving regulatory and tax landscape in the U.K.," which includes managing the impact of higher gambling tax rates through expense controls and marketing adjustments.

SUMMARY

DoubleDown Interactive Co., Ltd. (NASDAQ:DDI) reported third quarter results alongside the announcement of a tender offer from its controlling shareholder, DoubleU Games Co., Limited, at $16.25 per ADS. Management reported that the company achieved a record 58% of social casino revenue from its direct-to-consumer channel, which supported a 7.2% increase in adjusted EBITDA despite a slight decline in top-line revenue. The company stated that it successfully mitigated headwinds in the U.K. iGaming market through brand diversification and expense management while maintaining a strong net cash position of $545.3 million. Management indicated that it is prioritizing the optimization of its social casino portfolio through artificial intelligence and product enhancements to counter a projected market-wide contraction in the social casino industry.

• The company's board of directors unanimously recommended that shareholders accept the tender offer from DoubleU Games Co., Limited following the recommendation of a special committee.
• CEO Kim stated, "At DDI, our AI strategy centers on driving measurable capital and operating efficiencies across three core pillars," which include content velocity, player monetization, and targeting precision.
• Management noted that direct-to-consumer revenue grew from less than 5% of social casino revenue in early 2024 to 58% in the third quarter of 2026.
• The iGaming segment benefited from the success of the Los Vegas brand, which management noted blends traditional casino elements with a modern user experience.
• The company is developing a new mobile lobby designed to provide a simplified player journey and integrate slot content with meta features more effectively.
• Management intends to launch fifth and sixth iGaming brands to further diversify revenue streams and mitigate regulatory risks in existing markets.

INDUSTRY GLOSSARY

• ADS: American Depositary Share, a U.S. dollar-denominated equity share of a foreign-based company available for purchase on an American stock exchange.
• ARPDAU: Average Revenue Per Daily Active User, a metric used to measure how much revenue a game generates from an active user on a daily basis.
• DTC: Direct-to-Consumer, a distribution model where a company sells products directly to customers, bypassing third-party platforms to improve margins.
• iGaming: Online gaming or betting where individuals wager money on the outcome of games or events.
• Meta Content: Strategic or social gameplay layers that exist alongside the core game mechanics, designed to increase player engagement and retention.
• ROAS: Return on Ad Spend, a marketing metric that measures the amount of revenue a company earns for every dollar spent on advertising.
• UA Margins: User Acquisition margins, representing the profitability of investments made to attract new players to a gaming platform.

Full Conference Call Transcript

Operator: Good afternoon, and welcome to DoubleDown Interactive's Earnings Conference Call for the third quarter ended September 30, 2026. My name is Victor, and I'll be your operator this afternoon. Prior to this call, DoubleDown issued its financial results for the third quarter of 2026 in a press release, a copy of which is available in the Investor Relations section of the company's website at www.doubledowninteractive.com. You can find the link to the Investor Relations section at the top of the homepage. Joining us on today's call are DoubleDown's CEO, Mr. In Keuk Kim; and its CFO, Mr. Joe Sigrist. Following their remarks, we will open up the call for questions.

Before we begin, Joe Jaffoni, the company's Investor Relations adviser, will make a brief introductory statement. Mr. Jaffoni?

Joseph Jaffoni: Thank you, Victor, and good afternoon, everyone. 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, and we hereby claim the protection of the safe harbor provision 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 the words such as may, might, will, expect, assume, believe, intend, estimate, continue, should, anticipate or other similar terms.

Forward-looking statements include, and are not limited to, those regarding the company's future plans, merger 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, including risks related to the nonbinding proposal from our controlling shareholder described below. Therefore, you should exercise caution in interpreting and relying upon 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 today's 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, as previously announced on November 9, 2026, the company entered into a tender offer and post-offer cooperation agreement with DoubleU Games Co., Limited, the company's controlling shareholder. Pursuant to the agreement, DoubleU Games Co., Limited has commenced a tender offer to acquire all of the outstanding ADSs of the company not owned by DoubleU Games Co., Limited and its affiliate at a price of USD 16.25 per ADS in cash without interest and less any applicable withholding taxes.

The company's Board of Directors, following the recommendation of a special committee of independent and disinterested directors, has unanimously approved the agreement and the transactions contemplated thereby and determined to recommend that holders of the ADSs accept the offer and tender their ADSs. The offer is subject to various conditions, including a minimum tender condition and a majority-of-the-minority condition as described in the offer documents. There can be no assurance that the offer or the transactions contemplated by the agreement will be completed. For further information, please refer to the company's report on Form 6-K and solicitation/recommendation statement on Schedule 14D-9 filed with the SEC on November 10, 2026.

Meanwhile, the company continues to conduct its business and operations in the ordinary course. Given this development, management will not be taking questions this afternoon regarding DoubleU's tender offer, and we refer you to the tender offer agreement and tender offer filings for additional details. I'd 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 on DoubleDown's website. Thank you for your patience with that. It's now my pleasure to turn the call over to DoubleDown's CEO, In Keuk Kim. Please go ahead.

In Keuk Kim: Thank you, Joe. Good afternoon, everyone. We are delighted to be with you today to discuss DoubleDown Interactive's third quarter 2026 results. Key highlights include solid contributions across our social casino and iGaming segments as we continue delivering revenue consistency and resiliency by executing on our growth and geographical diversification strategies, delivering a record contribution of 58% of our total social casino revenue from direct-to-consumer payer activity, and delivering another quarter of strong operating profit and significant free cash flow generation. These results again reinforce our confidence in our business model as we continue to benefit from operational excellence across our portfolio. Let's start with the financial results.

This afternoon, we reported third quarter consolidated revenue of $94.3 million, down approximately 1.6% year-over-year. Despite this modest top-line decline, we delivered third-quarter adjusted EBITDA of $40.2 million, marking 7.2% year-over-year growth. In Q3, net cash flow from operations was $23.6 million. And in the first 9 months of 2026, we generated $94.7 million in net cash flow from operations. In the third quarter, social casino revenue declined 3.5% year-over-year to $76.8 million, reflecting the continued decline in the overall social casino market. Our social casino segment remains the primary engine of DoubleDown's profit and cash flow generation, and the third quarter marked the anniversary of our acquisition of WHOW Games, which closed on July 14, 2025.

A key highlight of DoubleDown's third quarter was the continued growth of our direct-to-consumer, or DTC, channel, a major contributor to the increase in adjusted EBITDA. In the third quarter, DTC accounted for 58% of total social casino revenue compared to approximately 21% in the third quarter of 2025 and approximately 52% in the second quarter of 2026. Our product enhancement initiatives focused on messaging and promotion on DTC, especially in our flagship DoubleDown Casino app, continue to support our successful DTC transition. Given the ongoing maturation of the social casino gaming segment, industry analysts at Eilers & Krejcik recently forecast that the global social casino market will decline almost 7% in 2026.

That said, our focus continues to be on outperforming the overall market through execution of our product development initiatives around player and payer retention, optimization of our marketing and live operation activities to maximize payer conversion and purchasing activity and continued maximization of the direct-to-consumer opportunity. Turning to our iGaming business. SuprNation's Q3 2026 revenue was $17.4 million, an increase of 7.4% year-over-year, primarily as a result of the continued success of our newest brand, Los Vegas. During the third quarter, the SuprNation team again did an excellent job managing around the higher U.K. gambling tax rate through a combination of product changes, marketing adjustment and expense control.

This allowed our iGaming business to effectively mitigate much of the impact of the tax increase in the third quarter. Our third quarter results highlights how prudent, targeted investments combined with precise operating execution are enabling DoubleDown to extend our long-term record of strong operating profit and cash flow generation. We are successfully integrating previous acquisitions while optimizing our core DoubleDown business through consistent DTC conversion. 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?

Joseph A. Sigrist: Thank you, IK, and good afternoon, everyone. To review, revenues for the third quarter of 2026 were $94.3 million. This compares to total company revenues of $95.8 million in the third quarter of 2025 and $94.3 million in Q2 of 2026. You'll recall that the revenue of WHOW Games, which was acquired on July 14, 2025, was included in Q3 2025 for all but 2 weeks of the year-ago period. Our social casino segment declined 3.5% from the third quarter of 2025 to $76.8 million, while iGaming revenues grew by $1.2 million or 7.4% year-over-year to $17.4 million.

Regarding our overall social casino KPIs, we previously highlighted that the metrics from WHOW Games are somewhat different than those from DoubleDown Casino. Specifically, the WHOW Games business experiences a higher payer conversion rate and lower average monthly revenue per payer. And as a reminder and for comparison purposes, WHOW Games metrics were included in overall social casino metrics starting in Q4 of 2025, not in Q3 2025. With all this in mind, overall social casino KPI highlights for the third quarter include the payer conversion rate, which is the percentage of players who pay within the social casino apps, increased to 9.5% in Q3 2026 compared to 7.8% in Q3 2025.

The average revenue per daily active user, or ARPDAU, of $1.44, up from $1.39 in Q3 of 2025 and an average monthly revenue per payer at $216 in Q3 2026, down from $272 in the prior year period. In the third quarter of 2026, operating expenses were $56.8 million compared to $60.9 million in the third quarter of 2025. Sales and marketing expenses for the third quarter of 2026 were $15.1 million compared to $15.7 million in the third quarter of 2025. Sales and marketing expenses in the third quarter were up approximately $1.2 million from $13.9 million in Q2 of 2026.

Profit, excluding non-controlling interest for the third quarter of 2026 decreased 43.9% to $18.4 million or earnings per fully diluted common share of $7.41, $0.37 per ADS in the third quarter of 2026 compared to profit, excluding non-controlling interest, of $32.7 million or earnings per fully diluted common share of $13.21, or $0.66 per ADS in Q3 of 2025. The decrease primarily reflects net foreign currency losses recognized in the third quarter of 2026, mainly unrealized and realized losses on the U.S. dollar-denominated financial assets partially offset by higher operating profit, which increased to $37.5 million from $35.0 million, driven by lower cost of revenue attributed to the higher proportion of DTC revenue.

Adjusted EBITDA for the third quarter of 2026 rose 7.2% to $40.2 million compared to $37.5 million for the third quarter of 2025 and $39.3 million for Q2 2026. Adjusted EBITDA margin was 42.7% for Q3 2026 as compared to 39.1% in Q3 2025 and 41.6% in Q2 of 2026. Net cash flows provided by operating activities in Q3 2026 were $23.6 million compared to $33.4 million in Q3 2025, with a decrease primarily due to higher income taxes paid in the quarter. And as IK mentioned, net cash flows provided by operations were $94.7 million for the first 9 months of 2026, slightly higher than the $94.1 million for the first 9 months of 2025.

And at quarter's end, we had $582.1 million in cash, cash equivalents and short-term investments with a net cash position of approximately $545.3 million, representing cash, cash equivalents and short-term investments less borrowings from our controlling shareholder of $36.8 million. I will now turn the call back to IK for closing remarks.

In Keuk Kim: Thank you, Joe. DoubleDown Interactive, powered by our core social casino and iGaming businesses, delivered another quarter of strong adjusted EBITDA and cash flow. Building on solid results delivered in the first 9 months of 2026, we remain committed to innovation and disciplined high ROI investments and to driving DTC revenues, which collectively optimize social casino margins. Finally, our strong balance sheet and cash position provides us the financial flexibility to pursue strategic growth opportunities as well as additional value-building initiatives and transactions for our shareholders. We are now happy to take your questions. Victor?

Operator: [Operator Instructions] Our first question will come from the line of David Bain from Texas Capital Bank (sic) [ Texas Capital Securities ].

David Bain: Awesome. IK and Joe, nice execution once again. I guess the question -- the first one I had was this is now the clear leader in DTC mix. What do you think the practical sustainable direct-to-consumer run rate ceiling is? And how much incremental margin flow-through can we think about as you kind of increase it from here?

Joseph A. Sigrist: Yes, that's -- yes. Thanks, Dave, and thanks for joining. Good question. I mean, it's a question that we've been considering, and I think you and others have been asking over this journey that we've been on for 2-plus years. As you'll recall, I think it was at the beginning of 2024, we were at less than 5% of social casino revenue as DTC. And now we're nearing 60%. The limit will occur at some point. I mean, I think we're really executing well. I don't know of anyone else in the industry who's approaching what we've done here more recently. I can't give you a number, but I can tell you that it's an important part.

It has been over the last 2-plus years, an important part of our strategy, and it's really helped relative to EBITDA dollars and EBITDA margins. And we continue to optimize the incentives, whether it be product-based incentives, communication and messaging incentives. And we're -- just in the last quarter, what we gained from 52% in Q2 to 58% in Q3. And we're -- I don't think we're finished. But obviously, it's going to be harder to make gains as we get higher and higher.

David Bain: That's great. Okay. And then I guess the second one would be, if you can maybe -- maybe IK, for you on this one, if you could review the IA -- I'm sorry, the AI, gosh, across live ops, whether it's dynamic pricing or personalizing gaming economies, whatever, the coin package pricing, if there's been a measurable lift that you've seen in ARPDAU from AI initiatives to date and what we can think about as we look into '27 from AI?

In Keuk Kim: Yes. Good question, Dave. At DDI, our AI strategy centers on driving measurable capital and operating efficiencies across 3 core pillars. The first one is content velocity, accelerating 2D and 3D asset pipelines, localization and prototyping to bring meta features to market faster. And the second one is, yes, your related question. Actually, player monetization, utilizing behavioral predictive models to dynamically tune in-game economies, personalized offers and retention mechanics. So yes, it is easier for us to maximize those leverage using AI tools, our internal server-side. And number three is actually targeting precision, automating ad creative iteration and spend allocation to safeguard our UA margins and improve ROAS. So overall, AI is already embedded into our day-to-day workflows.

So in '27, yes, we will leverage our AI skills more. So I hope this helps.

Operator: And our next question will come from the line of Aaron Lee from Macquarie.

Aaron Lee: So as you noted in the prepared remarks, Eilers is pointing to a deceleration in the social casino market, but you guys seem to have done better than that. Was that because you were able to deploy more marketing spend in the quarter? Or was that more related to the product road map? And more broadly, can you just share any thoughts on how you view the environment for social casino currently and whether there's been any notable changes in trends there?

Joseph A. Sigrist: Yes. Thanks. We're very proud of what we've done over the last few quarters. There's obviously a lot of headwinds associated with social casino given the maturity aspect of the industry. And we have benefited and we don't take this for granted, and we also lean into the advantage we think we have for having really passionate, committed, loyal players. And there's others out there that have that, but I would say that DoubleDown Casino, with a mix of its content, our history of how we treat players with great meta features that have been added over the years, has a stickiness that I would put up against anyone else's app in social casino.

Now that being said, it is definitely true that we have fewer players today than we've had in the past. And so we're continuing to try to optimize the monetization of those players and continue to give them great experiences, recognizing that we are going to have to hold on to them as long as we can.

In Keuk Kim: Yes. And let me add a bit. DDC actually continues to deliver new features, not only in meta content, but also slot content every week to enhance player satisfaction. So for example, the new slot launches every week and the new link jackpot system are designed to amplify the fun of slot game play that our users have enjoyed for a long time. Over time, as Joe mentioned, as we introduced multiple layers of meta content, the UX/UI experience has become somewhat complex. So nowadays, we have newer mobile lobby is being developed to provide more seamless and simplified player journey. So that allows slot content and meta content to reinforce each other more effectively and ultimately drive stronger engagement.

So I hope this helps.

Aaron Lee: Yes. Got it. That's very helpful. And then with regard to SuprNation and the Los Vegas brand, can you just talk about what's driving the success there? Is it acting as an effective funnel for an incremental player base? Is it attracting higher spending players? Any color there would be helpful.

In Keuk Kim: Yes. Let me take the question first. Los Vegas differentiated itself by blending traditional casino nostalgia with a modern user experience. While our previous brands, 3 brands, focused on rich themes, Los Vegas was designed for broader appeal, which has been the key driver behind its rapid early success. On the operational side, we have leveraged real-time data analytics to optimize user acquisition costs and enhance retention. While we are mindful of the evolving regulatory and tax landscape in the U.K., our strategy is to mitigate these headwinds through portfolio expansion. So by launching our fifth and sixth brands, we will further diversify our revenue streams.

Operator: Thank you. And this concludes the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

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