Operator
Good afternoon, and welcome to Double Down Interactive's earnings conference call for the third quarter, and it's September 30th, 2026. My name is Victor, and I'll be your operator this afternoon. Prior to this call, Double Down 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 Double Down's CEO, Mr. Ng Cook Kim, and its CFO, Mr. Joe Sigris. Following the remarks, we will open up the call for questions. Before we begin, Joe Giaffoni, the company's Investor Relations Advisor, will make a brief introductory statement. Mr. Giaffoni?
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 Legation 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 non-binding proposal from our controlling shareholder described below. Therefore, you should exercise caution in interpreting and relying upon them. We refer you to Double Down's Annual Report on Form 20F 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 issue this afternoon. In addition, as previously announced on November 9, 2026, the company entered into a tender offer and post-offer cooperation agreement with W Games Co. Ltd., the company's controlling shareholder. Pursuant to the agreement, WU Games Co. Limited has commenced a tender offer to acquire all the outstanding ADSs of the company not owned by WU Games Co. Limited and its affiliate at a price of $16.25 per U.S., $16.25 per ADS in cash, without interest unless 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 shareholders 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 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 6K and solicitation recommendation statement on Schedule 14D9 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 W'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 Double Down's website. Thank you for your patience with that. It's now my pleasure to turn the call over to Double Down's CEO in Cook Kim. Please go ahead.
Thank you, Joe. Good afternoon, everyone. We are delighted to be with you today to discuss Double Down 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 in the first nine 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 Double Down's profit and cash flow generation, and the third quarter marked the anniversary of our acquisition of WoW Games, which closed on July 14, 2025. A key highlight of Double Down's third quarter was the continued growth of our direct 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 double-down casino app, continue to support our successful DTC transition. Given the ongoing maturation of the social casino gaming segment, industry analysts at Aila and 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, SuperNation'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, Rosvegas. During the third quarter, the SuperNation team again did an excellent job managing around the higher UK gambling tax rate through a combination of product changes, marketing adjustments, and expense controls. This allowed our iGaming business to effectively mitigate much of the impact of the tax increase in the third quarter. Our third quarter results highlight how present targeted investments combined with precise operating execution are enabling Double Down to extend our long-term record of strong operating profit and cash flow generation. We are successfully integrating previous acquisitions while optimizing our core Double Down 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 will turn the call over to our CFO, Joe Sigrist, to walk us through the financials before providing my closing remarks. Joe?
Thank you, IK, and good afternoon, everyone. To review, revenues for the 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 WoW Games, which was acquired on July 14, 2025, was included in Q3 2025 for all but two 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've previously highlighted that the metrics from WoW Games are somewhat different than those from Double Down Casino. Specifically, the WoW Games business experiences a higher payer conversion rate and lower average monthly revenue per payer. And as a reminder, and for comparison purposes, WoW 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 ARPDAO, 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 Q2-2026. Net cash flows provided by operating activities in Q3-2026. We're $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 nine months of 2026, slightly higher than the $94.1 million for the first nine 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.
Thank you, Jill. Double Down 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 nine months of 2026, we remain committed to innovation and discipline, high ROI investments, and to driving DTC revenues. We are now happy to take your questions, Victor.
Operator
Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come flying out. David Bain from Texas Capital Bank. Your line is open.
Awesome. Thank you, IK and Joe. Nice execution once again. You know, I guess the question, the first one I had was, this is now the peer leader in D2C 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?
Yeah, 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 two-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%. Uh, you know, the limit will. Will occur at some point. 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 two-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 just in the last quarter, what we gained from 52% in Q2 to 58% in Q3, I don't think we're finished, but obviously it's going to be harder to make gains as we get higher and higher.
That's great. Okay, and then, I guess the second one would be, you know, if you could maybe, maybe IK, for you on this one, if you could review the AI, gosh, across LiveOps, whether it's dynamic pricing or, you know, personalizing gaming economies, whatever, the coin package pricing, if there's been a measurable lift that you've seen in ARPDAL from AI initiatives to date, and what we can think about as we look into 27.
Yeah, good question, Dave. At DDI, our AI strategy centers on driving measurable capital and operating efficiencies across three 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 your relative question, actually player monetization, utilizing behavior predictive models to dynamically Turn in game economies, personalized offers, and retention mechanics. So, yeah, it is easier for us to maximize those leverage using AI tools. Our internal server side. And number three is actually targeting preseason. Automating at creative iteration and stand allocation to safeguard our UA margins and improve OS. So overall, AI is already embedded into our day-to-day workflows. So in 2007, we will do it. Yeah, leverage our AI skills more. So hope this helps.
Definitely. Okay, thanks, guys. Thank you.
Operator
Thank you. And our next question will come from the line of Aaron Lee from McCurry. Your line is open.
Hey, guys. Thanks for taking my question. 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 roadmap? 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? Thank you.
Yeah, thanks. We're very proud of what we've done over the last few quarters. You know, there's obviously a lot of headwinds associated with social casino, given the, you know, maturity aspect of the industry. And, you know, we have. We've 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, you know, there's others out there that have that, but I would say that, you know, Double Down Casino with a mix of its content, our history of how we treat players with, you know, great meta features that have been added over the years has a stickiness that, you know, I would put up against anyone else. This app in social casino. Now, that being said, you know, it's definitely true that we have fewer players today than we've had in the past. And so, you know, we're continuing to try to optimize, you know, the monetization of those players and, you know, continue to give them great experiences, recognizing that we, you know, are, you know, We're going to have to hold on to them as long as we can.
Yeah, and let me add a bit. DTC 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 linked jackpot system are designed to amplify the fun of slot gameplay that our users have enjoyed for a long time. Over time, as you mentioned, as we introduced multiple layers of meta-content, so you... 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 contents and meta content to reinforce each other more effectively and ultimately drive stronger engagement. So hope this helps.
Yeah, I've got it. Thank you. That's very helpful. And then with regard to SuperNation and the Las 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.
Thanks. Yeah, let me take the question first. And Los Vegas differentiated itself by blending traditional casino nostalgia with a modern user experience. While our previous brands, three brands, focused on niche themes, Las Vegas was designed for broader appeal, which has been the key driver behind its rapid early success. On the operational side, we've 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 UK, 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. Thank you. Appreciate the call.
Thanks, Aaron. Appreciate it.
Operator
Thank you. And this concludes the question-answer session. Thank you for your participation in today's conference. This does include the program. You may now disconnect. Everyone have a great day.
