Q3 2021 DoubleDown Interactive Co Ltd Earnings Call
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Good afternoon, and welcome to a double Downs Interactive conference calls for District Kwartje ended September 30th 2021, My name is <unk> and I will be operators. This afternoon.
Before this call double that issued its financial results for the third quarter 20th me. They want in your press release, a copy of which has been furnished in every 41466 dash gay filled with filed with SEC N is available and the Investor Relations section of the company's website at Triple W. Dot.
Double down interactive Dot Com you can find the link to the Investor Relations section at the top of to help age joining.
Joining a nice today's call I fell down T L. Mr. <unk> Kim C F O Mr. Joe cigarettes.
Following their remarks, we will open to call for questions before we begin Jack grabbed the companies outside Investor Relations Advisory we will make a brief introductory statement Mister Graham.
Thank you Bye now before management begins or formal remarks, we need to remind everyone that some advantage mints comments today will be forward looking statements within the meaning of section 27 eight of the security Jackson 1933, as amended and section 21 of the Securities Exchange after 1934 as amended and we hereby.
Claimed the protection of the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995 forward looking statements are statements about future events and include expectations and projections not president of historical facts and it can be identified by the use of words such as maybe my will expect assume believe intend estimate continue should.
Anticipate or other similar terms forward looking statements include and and not limited to those regarding our future plans mergers and acquisitions strategy strategic and financial objectives expected performance and financial outlook for looking statements are subject to numerous risks and uncertainties that could cause the actual results to differ materially and adversely for them.
What we expect therefore, you should exercise caution interpreting and relying on them. We refer you to double down to annual report on form 20-F, and other SEC filings for a more detailed discussion of these risks that could impact future operating results in financial condition.
These forward looking statements are made only as of the date of this 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.
During the call management will discuss non-GAAP measures, which are believed to be useful in evaluating the companies operating performance. These measures should not be considered superior to an isolation or as a substitute for the financial results prepared in accordance with GAAP. A full reconciliation of these measures to the most directly comparable GAAP measures is available in the earnings release and on form 6K.
Filed with the S E C.
I'd like to remind everyone that this call is being recorded and will be made available for replay following instructions and the company's earnings release now I would like to turn the call over to double down CEO, Mr and cooking.
Thank you Sir.
Good afternoon, everyone. Thank you for joining us Uhm alrighty, no grilled onions cole following over a successful I P O either South Dakota I'd also like to welcome I wish you, a shake or theirs.
Appreciate it.
Alright Your February before we discuss the results of our order I'd like to <unk> Oh by some background on the double down for those of you who are your two hours company.
Leading developer and publisher of Egypt poke games on mobile.
We were all the pioneer Swisher Casino gaming segment.
As one of the initial publishers to lunch at Sushi Casino games on Facebook N T.
I will goal is to become one of the world's leading global gaming companies my delivery differentiating.
And claims experiences Chihuahua, you Jade.
I'll replace to gain double down casino has been a member pop plenty goes to the mood board games annually on the <unk>.
16, according to it.
We believe we have a deep understanding of love where users you still allows us to refine our game development content strapped to the game operation.
We also have unique access to content to our relationship with I G. T. M. A repairing W gangs <unk> able to leverage their slop gangs menu beach are exclusive to double down while also developing our own content to provide a wide array of.
U M exciting female style games hopefully yours.
We have what we call them all in one approach with our double dunk seem awhile, we believe that users pay for sure apps on their smartphones not <unk>. So having an all in one solution creates better retention real war huge or a position.
And higher lifetime value double done casino provides a diaper setup offerings to our players ranging from authentic land based slot to Laura casual a slot gangs as well other female side games, such as bingo and table games.
A key part of our strategy is to ultimate hour rubbing your streams by lunching gaming apps upside the traditional social female Oh first effort in this regard on that word sure survival, we say as an R. P. G that was munching globally at the end of September.
What if he's very only we are pleased with you meet your play a retention Rachel and excellent writing course, indeed ask tour in place or or the remainder I'll get an order we will focus on while they're improving play your engagement as we continue to apply you you you J.
And we are continuing to tune the games on me.
And the price of milk.
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We expect to release of HMO known Sochaux Casino gaming apps light on death row in 2022 hour isn't that that's game. It in the later stages of development and is currently planned to be late and I'll come back in two one open next year, we will.
Also continues to make updates to our core double dong casino platform to enhance cause somebody would engagement as strengths and cause so much lifetime value.
Regarding our financial resort, we are pleased with our third order fulfillment.
<unk> as a public company.
While revenue the crazed, 6% from two sweet 2020, due to the easing I'll stay at home and you said it was during the height of coffees related restrictions last a year just EBITDA increased four first then.
We were able to go and just as he beat that is Piet lower revenue as we focus on optimizing week tons from our sales and marketing spending we shower theatrical with Joe cigarettes, we'll discuss in more detail momentarily.
What's the doing that caught a regenerated Saudi $3.7 billion in that operating cash flows and and a decato read the cash balance of $223.1 billion, providing a speed a strong by nature petition.
Importantly, our business model should continue to be one that produces significant positive free cash flow it's Carter.
Now I will 20th over two hours Seattle with Joseph <unk> to walk you through our Finance Jersey for all biting my clothing.
Joe.
Thank you I K and good afternoon, everyone has.
As a reminder, double down interactive completed its initial public offering on September the second 2021.
Issuing approximately 6.31 million American depository shares, which we will refer to is a D. S is on this call each representing 0.05 of a common chair.
At a price of $18 per E D S.
Of this the company sold 5.26 million a D s's and S. T. I C special situation Diamond limited sold 1.05 million a D. S S.
Double down received net proceeds from the offering of $86.5 million after deducting under white, writing fees and commissions and certain offering expenses, which we plan to use to find our growth initiatives.
Our revenues for the third quarter of 2021 decreased 6% to $87.0 million from the prior year period.
As I K mentioned, two 320 20 benefited from the widespread stay at home Covid prevention initiatives in place at that time, which have significantly abated. Since then.
Despite the revenue decrease we are encouraged with several key monetization metrics that improved from the comparable period last year.
Average revenue per daily active user or opt out increased from 86 cents to 96 cents.
Pay your conversion, which is the percentage of players who pay double down increased from 5.4% to 5.7%.
And average monthly revenue per pair increased from $196 to $224 at.
At a high level, we would characterize these trends in our K P eyes as indicative of our discipline focus on growing wallet share a paying players, while allowing nutrition of non paying players.
Accordingly, we believe K P is that are aligned with paying players are more useful in evaluating our progress rather than aggregate user metrics.
Total operating expenses for the third quarter of 2021 decreased 17% to $59.2 million from the prior year period.
The decrease was primarily due to a combination of lower sales and marketing costs and lower depreciation and amortization expenses.
Specifically.
Sales and marketing expenses declined 18% from the comparable period, a year ago to $17.2 million as we continue to optimize our investments to acquire new players in light of Apple's new App tracking transparency framework and changes to I D F. A apple's identifier for <unk>.
Advertisers.
In addition cost per install or C. P. I for mobile users trended higher during the summer, which caused us to be more cautious in advertising spend during this period.
Overall, we feel confident about our ability to continue to measure and track the efficiency of our new player acquisitions optimizing the R. O Y of our sales and marketing expenses is at the core of our financial framework to diligently manage R. P N L.
Depreciation and amortization expenses declined to $2.4 million in the quarter compared to $8.0 million and two 320 20 at the useful life scheduled from assets acquired as part of W. Games 2017 purchase of double.
Down interactive LLC continue to end.
Net income for the third quarter of 2021 totaled $22.8 million or $9.91 per diluted share, which was higher than the prior period.
$8.3 million or $3.75 per diluted share.
Nope that are common to your account at the end of the third quarter was approximately 2.5 million shares.
As a reminder, each of our American depositary shares that trade on NASDAQ represent 0.05 of a common sure.
Adjusted EBITDA for the third quarter of 2021 increased 4% to $30.2 million from the prior year period.
Justin EBIT margin of 34.7% represents an approximate 330 basis point improvement from the prior year period.
The improvement and adjusted EBITDA and adjusted EBITDA margin is primarily attributable to the lower sales and marketing costs I previously mentioned.
Adjusted EBITDA and adjusted EBITDA margin or non-GAAP measures, which we believe are useful in evaluating our operating performance.
A full <unk> reconciliation of these measures to the most directly comparable gap measure it is available in the earnings release.
Cash flow from operations for the third quarter of 2021 increased 49% to $33.7 million compared to the prior year period, primarily due to the timing of payments from our platform partners, we did not incur any material capital expenditures dour.
The court.
Finally, <unk> turning to our balance sheet at corner, and we had $223.1 million of cash and cash equivalents the improvement in our net cash position was due to the aforementioned net cash flows from operations and the proceeds from our initial public offering.
That completes my financial summary, now I will turn it back over to I K for closing remarks.
<unk>.
Very excited about our entry into the publishing bark checked in our pipeline, though can do games.
Within an hour of course, <unk> casino franchise, and all five of <unk> <unk> <unk> <unk>.
Regarding a report double down casino franchise, we are continuing to make it.
Exciting gaming estimation for our users my lunch and you slept complaints approximately every once a week.
We will also be introducing you double down casino matter features over the next few months is the chest you collection features.
And finally, we are excited about the all these five two on that word here is so vital we look to increase if playerbase in two four and beyond while continuing to monitor <unk> <unk> as we tend to apply it in your users.
We are now happy to take your questions.
Operator.
Thank you Sir as a reminder to ask a question you will need to press star one on your telephone to a guy question pressed it baggy and Lisa nine while the compiled a cute name roster. Once again to ask a question. Please press, Taiwan I'd like to have the sauce.
Your first question comes from the line of David <unk>. Your line is open.
Great. Thank you and I can't Joe very nice execution on the quarter Uhm I guess my first question could you offer any broad commentary surrounding the potential reduction of platform fees from Apple or others and if that's something that you think could possibly impact margins next year are there certain strategies.
You're testing internally or or planning for at this point.
Yeah day. Thanks. Thanks, so much for the question on and your comment I can start and then I can comment perhaps you know obviously the entire gaming in mobile gaming industry is excited about the potential and I'll stress potential for you know the lowering of a platform fees based.
On the the court rulings and we.
Are interested to see not only how apple reacts to it but also and I think more importantly in the shorter term to how other gaming companies might be changing their games to.
Execute on on how they would would implement you know non apple.
Ways of collecting payments and I think that that's gonna be the key for US which is to you know kind of decide how we implement.
Which which I think is on one level pretty straightforward. The these alternative.
<unk> payment processors, but in a way that you know we believe based on what others in the industry frankly, who are larger than us do as far as you know what what they think will be acceptable frankly to apple.
Yeah to support or just come in from a development standpoint, you'll let be ready for taking those advantages, but it it will depend on author game companies Uhm implementation Uhm from December if we take the.
Look at our author competitor or other gaming companies I Miss It we we will.
Right now we will be ready right now so help yourself.
Okay, Yeah, no absolutely. Thank you Uhm. So my next question would be and we get the question flushed topic a lot. So maybe you can pay me some phone time.
Wondering if you could give you a broader view on emanate first you know as it relates to several cultural casino competitors acquired in your space G. S add ballgame sigh play I mean, they all seem to highlight your own valuation, but does that indicate any kind of competitive marketing shift.
Under new ownership are you seeing or hearing anything and then as it relates to have in a also we get this question. If you could discuss your own strategy I mean, the the 220 million plus of cash forecast generation is there a strong supply out their acquisition valuations rational and then.
I know, there's a multipart question, but if you don't find anything significant what the board consider return of capital opportunities over the longer term.
[noise] so.
The first one was M&A as it relates in your own core space and then you're all strategies.
Great. Thanks for the Cliff notes on the lawn question, there [laughter] alright.
Yeah, No no I think <unk>, you know, let's start with M&A and and you know what what first of all what's out there I think you asked perhaps to comment on on some of the more more recent activity I mean, it's it's not a lot that we can say about what others have done.
Uhm.
Except maybe to say it's interesting how I don't know if I can say social casino was hot again, but it's interesting how there have been some you know you mentioned the G. S N deal, specifically and others that our social.
The acquisition of social casino companies or companies that are primarily social casino that that have been been bought for some pretty you know pretty nice valuations, where I think over the last at least two.
Two or three years, you know there have been fewer of those those types transactions at least in social casino now you know I I think there still is great interest amongst especially because you know companies to purchase companies outside of social casino casino to expand yeah.
Yeah, but but I just will will comment that that what what you said about.
Because you know it comes being purchased is is kind of an interesting thing. That's happened you know since the summer as far as what we're <unk> as far as what we're looking for I mean, you know and we <unk>. We said this during the road show you know, we're looking you know potentially for companies to acquire.
That that could really move the needle for us and so you know companies that have revenue companies that have games in in you know in in market with with players. Obviously those companies are there are fewer of those then perhaps studios that.
Are just developing a game or just launched the game and there are there are a number of folks out there who you know maybe have a game in beta or something that are looking for someone to help them fund the marketing and there there are a number of those out there as well, but I think for US and this made me and it takes us a little.
<unk> longer then then then perhaps if we had you know.
<unk>, if we look at either of those companies. We are looking for companies that that can really help help US you know move the needle.
Oh and then.
Yep and then the <unk> the question about.
About you know what happens if we don't.
Other uses of cash I think you know certainly we we shareholder value in maximization of shareholder value is is the most important objective for us and as a result, you know given our cash balance you know, we we definitely need to look at all ways and all methods too.
To to maximize shareholder value and so uhm.
We won't take anything off the table.
Okay and also.
Congratulations again.
I'm, sorry did I cut you off yeah, sorry system.
Since the furniture would come in lately to emanate opportunity Yep. We also look at additional opportunities late T. Two N F T and I'm <unk> opportunity and fed up but actually it will fit a lot two hour gaming content. So.
Look forward to taking those authenticity for emanate.
Hope this helps.
Yep definitely.
Alright, Thank you guys.
Thanks <unk>.
Once again to ask a question please press thoughts and the number one on your telephone keypad.
Your next question is from Grad cheap S. If northman Securities. Your line is open.
Hey, good afternoon, I couldn't Joe Thanks for taking the questions and congrats on the nice EBITDA equivalent.
Wanted to ask I guess, I'm I'm kind of new developments uhm, how the rollout of on dead World is maybe going so far relative to your expectations initially kind of how your marketing it differently relative to double down casino.
And then just wanted to you know kind of gives you an timing of timing and kind of general cadence of new launches and kind of how development is going for.
The space related game spinning in space I believe it's called.
Yeah, I'll I'll just quickly describe how how we believe the game is is going in the market and then I'm Gonna ask Ikea to talk about the marketing of the game, which which I think is interesting relative to results I mean, it is early days, we just law.
Launched about five weeks ago global launch and consistent with what we saw during the open beta period. You know, we're really pleased with player retention, which means you know repeat play once we acquire a user and you know ultimately that's.
That's the first step in in getting players to convert and then ultimately to continue to monetize overtime and maximize L. T V. So right now we're continuing as as I believe I K said in his comments to not only acquire players, but also to continue to enhance the game tweak the game.
<unk> from Ah Ah monetization standpoint, so we can continue to drive up monetization, which is important but I. You know I think you know for US. It's encouraged very encouraging to see play retention at this early stage in in the release of the game.
Yep related to about 15 different undead well fundamentally for promo marching use it seem as a target can be Tammy <unk> all based on that however, it's channels <unk> totally different and you pay <unk> to get meaningful volume based on <unk>.
Burnt genre too.
To get them past Roger volume, we are testing and plus or marketing for on death row. It is one of the <unk> and Bentley compared to such a female out and like to use your player retention actually be and I'll see about 22 25 for the seven.
Tension <unk>.
<unk> uhm number compared to other competitors. So we will focus on how to utilize those I'll be tension to them. When it is going for help yourself.
Yeah, I think Greg you also asked about final part of that the the next game. The next game and the expand beyond social casino category that we have and and that's the the space game that I think you referenced which we had we had said in her comments here that were.
Planning open beta to be in the first quarter of 2022.
Okay, great Yeah, nice to hear that it's on track and yeah. Thank you previously said first half of next year. So good to hear and I appreciate the additional color there.
You know just wondering too is we kind of think about the <unk>.
Fourth quarter, how kind of seasonality impacts the business and you know how you are thinking about kind of the holiday season, and maybe your over your impacts cause I I know you said kind of cute three was <unk>.
Impacted by more stay at home a year ago, So how you're thinking about that.
Yeah. I mean, you know there are several or a couple I guess you know important seasonal factors in.
You know in the fourth quarter certainly one is the fact that there are more people at home you know separate from Covid of course, there are more people at home during the holidays and and generally the holiday period is is good for mobile gaming and we've seen that especially compared to again the seasonality that we've seen in past years.
In the third quarter, which includes the summer, which has you know kind of people not at home and and as a result, not playing as much again. This is all X COVID-19. So I think that's that's one one positive factor the other seasonal factor in the fourth quarter is is is C. P is which tend to.
Go up and so you know I had mentioned that C. P is in in the especially the latter part of the third quarter. We had seen increase now in October. We is late September October we had actually see have had seen cpi's, both for Android and Fry O S users too.
The decrease somewhat which was good but what we certainly anticipate essentially starting now if history is any guide that as we get into the holidays that C. P is will will increase in so you know that's something we have to be mindful of his you know we all all are always.
<unk> new players, but we certainly don't want to overspend is and as you know are Oh I have acquired users is our most important one of our most important metrics that we follow.
Okay, Great you know, what's gonna have gone M&A, but I think he'd covered that pretty pretty well I get the last one for me just relating to kind of opex trends going forward. I know you said you pulled back your your spend a little bit just seeing the the trends on player acquisition cost any thoughts on that I guess going forward.
Yeah.
Yeah, I mean, I I think just actually following on to what I said a minute ago. I mean, we do have the seasonal increase second half of the quarter that we have to be mindful of and C. P is that that would cause us maybe to pull back a bit at the same time, we will have this quarter of the <unk>.
First kind of folk and it's a full quarter impact of the launch of undead World and so you know we definitely will see you know investments in that area as we as we want to make sure. We we launched the game strongly and so you know I would expect that would mean that overall we.
You know, we we would be spending more of this quarter.
Great. Thanks again.
Once again to ask a question. Please press the stars and the number one on your telephone keypad.
Yeah.
At this time. This concludes our question and answer session I would now like to turn the call back to Mr. Secrets.
Great Brian and thanks again, Thank you guys all for joining us on our call today and for your interest in and double down we look forward to sharing future updates with you as we continue to innovate and grow the business.
And take advantage of.
A truly exciting.
Mobile digital gaming industry. Thanks, again have a great rest of your day.
Thank you for joining US today for example, dance earnings call you may now disconnect.
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